While you may be scouting for a unit to rent in Sydney, take a look at the changing rental trends before you choose your abode.
Rental properties: increasing rates in Sydney
Tenants in Sydney seem to be having a tough time. Domain’s Quarterly Rent Report signals that rent rates in Sydney are increasing at the fastest pace since four years. The main culprits leading to this hike are the suburbs in the Southern and Western regions of Sydney. According to the report, high demand areas of Blackwall and Liverpool have recorded over 5% jump in rentals in the past 6 months.
This hike is mainly being pushed by investors who are demanding more from the tenants to pay for their high value investment properties.
According to CoreLogic RP Data Hedonic Home Value Index in August 2015, the boom in investment property has led to almost 17.6% increase in property value in Sydney over the year. This means first home buyers have to wait much longer to save up for deposits (as APRA guides lenders to restrict loans that are more than 80% in value of the property price) and pay rents for longer periods of time. Also, with vacancy rates in Sydney being less than 2.0%, there is an imbalance in the market as demand far exceeds the supply, giving landlords an upper hand in driving the prices higher.
Some of the most expensive suburbs in Sydney based on the data from October, 2015 are:
The downward trend in rent rates across capital cities
CoreLogic RP Data, in its latest report, points out that the rental market is going ‘downhill’ with rent rates falling down in almost every capital city. The combined capital city rent rates have only increased by 0.3% over the last three quarters (and only by 0.5% in the past 12 months), a dismal figure for the landlords.
Tim Lawless, CoreLogic RP Data’s head of research explains the reason for this downward trend: “Rental appreciation continues to be sluggish and can be largely attributed to the ongoing boom in dwelling construction across Australia’s capital cities accompanied by record high participation in the housing market from investors.”
What does this mean for tenants?
As per the CoreLogic RP Data report, out of the 8 capital cities, Sydney recorded the second highest rental growth rate in of 1.9% over the past 12 months. However, with property values in Sydney increasing at a record rate of 17.6%, the actual gross rental yield has fallen to 3.3% from 3.8% last year.
This means that even though the slowdown is really slow, there is a long term softening curve that is evident. With the combined capital city annual rental growth rate at a historic low of 0.5%, the tenants might now be able to negotiate for better weekly rent rates.
What does this mean for investors?
Even though it is hard to predict where the rental market is heading, but APRA has tighten the lending for investment loans which will impact the rental market and rental yield.
Now whether you decide to rent or buy your own home, don’t let the data befuddle you, contact one of our free mortgage experts for guidance by submitting your details on any investment loan deals or new home loan deals.