NSW Rental Drought

From a REINSW release on latest NSW vacancy rates:

Released 11 September 2007

For the 12th month in a row, the residential property vacancy rate in Sydney has remained at below 2% - the benchmark figure that indicates whether or not there is a rental crisis.

Data just released by the Real Estate Institute of New South Wales (REINSW) shows that the August vacancy rate in Sydney overall was 1.5%, with the inner, middle and outer suburbs all recording vacancy levels below 1.8%. The situation was best in outer Sydney where the rate was 1.7% and worst in middle Sydney where the vacancy rate remained at 1.4% for the third month in a row.

“This situation is very worrying,” said REINSW President Cristine Castle. "Despite all the talk, there has been no action and no answers. And with other data showing a fall in new housing construction and a drop in housing loans, the supply of available property in a city such as Sydney with its ever-growing population is simply going to continue to worsen.”

Mrs Castle said that people are bracing themselves for further interest rate increases, which will further dampen the market and reduce the number of people investing in sorely-needed rental property.

“Investors need huge sweeteners to come back into the market,” she said. “It starts in our backyard – essentially we need the State Government to take the initiative so that supply can be matched with demand. If nothing happens, vacancy rates will stay historically low, rents will rise and people will continue to feel the pressure.”


Residential vacancy rates in Sydney:


Aug 2007 July 07 June 07 May 07 April 07
SYDNEY 1.5% 1.4% 1.5% 1.3% 1.4%
Inner (0-10km from CBD) 1.5 1.4 1.7 1.3 1.3
Middle (10-25km) 1.4 1.4 1.4 1.2 1.2
Outer (>25km) 1.7 1.5 1.3 1.4 1.7

 

The government should introduce incentives for investors to enter the market
or rents will continue to go up and up and up...
Cheers
Bill

 

But if rents go up, won't the marketplace provide it's own incentive?

 

Yes but how much do rents need to go up for it to be attractive.

Ie what will the yields need to increase to - 6%? It may provide its own market place however renters might expect another 50% increase in rents before this happen. Surely they cant afford another 50% increase...

 

They may have to cancel their Foxtel subscriptions, eat less takeaway and sell their Subaru Forresters!

 

Actually IP's don't need to be positive geared to attract lanlords.

It's a gradual thing, the more the rents go up the more affortable they will become.

Then more investors will buy, prices will start rising again and the housing situation will improve.

Cheers
Bill