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Vacancy rates paint mixed rental picture
JOSEPHINE TOVEY URBAN AFFAIRS
January 16, 2010
THE rent rises forecast for Sydney this year will hit some regions much worse than others, as the gap between vacancy rates in different suburbs widens by more than 10 per cent.
Economists said this week that rents would rise this year. The city-wide vacancy rate is around 1.6 per cent, but a suburb-by-suburb breakdown of the vacancy rates by SQM research shows the real picture will be far more varied.
Some of the highest vacancy rates are in the upper north shore, where a glut of dwellings sits empty: 7.5 per cent in Gordon and 7 per cent in Pymble in November last year, the most recent SQM figures show.
But in Hinchinbrook, southwest of Fairfield - the tightest market in Sydney - the vacancy rate was close to zero, with only 0.2 per cent of properties empty in November. Other suburbs in the west were feeling a similar squeeze, such as Fairfield (0.5 per cent), Campbelltown (0.7 per cent) and Penrith (0.8 per cent).
Alex Joiner, an economist from ANZ Economics and Markets Research, said that while a high vacancy rate was unlikely to drive down rents significantly, it would mean less growth. ''In suburbs where the demand is quite weak there may be virtually no rental growth or slight falls,'' Dr Joiner said.
An SQM property analyst, Louis Christopher, said the squeeze in the west was a result of a low level of investment in property in these suburbs and the demand for affordable housing.
Conversely, people had been priced out of ''prestige'' suburbs like Mosman this year, forcing up their vacancy rates.
The construction of large, expensive units and townhouses in the Ku-Ring-Gai area was also a factor in the high vacancy rates there, Mr Christopher said.
''I think a number of these blocks have targeted a demographic that isn't there,'' he said.
''If I had a choice between a house with a large backyard or an apartment, both for around $700,000, I know what I'd pick.''
Most analysts the Herald spoke to deemed 3-4 per cent to be a balanced or fair vacancy rate.
The vice-president of the Real Estate Institute of NSW, Wayne Stewart, said tighter marketplaces could lead to rent rises of between 2 and 5 per cent this year, but it was not likely to occur where vacancy rates were high. ''Where there's pressure for quick turnover you may see rates fall,'' he said.
Maree Culmone, from LJ Hooker Fairfield, said rents in her area had jumped by about 10 per cent last year as demand outstripped supply.
''Two years ago there's no way you would have rented out a two-bedroom duplex for $400 a week,'' she said.
SQM put the overall vacancy rate for Sydney in November at 1.7 per cent, while the REINSW it at 1.6 per cent.
A recent survey by Ku-Ring-Gai Council found that while 40 per cent of people in the local government area wanted to move house at some point, only 5 per cent wanted to move to a unit.
JOSEPHINE TOVEY URBAN AFFAIRS
January 16, 2010
THE rent rises forecast for Sydney this year will hit some regions much worse than others, as the gap between vacancy rates in different suburbs widens by more than 10 per cent.
Economists said this week that rents would rise this year. The city-wide vacancy rate is around 1.6 per cent, but a suburb-by-suburb breakdown of the vacancy rates by SQM research shows the real picture will be far more varied.
Some of the highest vacancy rates are in the upper north shore, where a glut of dwellings sits empty: 7.5 per cent in Gordon and 7 per cent in Pymble in November last year, the most recent SQM figures show.
But in Hinchinbrook, southwest of Fairfield - the tightest market in Sydney - the vacancy rate was close to zero, with only 0.2 per cent of properties empty in November. Other suburbs in the west were feeling a similar squeeze, such as Fairfield (0.5 per cent), Campbelltown (0.7 per cent) and Penrith (0.8 per cent).
Alex Joiner, an economist from ANZ Economics and Markets Research, said that while a high vacancy rate was unlikely to drive down rents significantly, it would mean less growth. ''In suburbs where the demand is quite weak there may be virtually no rental growth or slight falls,'' Dr Joiner said.
An SQM property analyst, Louis Christopher, said the squeeze in the west was a result of a low level of investment in property in these suburbs and the demand for affordable housing.
Conversely, people had been priced out of ''prestige'' suburbs like Mosman this year, forcing up their vacancy rates.
The construction of large, expensive units and townhouses in the Ku-Ring-Gai area was also a factor in the high vacancy rates there, Mr Christopher said.
''I think a number of these blocks have targeted a demographic that isn't there,'' he said.
''If I had a choice between a house with a large backyard or an apartment, both for around $700,000, I know what I'd pick.''
Most analysts the Herald spoke to deemed 3-4 per cent to be a balanced or fair vacancy rate.
The vice-president of the Real Estate Institute of NSW, Wayne Stewart, said tighter marketplaces could lead to rent rises of between 2 and 5 per cent this year, but it was not likely to occur where vacancy rates were high. ''Where there's pressure for quick turnover you may see rates fall,'' he said.
Maree Culmone, from LJ Hooker Fairfield, said rents in her area had jumped by about 10 per cent last year as demand outstripped supply.
''Two years ago there's no way you would have rented out a two-bedroom duplex for $400 a week,'' she said.
SQM put the overall vacancy rate for Sydney in November at 1.7 per cent, while the REINSW it at 1.6 per cent.
A recent survey by Ku-Ring-Gai Council found that while 40 per cent of people in the local government area wanted to move house at some point, only 5 per cent wanted to move to a unit.
