Sydney rental vacancy highest since 2005

Discussion in 'Property Market Economics' started by JohnPropChat, 16th Jul, 2019.

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  1. JohnPropChat

    JohnPropChat Well-Known Member

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    Sydney's rental vacancy has hit 3.5 per cent, the highest for the city since 2005, as vacancy rates across the nation continue to rise, data from property analyst SQM Research shows.

    Sydney's vacancy is also the highest in the nation, higher than Perth which is suffering a likely tailend of its housing downturn. The vacancy rate in Perth is 3.2 per cent.

    The latest data for the month of June shows Sydney's rental vacancy rising 0.5 per cent more than the vacancy rate of 2.8 per cent a year ago.

    The trend that Sydney is taking means the city will reach 4 per cent vacancy by the end of the year, a consequence of a flood of newly completed homes in the city, SQM managing director Louis Christopher said.

    "The increase in rental vacancies in June tends to be a seasonal rise for the start of winter. However, Sydney’s increases go beyond seasonal factors and so our expectation remains that Sydney will reach a 4 per cent vacancy rate before 2019 is completed," he said.

    Melbourne won't be spared the vacancy rise either, Mr Christopher said, although its vacancy remains tighter than Sydney's at 2 per cent.

    “Melbourne is also likely to record more rises in rental vacancies as newly completed dwellings purchased as ‘off-the-plan’ in the last boom enter the rental market now," he said.

    Consequently, Sydney and Melbourne’s asking rents for houses and units both declined in July.

    Sydney rental vacancy highest since 2005
     
  2. JohnPropChat

    JohnPropChat Well-Known Member

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    When rental yields suffer prices will follow. Nothing unexpected here of course. Have to give it time for the excess supply to soak up before things stabilize.
     
  3. dragon

    dragon Well-Known Member

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    Lot of new appartments/ townhouse are closed as they don’t get the rent for their mortgage. 600$ rent for 900k $ appartments are nothing for owners. As owner i prefer to wait for 6 months and sell it. Because i know holding an appointment in Sydney is not going to benifit me financially as it won’t give enough capital gain.

    With the current tax system i can hold it for 6 or 12 months as vacant. On and off i will advertise it for sale / rent. Doing some doggie work to cheat the system. Sorry, make more profit!! Lol...
    At the end, there is some lost.. either this year or in 2 years or so..
    definitely rent for appartments will reduce by long term investors. Price of appartments will reduce by short term investors..
     
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  4. highlighter

    highlighter Well-Known Member

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    This is the single strongest sign of oversupply (especially when the house price index we usually see reported doesn't include off the plans anymore). We've had five years of record high construction starts in Sydney during a time when housing demand has slowed, and now those starts are turning into record high completions. Which is why Sydney still represents very poor value, and questionable growth prospects at best, and why it's a much better idea to look to other cities right now.

    Other capitals are much more likely to grow (well, maybe not Melbourne or Canberra, which are still very overpriced too, and both have a truckload of new apartments going up). Sydney though also has slowed population growth in comparison, and much higher principals, so even if credit access relaxes that city has done its dash. The best growth is going to be centred on cities like Adelaide, Brisbane, maybe even Perth (surely Perth has hit bottom finally, after so many false recoveries).

    Even if the housing market keeps drifting up this year, you'd be nuts to buy in Sydney till that oversupply is absorbed in a few years time, especially if you're looking at apartments or new construction. The risk is just too great, and the prospects for good long term returns too sketchy. There's also the risk of recession, which Sydney just isn't well placed to weather, unlike other cities. People's debts are too high, and too far from stagnant incomes. In other cities like Adelaide, prices are at a level where they can be comfortably serviced by most people even during the worst recession.
     
  5. WattleIdo

    WattleIdo midas touch

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    Louis Christopher is excellent at collecting data and stating exactly what is occurring on the ground right now. Fullstop.
     
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  6. sash

    sash Well-Known Member

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    As I have said the recent strengthening of prices is a dead cat bounce.....with the supply in the pipeline we will see more downward pressure. These sort of yileds are not sustainable.

    The silver lining is in 4 years....we will see strong rental increases.

    I think we are about to see what happened with rents in Perth occur in Sydney......
     
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  7. Redom

    Redom Mortgage Broker Business Plus Member

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    This data is definitely interesting, it does point to the supply issues that'll slow the Sydney market down and allow the pent up demand to actually go somewhere other than nominal asset value rises. Clearly demand has risen significantly in recent months (most data indices would show this). This is partly natural, prices fall, demand rises. The issue in the past with Sydney has been the demand rise has led to a significant price rise because there was no supply to keep up.

    Now with supply levels elevated, the extra demand impact (from lower prices, lower rates, ridiculously strong population growth and multi-year strong employment growth) on prices should be contained. Given the high vacancy rates, its pretty clear there's an oversupply of housing at the moment. The experts in this field note that its likely to get worse before it gets better too.

