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HIA predicts Sydney rental crisis by Christmas 2006

Discussion in 'Real Estate' started by Jacque, 3rd Dec, 2005.

  1. Jacque

    Jacque Team InvestEd

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    HIA (Housing Industry of Aust) recently claimed (Oct 2005) that the current rental supply is not meeting demand and that Sydney may well be heading for a rental crisis, running out of vacant rental stock within the next 18 mths.
    They blame Sydney councils’ slow approval processes for new apartments. An estimated 4200 flats, units and apartments are stuck in the offices of Sydney councils awaiting approval, with allegations that some have been on council desks for more than two years.

    HIA’s NSW Executive Director Wayne Gersbach said that with Sydney rents already increasing faster than inflation, urgent action must be taken to get apartment and medium density projects into the construction pipeline rather than being locked up at the approval stage.

    “While the merry-go-round of arguments relating to planning, zoning, and sustainability continue, the unstoppable force of housing demand will further drive up rents and squeeze modest and low income earners,” he said.

    “Sydney’s supply of rental dwellings increased by only 14,500 in 2004/05, down 13% on the previous year and sending the rental vacancy rate plunging from 3.6 to 2.5%.
    With rental investment lending in NSW still down some 40% on two years ago, and with 14 consecutive months of sub-2000 new unit approvals, it is hard to see us adding more than 10,000 new properties to the rental stock over the next year. At this rate, the Sydney rental vacancy rate will plunge to zero by Christmas next year.”

    Naturally, one can assume that such a looming crisis will not affect all of Sydney, and certainly not those suburbs who are still experiencing continual growth through new housing estates.
    However, it's interesting to read what HIA thinks and we will have to now wait until Dec 2006 to see if their forecasts ring true.
     
  2. Nigel Ward

    Nigel Ward Team InvestEd

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    Jaq I know that at least on the lower north shore the list of apartments for rent seems to be getting shorter each week.

    I guess the big question is whether this will stem and perhaps ultimately reverse the gradual price decline which the media is reporting?

    This seems a bit surprising given the number of new units which have been built in the St Leonards vicinity...but it's happening. Perhaps that construction only satisfied the built up demand?

    Thoughts?
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    There's been a bit of commercial development around St Leonards recently too - not sure how much impact that might have on demand, but it's got to help if there's more jobs based in that area now.
     
  4. Glebe

    Glebe Well-Known Member

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    Whilst I don't agree or disagree with their statistics and assessments, it's worth noting that these guys are a biased lobby group for the housing industry.
     
  5. Jacque

    Jacque Team InvestEd

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    So do you believe they're just scaremongering Glebe?
    I realise they have their own agenda (all building is good so to speak!) but with vacancy rates falling and investors still out of the market it does look as though a tightening iof rental stock is predictable.
    And as for declining prices, well time will tell. Has Sydney hit bottom yet?
     
  6. Glebe

    Glebe Well-Known Member

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    Not necessarily, well, kinda. As I said their statistics may be true, but I'm sure there are many statistics in the world of property development and they're choosing the ones that suit their position.

    For what it's worth, I agree with them that development approvals take waaay too long on council desks. 2 years is rediculous.

    But a rental crisis within 18 months.. we'll see...
     
  7. Here_To_Learn

    Here_To_Learn Well-Known Member

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    Has anyone driven past Rhodes lately ? I entered the car park from the rear entrance ( not via Ikea ) and could not believe the amount of development ! :eek:

    I don't have all the facts however find it hard to believe Sydney will have a vancancy rate of zero. Anyone looked at any other major cities around the world ? :confused:
     
  8. Alan

    Alan Well-Known Member

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    Personally I think a bit of a tightening of the rental market is long overdue and a good thing.

    In the last couple of years my rents have hardly moved at all while costs have certainly gone up. I look forward to being able to increase my rents a bit.

    Anyway, if we want a 'soft landing', some increased rents will help support some of the still extended valuations.

    Slight pullback in valuations.........increases in rents........sounds reasonable to me......
     
  9. Jacque

    Jacque Team InvestEd

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    I'm with Alan on this one- a soft landing sounds more realistic, rather than 0% vacancy rates. With all other costs increasing (in particular the whammy land tax in NSW) it's been tough, no doubt about it.
    Rents, like property prices, tend to go in cycles too, and an increase is long overdue in my books :)