The first quarter of 2019 got off to a solid start but the rental market is slowing again as we enter Autumn.
There is now no doubt Sydney’s rental market is slower than it was a few years ago and this is evident in the headlines about rising vacancy rates across the city.
As we wrote in our December Quarterly Report, the Sydney property market has not been in a good place for some time, with sales prices and rents falling over the final month of 2018.
This quarter started off a little differently, with our property managers reporting a spike in activity during January. Since then, conditions have returned to where we left them at the end of last year.
Despite this, there are some glimmers of hope in Sydney’s Eastern Suburbs.
As we wrote last month, some suburbs (Coogee and Bellevue Hill houses, Point Piper and Dover Heights units) actually experienced rent increases over 2018.
As 2019 unfolds we expect to see similar rays of positivity for investors in key, blue-chip areas where demand outstrips supply and lifestyle appeal holds strong.
After all, quality assets - including premium property - tend to hold up better than the average during a downturn.
The Eastern Suburbs Real Estate Sales Market
Sydney’s overall auction clearance rate stood at 54.9% in mid-April according to Corelogic. Preliminary figures showed the Eastern Suburbs stood at 51.9%, a significant fall compared to the figures we reported on this time last year.
Eastern Suburbs Sales: Breaking It Down By Numbers
- Eastern suburbs auction clearance rate: (Wentworth Courier: 65% 10/4/2019)
- Median Sydney property price as at 31 March 2019: -3.2% qtr ($782,473)
- Median Sydney unit price: -3.1% qtr ($687,327)
- Median Sydney house price: -3.2% qtr ($880,594)
Source: CoreLogic Hedonic Home Value Index March 2019
Eastern Suburbs Rental Market: A Mixed Story
According to the first CoreLogic Quarterly Rental Review for 2019, national weekly rents rose by one per cent during the first three months of the year and 0.4 per cent over the past 12 months.
That good news is tempered by the fact that the same report shows regional housing markets are performing marginally better than the capital cities.
Although Sydney retains the crown of having the most expensive weekly median rents in the country at $582 per week, rents in our city did not actually rise over the first quarter of 2019. In fact, they have fallen by 3.1 per cent over the past 12 months.
Sydney also currently has the lowest rental yields of all capital cities, with an average of 3.5 per cent over the past quarter.
An Atypical Market Pattern
The Eastern suburbs rental market typically follows the same annual pattern, with a busy Spring quarter at the end of the year before an early summer slowdown.
However, the past nine months have not followed that pattern at all.
The Spring quarter in 2018 never really took off. There was no increase in rents and rental enquiries at the end of winter. And, with the exception of that January 2019 spike, the pace of the market has been far slower than normal ever since. In February and March we’ve observed reduced activity in the market.
As we head into Autumn, demand continues to be slow and investors are having the effect of this compounded by an increase in the amount of available stock.
In this market, rents have to be realistic and properties need to be in good condition. Otherwise, investors face the prospect of having a prolonged period of vacancy or needing to discount heavily.
We expect to see more of the same conditions through winter, until at least spring.
Long term investors have seen this before and understand finding a good tenant and securing them for the long term should be the priority
What We’ve Observed In Sydney’s East
Against this backdrop, we’ve noticed a few microtrends in the Eastern Suburbs market, including:
- Apartments in a good condition and priced correctly are still attracting keen interest are renting quickly. However, overpriced and poorly presented units tend to stay vacant.
- No suburb is a standout performer right now. However, new units or units in very good condition that are close to amenities like shops, transport, parks or the beach are more popular right now and far easier to rent.
- Investors looking to attract tenants need to be realistic about the rent they’ll achieve and present their properties in the best light.
For those looking to buy there are deals to be had, but competition is tight for the few quality assets on the market.
Speak to your agent to find out what’s going on in the marketplace and where the real opportunities lie.
Eastern Suburbs Rentals: Breaking It Down By Numbers
- Median Sydney rental price (units): $507.90 (week ending 4 April 2019)
- Median Sydney rental price (houses): $705.10 (week ending 4 April 2019)
- Vacancy Rate (real estate industry): 3.7%
- Vacancy Rate (Taylors): 3.09%