In the most expensive rental market in Australia, vacancy rates are climbing, and the trend is likely to continue
The national property market is finally entering a recovery period as Sydney’s correction phase begins to abate.
With the decline in the top quartile of the Sydney market easing over June 2019 in line with the steadying of the national property scene, CoreLogic head of research Tim Lawless believes this is indicative of Sydney’s impact on the downturn.
“We are seeing the first signs that the top end of Sydney and Melbourne’s housing markets are leading the recovery trend,” he says.
“The subtle rate of decline was heavily influenced by trends across Sydney and Melbourne, and the improving conditions through to mid-May were largely ‘organic’, predating the positive boost in sentiment following the federal election and interest rate cuts in early June and July.”
With a more rosy outlook for the near future, Tim McKibbin, CEO of the Real Estate Institute of NSW, suggests it could be the perfect time to get into the Sydney market as the low prices create better conditions for buyers.
“Now is a good time to be looking closely at where the market is headed over the coming months. With the election and banking royal commission behind us, the recent RBA interest rate cuts – and more cuts predicted, the fundamentals are in place for growth in property prices.”
An increase in property stock across Sydney has, however, resulted in the rental market slowing down. According to CoreLogic data, while rents have dropped in the capital recently, it remains the most expensive market in the country, with the median rent as of June 2019 coming in at $580 per week. This, along with increasing dwelling supply, means vacancy rates have been going up.
“Sydney’s vacancy rate is climbing and will most likely continue to do so for the next six to 12 months,” predicts OpenCorp director Matthew Lewison.
“There is a solid pipeline of existing development projects and homes still under construction.”
Nonetheless, Lewison also notes that reduced credit availability could significantly limit the amount of new housing stock coming on to the market.
“Assuming population growth remains steady, the impact of less completions is dwindling supply, leading to more competition. We expect this to be most evident in the rental market.”
SUBURB TO WATCH
ENGADINE:Limited potential in southern Sydney suburb
Dwelling values in the southern Sydney suburb of Engadine have been trending downwards in recent years, and in the year to June 2019, both house and unit markets went into the red.
House values dropped by 8.5% to a median of $816,765, while units saw a slight fall of 9.1% to $585,783. Rents went down as well, by 3.0% and 2.2% respectively. With yields also low at around 3%, it’s difficult to find much potential in the Engadine market.
The suburb is sandwiched between two national parks, the Royal National Park and Heathcote National Park. Engadine offers excellent views of Sydney across the Sydney Basin.
Amenities: Engadine is surrounded by national parks and has beautiful views of Sydney
Growth: Property values fell in the year to April 2019, continuing a downward trend