What a difference a few months makes.

Back in April this year, the inner Sydney vacancy rate was falling as people returned to the city for work and study, which created a surge in demand for rental properties.

Fast forward to now and the Real Estate Institute of New South Wales’ June 2017 Vacancy Rate Survey reports the inner Sydney vacancy rate is back up to 2.2 per cent after a jump of 0.3 per cent.

Sydney’s metropolitan vacancy rates, when compared to the rest of the country, are “relatively steady” at 1.8 per cent, but this is still an increase from April 2017.

A healthy vacancy rate tends to be around two to three percent or lower and while these latest findings aren’t exactly a cause for alarm, the upward trend is an indicator that not all is well in the inner Sydney rental market.

No matter what side of the property fence you sit, first-home buyers, investors and short and long-term renters are all potentially impacted by shifts in the Sydney rental market.

Here are four trends currently impacting the Sydney rental market:

1. Inner Sydney vacancy rates jump

There are several factors that contribute to the jump in vacancy rates for Inner Sydney. One explanation points to companies and businesses moving out of Inner Sydney and relocating to outer Sydney suburbs and regional areas. Commercial leases are cheaper, housing is affordable for employees and the daily commute is often easier.

The knock-on effect of businesses leaving Inner Sydney is that employer provided accommodation is no longer required and employees affected by the relocation also move out of the area to live closer to work, creating an increase in vacancies.

 

2. Rental demand high in other areas

Outside of Inner Sydney, the story changes. Depending on the suburb, vacancy rates remain low, but demand is high, especially in affluent suburbs on Sydney’s North Shore. As more first-home buyer hopefuls are being priced out of the property market, more are looking to rent for longer. While some may rent where they want to live, others opt to rent in more affordable suburbs situated further out than they are looking to buy, so they can save for a deposit.

The knock-on effect of more people renting for longer is a greater demand for rental properties in suburbs right across Sydney – in the South, North, and West.

 

3. Cost of Rent Climbs

Renters are being priced out of traditionally affordable areas and the building boom has created an oversupply of new stock in certain areas, but the cost of rent in some Sydney suburbs has surged. Even though the concentration of new developments is in Sydney’s west – and not in Sydney’s relatively well-heeled lower north shore, northern beaches, inner west or eastern suburbs, the Canterbury-Bankstown area and South-West Sydney have seen the cost of rent climb.

The knock-on effect of surges in rental increases is the pressure it puts on those trying to save for a house deposit; and as wage increases lag the rate of rental increases, the longer people are forced to rent, the more demand it places on the rental market.

 

4. Limited rental options for long-term renters

As new apartment developments try to tackle Sydney’s undersupply issue, Airbnb and other short-term accommodation services are stripping the market of long-term residential housing. Owners are realising they can earn more money advertising their property as holiday accommodation.

The knock-on effect of taking properties out of the long-term rental market and leasing them as short-stay lets will increase demand and create upward pressure on price.

 

If you’re concerned about how your investment property will perform over the coming months contact Stills Properties to arrange a consultation or a free appraisal.