    Re comments about 'recession' and Sydney's economy...I'm not so sure that state by state economy breakdown would be as simple as that. It really depends on why we're in a recession and what brought it on. If its external factors impacting exporting industries or mining related, then Sydney & Melbourne won't feel the national income drop as much as other states. In fact, they'll probably benefit as interest rates will adjust and they are the most rate sensitive economies (post mining boom transition). If its financial sector related recession (or infrastructure), Sydney & Melbourne will be in real trouble.

    But the general point about 'risk' to house prices is true for the bigger capitals. If there were a large recession in the major capitals, households here are far more susceptible than in other states. They have big debts that require strong employment conditions to be able to be serviced. I.e. if the employment market deteriorates significantly, the housing pack of cards can come crashing down.
     
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  8. Tenex

    Tenex Well-Known Member

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    I have no idea where this data comes from.

    We did have a rent adjustment perhaps during 2017 / 2018 timeframe as a flood of units and granny flats hit the market but that is since on the way up.

    I have managed to rent a 5 bedroom house for $1000 per week and I have other property where the agent is saying he is able to get higher paying and better tenants for, compared to last year.

    At present sites across Sydney are selling within 2 days as I am looking to buy and its either been sold or is going for auction.

    Dont let false data / people who dont know what they are talking about fool you. I would say units in general across the country are a bad investment both from rental and capital growth point of view due to high supply and bad quality. But other than that, house and land will sell and rent for a good prices and I certainly dont believe the data posted is valid.
     
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  9. highlighter

    highlighter Well-Known Member

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    It comes from SQM. It's not "false data".
     
  10. Peppas

    Peppas Well-Known Member

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    Probably depends on which part of Sydney. I've just gotten notice for an apartment in South West Sydney and the real estate agent advised dropping the rental as it was currently hard to get tenants in due to oversupply in the area.
     
  11. Woodjda

    Woodjda Well-Known Member

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    Domain reporting the same thing:

    Domain Rent Report June 2019 - See what's happening in your city

    Quarterly change in median rent for houses:

    Sydney -1.9%
    Melbourne -2.3%
    Brisbane -2.4%
    Adelaide -1.3%
    Canberra -3.5%
    Darwin -2%
    Perth and Hobart were unchanged

    It's clearly not just Sydney and not just apartments (actually overall the recent results for houses is worse).
     
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  12. Tenex

    Tenex Well-Known Member

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    Only if it was that easy.

    Core logic hires and pays data scientists and statisticians (I actually have appointed a few of them) who look at and crunch data that would make you dizzy if you just looked at it for a few minutes and they still get it wrong. Just because someone publishes something and sticks a brand name over it doesnt make it true.

    Be it as it may, I dont have any interest one way or another if you wish to believe it be my guest.
     
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  13. Mel Morgan

    Mel Morgan Sydney Property Manager Business Member

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    As a PM, I'm finding the Sydney market really segregated. I think on a whole, the data is probably correct, but there are pockets where demand is as strong as ever, and other pockets where rents have fallen significantly. A lot of it is to do with the supply of new apartments.

    So I wouldn't paint the whole Sydney market with the same brush, more to look at each type of property in an area and supply/demand factors there.
     
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  14. marty998

    marty998 Well-Known Member

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    $52,000 a year rent (your tenant would have to earn over $70,000 pre tax just to pay that :eek:) is a lot of money for your average punter.

    My hair would go prematurely grey knowing I'd have that sort of payment coming out of my bank account. I don't know how people do it and still stay sane.
     
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  15. sash

    sash Well-Known Member

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    Geez.....its been a while....did you ever make money on the Duplex development in Pazza?

    The fact is some people are in denial......there is clear evidence that in most parts of Sydney rents are dropping. On current trajectory we could see a 4% plus vacancy rates.....in the next year...

     
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  16. Kangabanga

    Kangabanga Well-Known Member

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    If there are five adults sharing, six if master bed has a couple , that's only $200 or less per week per person. Pretty okish if it was well located near cbd area in Sydney I guess..
     
  17. Kangabanga

    Kangabanga Well-Known Member

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    Rents dropping. Interest rate dropping. GDP dropping. Part of it is oversupply but methinks big R has already begun.
     
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  18. virgo

    virgo Well-Known Member

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    Anecdotal

    Just visited a friend and his wife who are renting a 1 bedder apt in Carlingford ..one of those spanking new ones opposite Carlingford Court...

    Starting rent 5 months ago: $380
    Last month, landlord wanted to raise rent to $400 ... figured tenants will not move...

    My friend promptly gave notice and got another 1 bedder IN THE SAME COMPLEX ONE FLOOR DOWN at $350!

    Go figure...
     
  19. hammer

    hammer Well-Known Member

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    This is exactly how market rent goes down.
     
  20. JL1

    JL1 Well-Known Member

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    another anecdote, a friend of mine has just negotiated their central Sydney share house down from $6,000/month to $5,200 per month, also pushing the agent to complete some long-needed repairs.

    From a data perspective, new dwelling completions have only just reached the peak approvals which were maintained from 2016 to 2018. expect current supply rates to be maintained for a good year or 2 more. If population growth rate continues to slow further, the market effect of this supply will add even more downward pressure on rents.
     
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