Sydney property investors should sell while they can

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.

Leith van Onselen
Latest posts by Leith van Onselen (see all)

Comments

    • The buyers will start disappearing rapidly
      I wrote a year ago mid last last year
      Q4 2019 was really the last opportunity to sell
      Very hard to selling into a falling market
      Buyer just keeps lowering their buy price
      In nearly all times you have to sell into strength or buy into weakness or you just get crucified
      As we head into Q 4 it’s all over
      The falls in Mel and Syd are going to accelerate
      There is now huge demand for lower end regional country homes from affluent Melb buyers
      They want to buy for $500k to $600k Mansfield and Bright and towns N of Seymour
      They want to initially hold Melb but it’ll come where they exit big cities
      but that affluent will sell their Melb investment property to be able to buy more rural regional
      Another note I had to go into the city for work yesterday, the city was virtually a ghost town
      One more thing the AFFLUENT WILL BECOME EFFLUENT
      I said last year I’m going to park my soup van in church street Brighton, it’s the macan drivers that’ll need to soup the most
      BC’s soup van, an old gelato truck maybe we could be a cash converters, they can exchange a pair of Valentino shoes for soup credits
      I think it’s too late now to unload your investment property

      • DominicMEMBER

        You, know, I look at some of the property in Sydney and it boggles the mind. The fact that people are willing to pay $1m for a tiny 2 bed ’60s unit in the bay area, with ‘water glimpses’ if you’re lucky, (with what looks like all the original fittings and carpet!) just screams insanity has taken hold.

        The mentality is the same as those piling into TSLA stock at $1,600 — a company that has never made a profit and likely never will. The buyers are simply relying on being able to sell their stock to a greater fool at a higher price.

        • You forget the enormous historical rise in rents.
          Literally $200 per week, then $400 per week, then $800 per week, then $1050 and recently down to $900.
          The rents indicate an outrageous shortage and exploitation opportunity.

          • DominicMEMBER

            Well, there’s little you can do about those – they are what they are. However, importing 400k migrants every year doesn’t exactly help the situation, along with ridiculous zoning constraints which only serve to enrich land-bankers.

        • Tesla, PE ratio of 10349….!…that means on the current revenue it will take 10,349 years to pay of the value of the company….!

          • DominicMEMBER

            You tell that to average knob and they just don’t get it — the cars look great, buy the stock!

            The coming losses for TSLA stock holders are going to be epic — even if the company magically manages to make a profit and time soon.

      • Demand for rural properties ex-Melbourne are not just for Mansfield and Bright and towns N of Seymour. Also in Otway shire south of Melbourne. Agents from Lorne to Apollo Bay, Geelong to Colac are saying they’ve never had it so good. Prices rising and very few properties for sale.

        Wonder how long that’ll last? Perhaps the new IP? lol

        • Drt
          I only spoke to a larger finance brokerage firm yesterday and he was doing three loans for those places
          Yes it’s wide spread coastal and rural all over VIC

        • BigDuke6MEMBER

          Its also a new phenomenon for victorians called “white flight”. Well known in other parts of the world

          • “He said high volumes of non-English-speaking residents forced schools, clubs, civic associations and shopping areas to change completely in their composition.

            Such changes were some of several reasons long-time residents began to feel uncomfortable in their neighbourhoods.”

            The issue isn’t multi-ethnicity, but multi-cultures not attempting to fit in. People are sick of hearing every other language than English spoken loudly in public. They are sick of new arrivals not engaging with the locals in a positive or even neutral way.

      • Strange EconomicsMEMBER

        No renters No buyers No students. And only down 1.9% after a 10 % increase. Joke. Why isn’t it down 20%. Fake market.

        • Interest rates artificially low
          Stimulus
          Low volume

          The falls will pick up steam over time, whether fast or slow we are now past the peak in prices in Melb and Syd
          Melb definitely

          Strange just do yourself a favour rent buy gold and try and enjoy life and don’t worry about the prices

          • Jumping jack flash

            Was looking at OnTheHouse website last night and this morning. Its amazing to see the effects of 20 years of interest rate manipulation and the subsequent debt growth in my area. Truly astounding.

            As easy as it went up with the debt, as the debt subsides it will go down. It does depend on the debt staying away though. That’s the key.

