Sydney rental market remains flat
For the second consecutive quarter, rental growth has remained flat. Despite a flat rental market, demand for the Sydney real estate market remains strong; yields are still high and demand is a net undersupply of dwelling in Sydney. Property investors are beginning to return to the Sydney housing market, lured by high yields, a return of positive sentiment and historically low interest rates.
This quarter we saw the RBA (Reserve Bank of Australia) raise interest rates for the first time in 18 months. the RBA cash rates currently stands at 3.25%. The rapid and dramatic slashing of rates earlier in the year has been very favourable to investors. Mortgage repayments have been reduced by up to half for some property investors, helping to bump up the total yields on their investment properties. This favourable environment has been luring savvy investors back into the Sydney property market. For the first time in a long time there are opportunities for positively geared property in the Sydney real estate market. The drop in the first home owners grant has reduced the demand for property in this segment of the market; however investors are more than making up for this, returning to the property market on mass.
Median Weekly Rents Sydney *
| |
Units |
Houses |
Unit Yields |
House Yields |
| October 08 |
$420 |
$445 |
5.10% |
4.43% |
| October 09 |
$415 |
$450 |
5.18% |
4.55% |
The current average weekly rent for Sydney houses stands at $450 per week (up slightly from $445 a year ago) a rise of 2.6% year on year. The average weekly rent for units is currently $415 per week (down a touch from $420 a year ago) a fall of 1.2%. This gives an average gross yield for houses and units of 4.55% and 5.18% respectively.
The reduction of the first home owners grant at the end of September is a significant factor in the rental market. This reduction of the grant in turn reduces the attractiveness of buying over renting.
The increase in interest rates also dampens the first home owners segment of the market, forcing many to remains as tenants till they can more comfortably afford to purchase their first property.
Short and long term migration rates along with high birth rates continue to push the population along strongly, creating a continued gap between dwelling supply and demand. This population growth will assist in pushing rental prices up.
* Data courtesy of APM
JRS - Investment property management experts.