Low vacancy rates continue to push rents through the roof, but with dwindling supply of new dwellings in the pipeline, Sydney’s accommodation crisis is set to worsen.
Property values in NSW barely moved, with metropolitan Sydney recording negligible growth of less than half a percent in the three months to May, according to the latest Residex data. In regional areas, real estate prices have taken a small step backwards, with negative growth of 1.19% recorded across the same period.
The beleaguered Sydney residential market has ground to a halt, and the short-term outlook, according to Braxton Chase director Andrew Donnelly, is not good.
He says the imbalance between median wages and median property prices in Sydney is much more pronounced than in any other capital in Australia, turning Sydney into “an affordability nightmare zone, especially for first homebuyers”.
“In addition to interest rates coming down, Sydney needs an enormous economic jolt and upward pressure on wage growth before the market can move forward again,” Donnelly says.
The bright patch for Sydney is rental yields, which continue to trend upwards.
“Investors can be forgiven for forgetting about capital growth for 2008 and hoping for the best in 2009,” Donnelly adds. “Rising yields will probably be the key factor dragging them across the line.”
But while increasing rental yields are providing much-welcome relief to existing landlords, they’re doing to little to encourage new investors to enter the Sydney property market.
Investors are still cautious to dip their toe in the market, despite the fact that rental returns that have increased by 20% in twelve months, up from $400 per week in May 2007 to $480 in May 2008, according to Residex.
REINSW President Steve Martin says Sydney vacancy rates have hovered around or below 1% for more than a year, and calls on the State Government to remove land tax and stamp duty for investors, so that property investment is on the same level playing field as other investment options.
“At present, property investors are unfairly penalised for providing something that actually provides benefit to the community – housing for people,” Martin said. “Make no mistake, we are not facing a crisis – this is a crisis. There are people who have no where to live.”