      • I have to say, I can see it. BUT, the actual houses for sales are still sky high prices. So it has nowhere hit mainstream yet.

        • Divya
          You have to think in a different way

          You have a choice of two general options

          1 you buy a home in say Sydney of say the example of the $1M 60s style unit
          So say you have ok equity let’s say $300,000
          So you borrow 750,000 and pay separately stamp duty of $50,000
          So you now have further risks
          1 interest rate risk, interest rates will rise they will not be 2.5% fake interest rates over the next 5 years let alone 30 years
          2 if NSW government implements OO land tax, they may not give a rebate
          3 what if you lose your job and are forced to sell in a rising interest rate falling house price environment you have no choice but to sell and then you’ll be paying another 2.5% total to sell,
          4. The only way to protect interest rate risk is by fixing and you’ll need to break that rate to sell 0= it’s way too risky to be variable at these interest rates
          5. Ok you take a fixed rate for 3 years at 2.5% and all else is ok over the 3 years but when your fixed rate expires you need to roll into 5% interest rates that’s double the interest so on say $700k your interest without repayments is now $35k per annum instead of $17.5K
          5 if you happen to be forced to move for employment and there were no available tenants because 3 others in your block are empty and the land lord has reduced rent by 40% to get some in

          Choice 2
          Rent have a 5 to 10% reduction in rent ore year
          Your new land lord kissing your arxe and they will (I’m getting that now in inner SE Melb they’ve reduced rent by 20% and petrified to have the home empty)
          Instead of giving the state government $50k you bought at today prices 20 ounces of gold (2/3 of a KG)

          Guess it’s your choice

          * NOTE THIS DOWN IN YOUR OUTLOOK FOR JULY 2027 (7 years away)

          You will buy that unit with no mortgage (outright) with that 2/3 KG of gold

          I would not even surprise me that you pay the owner on signing of contract a bag of 20 x 1 ounce pieces

          • The problem is not many people want to buy $300K worth of Gold – and if they do it doesn’t generate an income. So you then have a different risk – bail ins, equity market crash, negative rates (for depositors), etc.
            Not saying your views are wrong – just saying there are no alternative choices for the average punter.

          • Oh all saying is that right now the prices are being set by people who don’t think about the 5 things you mentioned. So that becomes our reality.

          • C3
            That’s the $300,000 question we are all in search of the answer
            Where do you put your $300k
            If you find out can you tell me pls

  1. It’ll be grand…Prices to start to rise when spring comes and a lovely waterfall of nubile cherubs from the great Eastern Country are allowed to flow into Sydney and Melbourne, virus laden, to save those brave landlords…

    • DominicMEMBER

      I like it – tell me more …

      Assume the story finishes with: And they all lived happily ever after – wallowing in vast pools of money.

    • Not this time
      Be patient you’ll be buying more than half iof today’s prices
      We are going to see a blood bath in property

      • Why are people dismissing HCQ as an effective prophylactic and treatment for COV2? If people knew what’s in vaccines, they’d change their love for them immediately.

        • BoomToBustMEMBER

          I’d love to agree with you but unfortunately you are wrong. I’ve told people whats in them, and they still shoot me down and demand to have it injected into them. What I find ironic is they are happy to have heavy metals in the form of Mercury the second most toxic substance known to man injected into them which is designed to stimulate an immune system over response (why do we have so many autoimmune diseases which is exactly what the mercury is designed to do ??!!) that is 100% guaranteed to damage their bodies in exchange for protection against something that *might* make them sick. Fear defies all logic.

          • https://www.smh.com.au/world/europe/oxford-coronavirus-vaccine-triggers-strong-immune-response-trial-shows-20200720-p55dtl.html

            Trials on more than 1077 healthy adults aged 18 to 55 were conducted in British hospitals between April and May. The trial concluded that the vaccine provoked a strong antibody and T cell response, and minor side-effects like headaches, fatigue and chills were able to be treated with paracetamol.

            so side effects for people between 17 and 55 are same as getting infected by the virus – great vaccine

          • “so side effects for people between 17 and 55 are same as getting infected by the virus – great vaccine”
            bahhahahha.. lol.

