With the Sydney property market crash and falling house prices across the nation, rental properties in the harbour city have dropped for the first time in 12 years - leading Canberra to overtake Sydney as Australia’s most expensive city to rent a house.
According to Domain.com.au, the median weekly asking rent for a house in Sydney was $540 in December 2018, which is a drop of 1.80% when compared to the previous year. On the flipside, the weekly asking price for rental properties in Canberra grew 3.7% year on year, bringing the weekly median asking rent for houses to $560 in the capital.
What’s causing the drop for rental properties in Sydney?
The dip in asking price of rental properties in Sydney is largely due to an increased availability in stock, following a boom of new housing developments in recent years. As supply continues to outstrip demand, Sydney’s vacancy rate has climbed to 3.6% in December 2018 - the highest it has been in over 13 years.
The cost of living in Australia is also increasing, and Sydney still holds its title as one of the most expensive cities in the world. Because of this, many Aussies are choosing to relocate to more affordable cities like Adelaide, Brisbane, or Perth, where median asking rent for houses is more than $100 cheaper per week, and the median asking rent for units is almost $200 cheaper.
Finally, the potential burst in the Sydney property bubble is contributing: with a slump in house prices and interest rates at an all-time low, there have been a surge in new home buyers in the property market. The number of first home buyers shot up by 74% in 2018, hitting its highest level since 2009.
Why are rental properties in Canberra in demand?
Canberra’s property market is skyrocketing as a result of increased jobs in the university sector, and an uplift in temporary workers moving to the city on contracts for major infrastructure projects. Investors have also been hit with higher land taxes and rates, which have potentially been passed on to tenants.
As a result, there are less rental properties available in the Canberra property market with a vacancy rate of 1.3% in December 2018, compared to the national average of 2.5%.
Although Sydney still tops the nation for the asking rent for units, Canberra is following closely behind. The median weekly rent for a unit in Sydney is $530, while Canberra comes in second at $465 per week. However, Canberra’s unit rental prices are growing quickly, with an increase of 8.1% year on year, while Sydney’s unit price dropped by 2.8%. This is also welcome news for property investors, as rental yields grew 6.9% for units in Canberra over the past year.
Looking to the future
It’s highly likely the property market trends from 2018 will continue in 2019. Sydney’s rising vacancy rates will continue as new developments near completion, and more apartments become available. This, combined with falling house prices and more buyers entering the market, could cause Sydney to shift to a renter’s market for the first time in recent years.
Experts also expect Canberra’s rent prices to keep growing due to a lack of available housing in the city, and increased costs for investors as the ACT Residential Tenancies Act reforms are put in place.
In short, investors and property owners might consider turning to Canberra over Sydney for better rental yields and lower vacancy rates. However, as with all considerations in the property market, it’s essential to stay up-to-date with the latest market trends to make an informed decision.
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