Sydney property investors should consider selling before the market worsens.
The latest rental vacancy data from both the Real Estate Institute of New Zealand (REINSW) and SQM Research shows vacancy rates ballooning, especially across the inner-city:
Sydney’s rents are already falling, down 1.0% in the year to June according to CoreLogic, and have been negative for several years:
Now with immigration collapsing and vacancies rising 70% from the same time last year, Sydney landlords are facing hefty rental reductions, as reported yesterday by ABC News:
Chief economist at BIS Oxford Economics Sarah Hunter said the heart of the city bore the brunt of rental vacancy rates because it was disproportionately exposed to the impact of the standstill in migration.
“That’s normally where a lot of overseas students will locate themselves and that demand obviously has taken a significant hit with the closing of the border,” she said…
“We’ve also seen a drop-off in demand from some of the younger people who might normally live in share houses and share apartments that have been hit particularly hard by the pandemic.
“Perhaps they are having to relocate back to their parents, so that demand has dried up.”
Another reason behind the increase in rental vacancies is due to a glut of new apartments hitting the market, Ms Hunter said.
“We knew that those completions were coming and they’ve come at the same time [as the pandemic] so, put all that together and the vacancy rate in the centre of town has really shot up.”
Of course it is not just rents that are falling, but prices too.
According to CoreLogic, Sydney dwelling values are down 1.9% from their 5 May peak:
Sarah Hunter from BIS Oxford Economics rightly believes that prices will continue to fall for the foreseeable future:
“The economic conditions are obviously very challenging right now, so from a demand, affordability, ability to pay perspective, that’s a negative. So you put those things together and you do get falling prices.
So we do think you will see falling prices at least for the next 12 months. Maybe even 18 months and beyond that”.
With both prices and rents falling, Sydney property investors should sell while they can.