          • BoomToBustMEMBER

            @Bowerbird – Interesting link, if you read below it where it says there is no link between Autism and Vaccinations you are aware that the US CDC is being sued and as admitted they dont have any data to backup that claim ?? (i’m not giving an opinion either way) https://www.collective-evolution.com/2020/03/08/cdc-admits-in-federal-court-they-have-no-evidence-vaccines-dont-cause-autism/

            Just because information is on a government website does not make it true.

          • @Divya
            According to the estimates between 40% and 80% of people under 55 are asymptomatic and fatality rate is below 0.02% (less than one in 5k). Much less among healty population of that age.
            According to trials this vaccine made 70% of healthy participants aged 17 to 55 experience noticeable side effects including some of typical and most common symptoms of covid like fever, headache, …

            So if they just infected 1070 healthy people aged 17 to 55 with coronavirus they would have seen less people with health problems.

          • There’s no evidence of increasing autism, just increasing detection. As autism numbers rise the other types of impairments have fallen in equal numbers. That being said antigen vaccines are not associated with beneficial outcomes in some cases and often produce poor immune response. Genomic vaccines will hopefully overcome this problem.

          • BtB, yep – fear and ignorance dismisses all logic. Also known as the Ostrich Effect.
            Mercury in fish bad, but OK in vaccines
            Aluminum in deodorants bad, but OK in vaccines
            Formaldehyde in food bad, but OK in vaccines

            It all comes down to warped individual perspective.

          • drsmithyMEMBER

            @Bowerbird – Interesting link, if you read below it where it says there is no link between Autism and Vaccinations you are aware that the US CDC is being sued and as admitted they dont have any data to backup that claim ??

            You seem to have the burden of proof arse-about-face.

          • BoomToBustMEMBER

            Not at all – Everyone is missing the point. For many years the CDC has said they have conducted studies saying there is no link. However it turns out there have been no studies so they are lying. The FedGovofAU has then published this information as a fact, which there is no proof to establish either way at present. Just for the record i’m not providing an opinion either way here.

        • Could you provide a link to a peer reviewed study outlining the efficacy of HCQ.

  2. WhatcouldgowrongMEMBER

    Need to get in them foreign students quick! Rentiers’ gonna rentier.

  3. Sydney’s rents are already falling, down 1.0% in the year to June according to CoreLogic:

    this is a joke? right?

    rents are down 1% (± 20% because our index is as shi$$y as it can be but we have to cover our asses)

  4. Sydney’s rents are already falling, down 1.0% in the year to June according to CoreLogic:

    this is a joke? right?

    rents are down 1% (± 20% because our index is as $hitty as it can be but we have to cover our asses)

  5. Interest rate 2.6%, fixed for 3 years. Wake me up in 2023 and I’ll think about whether to sell or not.

    • That’s a rate low enough to entice but is high relative to real wage growth.Crushingly high and won’t work on its own. There needs to be additional inducement with more ‘inventive’ policy measures. I think the policy we have seen so far is only as much as needs to be seen at this point; there’s more to come. Otherwise, and this is where I sit, debt deflation continues its relentless march unchecked and perhaps nothing will save this bubble.

      • Jumping jack flash

        Its the eligibility and buy-in that are the problem.

        There’s plenty of cheap debt. Even when it was at 5% the debt was cheap as, 2.5% is even cheaper, but the eligibility and buy-in remain pretty much the same.

        Government and banks need to address the actual problem which is not “affordability” because everything is affordable with the correct amounts of debt, nor is it the price of the debt, it is the fact that as the amount of debt that is necessary to obtain to afford the properties continues to rise, they need to adjust the eligibility bar lower for that volume of debt, and reduce the ponzi buy-in. 5% of a million is a fair whack of cash to try to save up in this economy.

        This hasn’t been done so far,

        • Yes, I agree. It didn’t matter so much with rising prices but the mountain of debt required is not being deflated away and zero or negative wage growth makes it untenable. For me at least; I pity those sucked in by it.

  6. Sell and do what? If you have decent property (not a sh!t box) just keep it – providing you can afford it. If everything turns to sh!t then does it really matter if and when you sell.

