Rising rental vacancies hit Sydney's suburbs
Sydney’s climbing rental vacancies have spread from the inner city to the outer suburbs, downwards pressure is being placed on rents in Melbourne, while a dwindling supply of properties available for lease has Perth on the cusp of a rental shortage.
Recent rental market analysis from the Real Estate Institute of NSW showed the COVID-19 pandemic was continuing to impact property markets right across New South Wales, with overall vacancies rising for the fifth consecutive month in June to hit 5 per cent.
Vacancies in Sydney’s inner city eased slightly to 5.3 per cent, to be 2.8 per cent higher than at the start of the coronavirus crisis, REINSW said.
In Sydney’s Middle Ring suburbs, REINSW chief executive TIm McKibbin said vacancies had risen to 5.4 per cent.
“The real surprise this month comes from Sydney’s Outer Ring, where vacancies increased sharply.
“Vacancies have been steadily trending downward since March, as inner-city tenants relinquished properties with higher weekly rents for more affordable options in the suburbs more distant from the CBD.
“However, July saw a rise of 1.7 per cent in just one month.”
Aussieproperty.com property manager David McElwain said the increasing vacancies continued a three-year trend of falling rents, for both houses and apartments.
“We are noticing that in the inner city, rents are becoming very competitive and tenants are dictating what they pay more than ever before,” Mr McElwain said.
“This coupled with landlords under their own financial stress and needing the income stream to pay mortgages etcetera, has put downward pressure on rents, as well as a surplus of stock to add further choice to intended tenants.
“Personally I have found that with my managed properties I have had to drop the rent by up to 20 per cent for inner city vacant properties or people will just not show up.
“Whereas in past years people would look at more expensive properties in anticipation of offering a lower rent, now we are finding that this is no longer the case.
“If a property is deemed too expensive then there will just be no interest.”
Mr McElwain said it was important for property managers and landlords to take a longer-term view and weather the current crisis, and negotiate with tenants affected by COVID-19.
“I have had vacant properties available for up to 3 months and while all landlords are in different financial positions and some can weather the storm better than others, now is the time to bite the bullet and accept that a lesser figure is better than nothing at all,” he said.
Inner-city rental markets in Melbourne are also continuing to struggle, with the latest data from CoreLogic showing downwards pressure is being placed on rents.
Inner Melbourne’s listings have been most affected by the pandemic, CoreLogic said, with the number of rental listings up 52.3 per cent in August, as compared to the start of the crisis in March.
CoreLogic said rental listings in Melbourne’s inner city in the 28 days to March 5 were 7,068, while in the 28 days to August 9, 10,764 properties were advertised for rent.
Median asking rents in Melbourne’s inner city have fallen by 9.6 per cent over the pandemic.
“Across Southbank, rental stock has erupted from 568 rental listings in the 28 days to March 15, to over 1,200 by August 9,” CoreLogic head of research Eliza Owen said.
“In the year prior to the pandemic, total rent listings across Southbank averaged 450 listings per month.”
In Sydney, rental listings in the city and inner south are up 48 per cent due to COVID-19, with median rents down 10.5 per cent.
The regions with large accumulations in rental stock reflect many of the pain points that have come with the COVID-19 downturn, particularly more recent commentary which has highlighted the gaping hole in housing demand because of international border closures,” Ms Owen said.
“This is because the majority of new migrants to Australia are renters, at least initially.
“The 10 regions which have seen an uplift in rental listings between March and August, together accounted for 29.1 per cent of the net overseas migration to Australia over the year to June 2019.”
Ms Owen said additional factors driving up rental listings included recent new supply additions, while demand had been affected by weakness in labour markets associated with renters, such as food and accommodation and arts and recreation.
“These trends highlight some of the acutely impacted markets,” Ms Owen said.
“Due to the relatively high level of investor concentration, particularly in inner-city apartment markets, the patterns in rental supply and demand point to added downside risk for values in these precincts until international borders reopen and labour market conditions tighten.”
On the flipside, Perth’s rental market has continued to tighten, with vacancies falling to their lowest level since March 2008, according to the Real Estate Institute of Western Australia.
REIWA data showed there were 3,553 properties available to rent in July, half of what was available at this time last year.
REIWA president Damian Collins said Perth’s vacancy rate had been below 3 per cent, which is considered to be a balanced market, for 21 consecutive months.
Mr Collins said the market was starting to experience the impacts of limited stock.
“It is only a matter of time before rents rise,” Mr Collins said.
“In some areas, agents are reporting rents are already on the move up.”
Suburbs in high demand include Scarborough, South Perth, Mandurah, Joondalup and Subiaco, according to reiwa.com search data.
Mr Collins said the conditions indicated that the emergency measures introduced due to the pandemic, including a moratorium on evictions, were no longer needed.
“Investors are concerned about returning to the market due to the limitations on their ability to put rents to market and evict tenants who do not pay their rent,” he said.
“While we’d prefer to see the legislation lapse in its entirety, if there is an extension, it must be for the very small number of tenants still affected.
“If we don’t encourage investors back into the market, then the rental shortage will only get worse.”