Why Negative Gearing should be scrapped, page-15

No relief for Sydney's renters, despite property investor boom

Date
April 16, 2015 - 9:22AM

• 42 reading now

Jennifer Duke

Domain Review Editor

View more articles from Jennifer Duke
Follow Jennifer on Twitter Email Jennifer

• submit to reddit
• Email article
• Print
• Reprints & permissions

Despite the surge in investors looking for tenants, Sydney rents remain at an all-time high. Photo: Wolter Peeters
A record number in investors buying property hasn't led to a fall in Sydney rents, new figures show.
In fact, in a select group of suburbs rents are still skyrocketing.
According to Domain Group's March quarter Rental Report, the median weekly asking rent for houses and units in Sydney is currently $520 and $500 respectively - the highest they have ever been even with investors purchasing and providing more rental homes.
Domain Group's Andrew Wilson said that it wasn't the case that a higher number of investors would cause rents to drop in Sydney, because demand was still outstripping supply, keeping rents stable.
"We're really not seeing any shake-out in the rental market from high levels in investor activity," Dr Wilson said.
While there's no relief for tenants yet, a slight increase in the vacancy rates may be a suggestion that supply is starting to creep up.
Housing Industry Association economist Geordan Murray said a surge in supply had been recorded with 50,000 new homes begun in NSW. However, they are yet to reach the market.
"We're seeing population growth in NSW being particularly strong at the moment," he said.
"Typically NSW has lost a significant amount of people through interstate migration – to Queensland and Western Australia – but we've seen a decline in interstate migration. The net outflow is very small at the moment," he said.
BIS Shrapnel's Angie Zigomanis also said that it was early days for supply and agreed that strong population growth is a factor.
"With new dwelling activity in Sydney concentrated in the unit/apartment sector it takes a couple of years for an off-the-plan purchase to translate to a completed dwelling to be made available for rental," he said.
This supply may not be enough in the face of a skyrocketing population and a previously accumulated supply deficit, according to AMP Capital's Shane Oliver.
"The answer is simple – while the supply of investor property is on the rise it has not yet made up for 10 years or more of under-supply," he said.
However, things could be set to shift over the next couple of years.
With the recent growth in prices and lower levels of growth in construction costs, EPS Property Search buyer's agent Patrick Bright said that developers' profit margins were now attractive enough to encourage more building.
"You will see a lot of constructions start in the next six to 18 months," he said.
"One thing that will slow the rental market up is more supply but that won't happen anytime soon."