Market Update For Sydney's Eastern Suburbs Investors

Since COVID-19 impacted the Sydney Eastern suburb's rental market just over twelve months ago in April 2020, the situation has remained tough for landlords.

Rents in Sydney's East have remained on average between 15-30% lower than the same period pre-COVID. We share why, if now is a good time to buy or sell an investment property and how the future is looking.

Why Are Rents Still Low?

The biggest factors we have found have been:

• International students not returning from abroad to study on campus;
• Australian students continuing to study from home;
• Closed international borders keeping out migrant workers and those on working holiday visas who would take up hospitality and tourism roles in the area;
• Australians working in the hospitality and tourism areas losing their jobs and leaving the area to seek alternative employment elsewhere;
• People who are able to continue to work remotely from home choosing to leave their inner-city rental property and move interstate or to regional Australia for lifestyle and affordability reasons; 
• Investors with properties that previously relied on holiday and short-term rentals switching over to the permanent market in search of long-term tenants.

What Do The REINSW Stats Show?

As stats from REINSW (the Real Estate Institute of NSW) show, inner Sydney residential vacancy rates that had an average of 3% from April 2019 to March 2020, have remained at an average of 4.84% over the past 12 months which is almost 2% higher than the average for the previous year.

In contrast, regional NSW has very low residential vacancy rates which have been positively impacted by people leaving Sydney and moving to these regions.

Good News: Properties Are Leasing

The good news is that properties that are strategically marketed, priced competitively and presented well are leasing. Three top tips to achieve this are:

• Presenting your property in the best light possible – clean and tidy, repairs and maintenance undertaken, good condition of the carpet and paint, etc.
• Marketing your property strategically – professional copy and photographs to target the best market for your property (handy hint: virtual styling can lift an empty living room or bedroom and attract more prospective tenants).
• Pricing it right – being realistic about the current market, the vacancy rates and pricing it competitively to get it leased.

Should I Buy Or Sell An Investment Property?

If you have made the decision to invest in Sydney, be mindful of extended vacancies and lower rents. We find that houses tend to lease more quickly as there is a lower volume available. Apartments that are more in line with the change in lifestyle since COVID-19 and offer a study or extra space to work from are more attractive to prospective tenants.

But whether a house or an apartment, remember…presentation is important. Previous high volumes of international students and visitors on working holiday visas who were in Sydney for the experience, were not too fussed on their accommodation because they were out enjoying the lifestyle. However, today’s renters are wanting quality properties that show value for the rent they are paying, even though those rents are down on previous years. Properties are leasing quickly that are well-maintained, priced and presented well but those that aren’t are staying vacant for extended periods.

If you do have an investment property in Sydney's East, have retired and are ready to cash up, this current market is one to take advantage of. With a strong rise in housing prices, it is becoming more appealing to sell. According to a recent report by Michael Yardney, founder and CEO of Metropole Property Strategists, ‘Sydney property prices rose by 6.3% in the last quarter and Sydney’s auction market remains strong’. We’ve seen an increase in investors selling apartments and having them settle in a short period of time for a good return. By far, the majority of people purchasing those apartments are doing as owner occupiers.

In an article by Grace Ormsby published in February this year, Archistar’s chief economist, Dr Andrew Wilson, flagged  ‘a clear prospect of high rental vacancies persisting into the foreseeable future’ for Sydney and Melbourne’s inner-city apartment surplus. With the majority of international borders remaining closed and lockdowns in the community remaining a concern for many, Dr Wilson also said 'there is certainly no prospect of a sharp improvement in demand anytime soon that will push vacancy rates downwards and offset falling rents'.

How Is The Future Looking?

We believe that if international students are allowed to return to Australia, this will have an immediate positive impact on the inner Sydney market. We are therefore keeping a close eye on the NSW Government’s commitment to supporting the safe return of international students to Sydney and NSW, particularly given that two in five international students in Australia chose to study in NSW in 2019, and those international students are an important source of rental income for investors in inner Sydney.

Until then, we don’t see much change in rents or vacancy rates in the inner Sydney market. It therefore remains paramount for current investors to strategically market, present and price their properties well to have them leased. Make improvements if necessary – from new paint and carpet through to a kitchen or bathroom renovation – to get ahead of the competition, attract the interest of good tenants to attend home opens and for the right, long-term tenant to lease your property. 

If you would like advice on the investment property market in Sydney's East, please contact Mark Taylor on 0412 976 697