    • Sell and do what? If you have decent property (not a sh!t box) just keep it – providing you can afford it.

      according to tax data 80% of them were losing money on holding these investments well before rents crashed and vacancies increased. With income down and loses up I would guess not very many can afford them (in the sense that’s not worth with prices falling)
      also many are at the age where waiting a decade for prices to rise enough to make any decent profit is stupid because they may be dead by than while draining their savings to keep them

      also if they sell some will get profit they can use instead of dividend and other incomes to fund their planed lavish retirement life style like buying overpriced caravans and new land rovers

    • Agree Joe – that is a strong mentality – what do you do with it? For the boomers just about to buy the caravan yes they should sell – but for those 5yrs away or more and who are not mortgaged to the hilt (or at all) – there are no realistic alternatives. They will think they can always rent it out and even if the rent goes down for a bit it is a lot better thanh a TD or the volatility of bank shares. So why not just hold onto it if they can afford to.

  7. The UsurperMEMBER

    ‘Real Estate Institute of New Zealand (REINSW)’

    I assume New Zealand is NSW?

    On a side note, how do you embed quotes in a comment?

  8. TailorTrashMEMBER

    Rents down 1% ……wages and income down ??
    …..the great screwing of the kids continue

  9. Sydney rental yields are still what? 2-3% ?

    Why would anyone sell
    They’re positively geared at these low rates

    Rates will never rise

    • Of course they are.

      You should call Scrotty from marketing and share your genius with him.

    • C.M.BurnsMEMBER

      Positively geared assuming;
      Their rental income remains the same
      with IRs already being at the bottom and rents still coming off nose bleed levels, positive gearing is going to be a rarity.

      • Who says interest rates are at the bottom ?

        And the government is already reopening the gates

        Honestly, the biggest immigration/tourism/employment shock in history and rents went down 1%?

        Come on guys, open your eyes

          • C.M.BurnsMEMBER

            because it’s complete fiction. see below for some real world examples of discounts and stock on market levels.

        • Rents fell 1% in a corelogic fairy tale
          in real world 10% for ongoing tenants and 20% down for new leases

        • I dont think this includes those landlords providing 50% rent reduction.
          What’s not talked about in Scummo’s address is that if they’re acknowledging that people need support beyond Sept, then they’re indicating to landlords that renters will need support beyond Sept.
          If those landlords think that the 50% reduction can be taken away post Sept given second wave, they’re dreaming.
          So yeah, the indexes showing 1% down for rents, but a year of 50% rent reduction makes it rental growth -51%. But you know, you keep looking at the indexes, why not…

        • C.M.BurnsMEMBER

          i have just gone through the exercise of moving into a new place. Great 2 bed terrace in the inner west. The asking rent is $150 less than what it was in 2019. That’s an %18 discount. I also looked at many other, less nice places that were similarly discounted and failed to let (the crowds and demand is only there for a the “really” nice places) – some of those have been further discounted since I inspected and are still empty. So that’s a 20% discount and still hasn’t met the market price.

          And let’s not talk about those savvy investors who bought 1 bedrooms inner city apartments. One RE agent showed me their current 1-bedroom book – it was hundreds of 1 bedroom apartments in the Inner city, all sitting empty. So that’s an effective discount of 100% from 2019 rental price right ?

          • anecdata

            The biggest economic shock in history, and as far as I can see prices have barely moved

            That tells you everything you need to know

            All lockdowns will be reversed, borders will be reopened, immigration will resume
            Surely you can acknowledge at least that?

          • When?
            Not just scummo saying he’ll do it.. but actually doing it. without taking the economy down with another lockdown.
            So when? let me guess.. in 18months time.

          • C.M. Burns
            Yep. Spoke to a mate last night with a rental house in inner Richmond, Melb. Agent told him to knock $150.00 p/w off the rent & advised him to sell now. Agents are all holding their breath for September when they expect all hell to break loose.

          • C.M.BurnsMEMBER

            ill trust my real world anecdata over an opaque index by the industry for the benefit of the industry, that bears no resemblance to the lived experience myself and others have had

            yes, i acknowledge that at some point in the future the conditions will reverse. I have a good friend high up in NSW Health – conditions are not going to improve and reverse back to the pre-covid until late 2021, possibly 2022 now (given how quickly VIC and then the rest of Oz have gone into a second wave)

          • So you acknowledge conditions will reverse in at most 18 months
            Then why, on earth, would NOW be the best time for Sydney property investors to sell?
            At the very worst time possible, and with a light around the corner

            Especially since they don’t have to, because of bank forebearance

            Wouldn’t now be the best time possible to BUY sydney property under these circumstances?

