Quarterly Market Report For Sydney's Eastern Suburbs Investors: Jun 2019

The June quarter remained challenging for investors in Sydney’s Eastern Suburbs but the increasingly strong performance of the sales market could see us out of the gloom soon.

The June quarter was another challenging one for investors in Sydney’s Eastern Suburbs, at least when it came to rental returns. However, the strong performance of the Eastern Suburbs sales market should bring welcome relief. 

The Eastern Suburbs Real Estate Market: Confidence Returning 

One factor that we think has had a major impact on the Sydney property market generally has been the election result. The Morrison government’s surprise win means Labor’s proposed changes to both negative gearing and the CGT discount are off the table for the foreseeable future. 

This combined with interest rate cuts in both June and July, to introduce new confidence into the market and make buying property a more attractive proposition than it has been in some time. 

In line with this, by June 2019, we started seeing city-wide auction clearance rates around 70% once again, albeit with more limited stock than we’d usually expect at this time of year. These peaked at a healthy 77% on 10 July 2019.  In the Eastern Suburbs, the auction clearance rate reached an incredible 96% that same weekend. 

Eastern Suburbs Sales: Breaking It Down By The Numbers

• Eastern suburbs auction clearance rate: (Wentworth Courier: 96% 10/7/2019)
  
• Median Sydney property price as at 30 June 2019: +0.1% month, -1.1% qtr ($777,693) 
• Median Sydney unit price: +0.3% month, -0.8% qtr ($682,374) 
• Median Sydney house price: +0.0% month, -1.2% qtr ($866,524)

The Eastern Suburbs Rental Market: A Similar Pattern Continues

According to the CoreLogic Quarterly Rental Review for July 2019, national weekly rents rose by 0.3% - slower than the one per cent recorded during the first three months of the year but level with the same period in 2018. 

Unfortunately, Sydney was the worst performing city with a -0.3% fall in median rent, or -2.7% over 12 months. Sydney keeps its crown as the most expensive city in which to lease a property…but only just. The median rent here is now $580 a week, with Canberra coming in at second at $549 a week.  

Sydney also currently has the lowest rental yields of all capital cities, with an average of 3.5% over the past quarter - although that is up from 3.2% a year ago - thanks largely to declining property values.

The Light At The End Of The Tunnel For Investors?

In April 2019, we reported that Sydney’s rental market was slower than it had been for some time.  The June quarter just past has taken on a similar pattern according to the official numbers, with an average vacancy rate of 3.23% over the three months to 30 June 2019, compared to 3.23% for the March quarter.

Our experience however, has been more positive. As an agency, we leased 36% more properties over the June quarter compared to April - a sign both that tenants are more willing to make a move and also that investors are more willing to meet their expectations when it comes to price. 

One factor weighing against this confidence is that there is currently an oversupply of property on the market. Given that demand has not been strong for some time, tenants have significant choice and can take their time making a decision. Many investors still need to reduce rent to attract interest. 

This scenario will only change once the oversupply is addressed. For that to happen, demand must rise to meet the supply, which means the overall number of people looking to make a move must rise. Usually this comes about as a result of a lift in economic conditions, with more people looking to move to the inner-suburbs to be close to work and amenities. 

What We’ve Noticed In Sydney’s East

That said, family homes such as houses and semis, in good condition and well-located are in short supply. This is the standout market segment right now. Conversely,  properties that are not at all unique - such as standard two-bedroom units in poor condition - are difficult to lease. This is especially true if they’re located near brand new stock that are priced in a similar price range - a much more attractive proposition to most renters.

To this end, we’d single out Bronte, Randwick and Queens Park as strong performers. In these three suburbs, the median rent on a four-bedroom home is now $2,200, $1,450 and $1,625 respectively. 

Eastern Suburbs Rentals: Breaking It Down By Numbers

• Median Sydney rental price (units): $550 
• Median Sydney rental price (houses): $615 

• Vacancy Rate (real estate industry): 3.5%
• Vacancy Rate (Taylors): 1.8%