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Is COVID-19 done with the Sydney Rental Market?

In terms of the rental market 2022 sure has seen a different rental market from what we’ve become accustomed to across 2020 & 2021.

My experience has been that it started off with momentum from January and has continued to see demand for Rental Properties throughout the inner city & inner west suburbs with only a small number of Properties having struggled to get across the line & lease.

I’ve personally had Open Homes with groups of 30 + coming through and then some with 0 people. Ignoring the media hype, I have found that demand has increased this year, properties lease a lot quicker, and vacancy rates have reduced, however, rents haven’t increased substantially. This is not to say that they won’t soon enough.

A perfect example has been where we had to reduce rents in 2020 simply to keep tenants in their properties, those rents have gone back up but not to their pre-pandemic levels. In most cases, those rents have increased by at least 50% of the reduced amount, so if someone’s rent was reduced by $50pw we’d be increasing it by $30pw. Still, the goal is to keep properties occupied, but in all honesty, we’re not living in fear of tenants choosing to move on if they wish because there are prospective tenants out there.

We now have a CBD that doesn’t represent a ghost town and restaurants booked out for months in advance so it’s obvious that people are back out there, and in many cases have moved back to Sydney. Just the other weekend we secured a tenant that moved back from Byron Bay due to the lack of work opportunities in the Northern Regions & also due to all of the ongoing weather events. These factors translate to more prospective tenants and fewer available Properties.

I do know and can see firsthand that rents are increasing. Asking rents have been on the increase from what they were previously advertised and these are being achieved with little to nil negotiation from prospective tenants, unlike in the past two years. Whilst the media may have people believe there is a Rental Crisis, I’m yet to see it in the Eastern Suburbs, Inner City & Inner West. It is clear they’re looking at the wider area of Greater Sydney and even the Illawarra, which we know has seen huge demand with very little increase in supply, where building approvals fell nationally by 2.4% in April 2022 alone. New Loan investment stats have also shown a decline in investor activity.

At a snapshot, vacancy rates in Sydney in November 2021 were at 4.4% and they have more than halved to 2.1% in April 2022 and have remained in the 2’s throughout 2022.

So, are we still COVID Impacted?

REIA’s Housing Affordability Report found rental affordability declined over the March quarter with the proportion of income required to meet median rent increasing by 0.5% to 23.5%. Rental affordability declined in all states and territories except the NT (where affordability improved by 1.1%). The proportion of income required to meet median rent payments in NSW was 26.9%, in Victoria 20.0%, in Queensland 21.9%, in SA 24.7%, in WA 20.4%, in Tasmania 30.8%, in the NT 24.8% and in the ACT 22.5%.

Of course, we can’t ignore that there are many out there struggling financially but it is clear across the suburbs that I cover that there are many Prospective tenants in secure, full-time employment, and that are high-income earners.

But to answer my own question, NO, we don’t have any tenants that have been COVID Impacted since the onset of 2022 and I sincerely hope it remains that way, for tenants themselves & investors. As a Property Manager, it’s strange how we now look at Applicants differently and think about a Prospective tenant’s current financial position, their past employment, experience & expertise but also the companies which they work for and consider a wider range of what might be sustainable. I think Prospective tenants are being financially responsible when they apply to rent a property but agents also play a different part here too. Whilst final tenant selection decisions come down to the individual investor, it is paramount that as Property Managers we are at least presenting as many facts and insights as possible so that clients can make informed and calculated decisions.

To be honest, as a Property Manager but also as the Operator of my agency, it’s up to me to inform my clients where their property sits in the current market and guide them towards successful outcomes. While some clients may want to persevere to chase the absolute top dollar for their property, I’ll always present them with the facts and possible scenarios that may impact their objectives. I find that most investors playing the long game realise quickly that maintaining low vacancy and reduced turnover of tenants, may be more financially beneficial over time than chasing that top dollar.

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– Antonio

Director & Property Manager