    • How about $10k strata for dogboxes?
      How about 10% vacancy rate meaning on average there is no rental income for 5 weeks a year?
      How about fixed IR loans?
      How about renters that dont pay anything or pay half ?

  10. That 1% down in rents obviously doesn’t include the huge numbers of people getting a Covid19 50% rent reduction. Any stat that includes the word hedonic should be avoided at all costs.

  11. Meanwhile Sydney auction clearance rate increases to 76% last weekend!
    I wonder what is going to happen when the vaccine gets announced……

    • Yeah … a constant 40% of scheduled auctions get reported aold but auction rates booming from 55% to 80%
      LOL

    • The90kwbeastMEMBER

      Was at a 3 bedroom townhouse auction in Castle Hill in Sydney on Saturday, fetched $1m, the same price as a very similar townhouse in the same complex went for 8 months back at peak bubble. Nuts.

  12. Ajaydee73MEMBER

    There are many factors at play but the virus will be on its way out in six months with the combined effects of natural herd immunity and the Oxford vaccine.

    • Oxford vaccine so far just reported creating immune response, not tested if response is high enough and not confirmed that the antibodies actualy work on cov2 virus

    • C.M.BurnsMEMBER

      once a vaccine is actually confirmed effective and passes all medical trials, we are still looking at at least 12 months for the global supply chain and global and then regional distribution before it’s getting injected into your arm in a hospital car park somewhere.

    • Well fkck me – thank fkck there are randoms on the internet with absolute certainty about this virus and its vaccines, because actual doctors and scientists seem a lot more cautious and uncertain and frankly I’d rather rely on someone’s overconfident sh!tposting on a blog comments page!

      • Exactly right.

        Should’ve listened to actual Doctors of Propertytology and bought 10 years ago. Instead of relying on random sh!tposters on fringe econom!c forums predicting doom with overconfident certainty, every 18 months.

        • Too right. There are no doctors more reliable than self appointed Doctors of Propertyology!

        • Tiliqua scincoidesMEMBER

          How else are they supposed to get the clicks Peachy? Nothing is more popular than pedaling false hope to disenfranchised young Australians. It’s worked so far so why change the business model 😉

        • Yeah, like I have two GPs and one checks me for skin cancers and advises me to avoid sun during summer, the other read an internet blog and reckons I should pray to a pyramid while blending my chakras in Péte Eváns’ bullsh!t blender while wiping my posterior with activated kale.

          And they are both right, right? Yeah. Good one “Doctor”.

          • You see, even a case you thought that is safe argument is actually not
            There are many studies and by now prevailing opinion that sun exposure in adult age not only improves health via vit D and other benefits but also reduces risk of malanoma

            https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5129901/

            So your doctor you consider to be smart is maybe killing you

          • Someone with my skin needs about 15 mins of sun a day in summer to get enough vit D. Which I do. So don’t fret. It’s pretty easy to get enough vit D but not get cancer. The actual real doctor’s advice is fine.

          • It’s not all about vit D
            sun exposure makes nitrogen oxides particularly nitrate to get into a bloodstream and they significantly reduce blood pressure and heart problems

            also sun exposure in is a risk factor for skin cancers, but no link has been shown with increased all-cause mortality because risk of some of the most deadly skin cancers like melanoma actually reduces with increase adult sun exposure

            also what we think is a “healthy range” or “enough” vitD may not be that (in my lifetime I witnessed changes to healthy range few times). what if 60 or 80 nmol/L is not enough to prevent heart disease?
            if you think 15 min of your face and hands only being exposed to the sun while you walk around is enough you may be very wrong
            medicine is not a Science (with uppercase S) but rather an art based on applied statistics often based on inadequate samples and questionable control groups. Often meteorologist have better change of being right than medical doctors

          • Face and hands? I thought it was buttholes facing eastwards at dawn and get those sunspots into ya unfiltered and direct! Where are you getting your medical advice? (I get mine from this blog, obvs.)

  13. ErmingtonPlumbingMEMBER

    If I sell my place and Prices go up I’m gunna be really mad at you Leith

  14. Jumping jack flash

    First ones out take the cash – well, take the debt from the few remaining people who are eligible for the correct amounts of debt for them to get out on top.

    The rest fight over the dregs, and will need to take whatever the banks are willing to lend out to them.

    Ready……….. GO!