"At this stage, the only positive outcome we can see is that properties ranged $500 to $750 per week will now be much more sought after, and demand has already surpassed supply."
Sydney’s rental market feeling the sting of changes to living away from home allowance
From October 1, the government’s crackdown on the living away from home allowance (LAFHA) will officially be in play. The reform will tighten LAFHA tax breaks and put new limits on accommodation and food benefits for employees working away from home.
At Lifestyle Property Agency, we specialise in leasing properties to corporate executives in the Sydney CBD and immediate surrounds; over the past few months, we have already begun to feel the sting of the legislation changes on executive rentals.
In the past, most corporate budgets for leased property would range from $750 to $3,000 per week, and a mix of both local and international executives ensured that the high-end city rental market was kept buoyant.
In 2012, international rental enquiries have all but fizzled out, and any property listed for over $1,200 per week has been leased to local Aussies.
Rohan Alexander, Lifestyle’s associate director, has leased over 100 corporate rentals this year and says he has experienced the following major changes:
1) Based on the uncertainty of the new changes, current tenants benefitting from the LAFHA are renewing their leases for only three months as opposed to 12 months.
2) Tenants are on the hunt for cheaper accommodation, reducing their weekly budgets by as much as $500.
3) All rental properties priced $1,000 – $3,000 per week have been leased to Australian residents.
4) International enquiries have taken a dramatic dive – from making up almost half of all enquiries prior to 2012 to virtually non-existent this year.
At this stage, the only positive outcome we can see is that properties ranged $500 to $750 per week will now be much more sought after, and demand has already surpassed supply.
However, as this trend continues, we will see a rise in vacancies for city properties in the higher end of the market which may in turn affect sales values.
It’s also sad to see a shift in the diversity of the inner-Sydney market, with many international executives currently being sent to other cities.
At Lifestyle, we aim to showcase properties that embody the ultimate in Sydney city living. Perhaps, moving forward, recruiters should also focus on selling the key desirables of our city lifestyle when securing international talent. This may help to build an intrinsic affiliation with our city that outweighs remuneration benefits.
In the long term, I am confident that the market will recover, but the decision couldn’t have come at a worse time.
Carlie Ziri is the director of Lifestyle Property Agency.