NSW rental market on the up — but not everywhere

• According to a Sydney buyer’s agent, while rental prices have risen in New South Wales, landlords are not reaping the benefits across the state
• BFP Property Buyers’ Ben Plohl says the diverse circumstances can be traced back to an oversupply of rentals from the boom four years ago
• Areas such as Parramatta, the Inner West and Liverpool were struggling with more rental stock than supply long before the pandemic Mr Plohl says
• Many regional lifestyle regions, on the other hand, have had more demand than supply for several years, according to Mr Plohl

New South Wales has witnessed an uplift in rental prices, but landlords are not making hay all over the state, according to a Sydney buyers’ agent.

The evaluation of SQM Research’s Weekly Asking Rent and Vacancy Rate data, according to BFP Property Buyers founder and principal Ben Plohl, has revealed the diverse rental market circumstances occurring in different regions of the city and country at the moment.

He said, however, that the scenario was partly a result of an overstock of substandard rental property acquired during the peak of the boom four years ago in Sydney.

 “In the last year or two of that boom some buyers were mostly speculating on the market, so they bought cookie-cutter units in areas that were already tipping into oversupply territory,” Mr Plohl said.

“Areas such as Parramatta, the Inner West, and Liverpool were struggling with more rental stock than supply long before the pandemic, which has just made that situation more difficult.”

Many regional lifestyle regions, on the other hand, have had more demand than supply for several years, with vacancy rates far below the equilibrium threshold for some time, according to Mr Plohl.

“While the pandemic has accelerated the exodus of people away from the city, that is a situation that had been under way for a while already, mainly because of the high property prices in the Harbour City,” he said.

“On top of that, the lending restrictions that came into play in 2017 also prevented many financially capable investors from borrowing to purchase a strategically located investment property in areas like the South or Central Coast.”

Over the year to early July, weekly asking rentals for properties climbed by more than 35 per cent in Broken Hill-Dubbo, almost 28 per cent on the South Coast, and around 23 per cent on the Central Coast, according to the SQM data.

“All of these locations have had undersupplied rental markets for some time, with vacancy rates currently sitting at just one per cent or below,” Mr Plohl said.

“Also, with areas like these seeing the lion’s share of internal migration from Sydney, this situation is not likely to change anytime soon.”

New South Wales Top 5 Weekly Asking Rent (All Houses)

Mr Plohl added that rental markets in a lot of city locations were suffering the burden of people relocating to lifestyle destinations, but that they were also struggling because to the lacklustre rental markets that existed before to the pandemic.

According to SQM Research, the vacancy rate in Parramatta has been going up since 2017 and is now at 4.2 per cent, while the vacancy rate in the Inner West has grown from 1.1 per cent four years ago to 3.5 per cent in June.

“Many of these locations are also feeling the pinch from the loss of international students and tourists,” Mr Plohl said. 

“However, when you also consider that there was a net loss of 9,300 people from Greater Sydney in the December 2020 quarter, and 7,800 in the previous quarter, it seems quite likely that these locations while have challenging rental markets for a while yet.”

New South Wales Bottom 5 Weekly Asking Rent (All Houses)