- Asking rents are not soaring everywhere, Ben Plohl argues
- Buyers seeking lifestyle locations has made increases uneven
- Situation influenced by oversupply of rental stock from the last boom
While an exodus of Sydneysiders is causing asking rents to soar in lifestyle locations, some city locations are experiencing the opposite market conditions.
Ben Plohl, BFP Property Buyers Founder and Principal, said SQM Research data has highlighted vastly different conditions throughout the rental market.
He says the situation also reflects the oversupply of rental stock purchased towards the end of the boom four years ago.
“In the last year or two of that boom some buyers were mostly speculating on the market, so they bought cookie-cutter units in areas that were already tipping into oversupply territory,” Mr Plohl said.
“Areas such as Parramatta, the Inner West, and Liverpool were struggling with more rental stock than supply long before the pandemic, which has just made that situation more difficult.”
Ben Plohl, BFP Property Buyers Founder and Principal
Many regional lifestyle areas, however, are experiencing greater demand than supply with vacancy rates below equilibrium for some time, Mr Plohl said.
“While the pandemic has accelerated the exodus of people away from the city, that is a situation that had been underway for a while already, mainly because of the high property prices in the Harbour City.”
“On top of that, the lending restrictions that came into play in 2017 also prevented many financially capable investors from borrowing to purchase a strategically located investment property in areas like the South or Central Coast,” he said.
Asking Rent – Broken Hill-Dubbo
[Select part of the chart to zoom in on various years, and ‘reset zoom’ button to return]
Weekly asking rents for houses increased by over a third (35%) in Broken Hill-Dubbo, while on the coast an increase of nearly 28% was recorded with a further 23% on the Central Coast through the year to early July.
“All of these locations have had undersupplied rental markets for some time, with vacancy rates currently sitting at just one per cent or below,” Mr Plohl added.
“Also, with areas like these seeing the lion’s share of internal migration from Sydney, this situation is not likely to change anytime soon.”
Subsequently, rental markets in some Sydney areas are bearing the brunt of this exodus, he argued.
Vacancy Rate – Parramatta
[Select part of the chart to zoom in on various years, and ‘reset zoom’ button to return]
Parramatta, he explained, has seen its vacancy rate trend up since 2017 – currently, it is at 4.2%. For the Inner West, the vacancy rate has increased from just 1.1% four years ago to 3.5% as of last month.
“Many of these locations are also feeling the pinch from the loss of international students and tourists,” he said.
