Low rental vacancy rate ‘insulating’ Sydney residential property market against economic woes: CBRE

Sydney’s low rental vacancy rate continues to insulate the residential property market against wider economic forces, according to the latest CBRE review of the NSW residential market. 

The report quotes Residex figures showing that Sydney house prices are down 0.4% over the past 12 months to March to a median of $667,500 – a strong result relative to Melbourne (6.2% decline to March) and Brisbane (down 4.3%). 

It also notes RP Data-Rismark figures showing a 1.2% gain in Sydney house prices for the March quarter to a median of $572,000. 

CBRE assesses the Sydney’s housing market as being “reasonably positioned in relation to the remainder of the Australian market”. 

In line with a similar trend in Perth, the picture is brightest for affordable properties priced under $500,000, which continue to attract most demand, with prestige homes remaining under pressure. 

CBRE associate director of global research  consulting Sam Reilly says this stability is linked to low vacancy rates, “which continue to underpin the market”. 

“This [low vacancy rate] has somewhat insulated Sydney from the significant declines in capital values that have been witnessed recently in other states,” he says. 

Sydney’s vacancy rate remained unchanged at a very low 1.6% in March quarter figures released by the Real Estate Institute of Australia (REIA) – the lowest of all capital city market, with Brisbane at 1.7%, Perth at 1.9% and Melbourne and 2.3%.

REIA says that a vacancy rates lower than 3% indicate strong demand for rental accommodation. 

House rents rose by 6.9% and unit rents by 8.9% over the year to March 2012 according to CBRE, with weekly rents for houses and units sitting at $545 and $490 respectively as at March this year. 

The CBRE report also notes that sales volumes for Sydney houses have shown signs of a recovery, with a moderate increase of 3.2% over the year to March 2012 to 42,118. 

There were 40,452 units sold during the same period, representing an increase of 6.2% on the previous year, meaning that annualised house sales surpassed more affordable unit sales for the first time since the end of 2009.

This occurred at a time when the NSW government offered an additional $7,000 for first-home buyers as part of its first-home owner boost scheme, which ran from October 2008 to December 2009. 

CBRE senior director for NSW residential mortgage valuations Ted Hoskin says although the house and unit markets remain under pricing pressure, recent results pointed to a moderate recovery for the state. 

“With increased sales volumes for both property types, it appears that although not yet supporting a longer term recovery, the sustained down trend in market activity appears to have stopped and a greater degree of stability is now being recorded,” he says. 

Buy activity and demand differs from region to region: 

Eastern suburbs 

Though buyer activity has dropped since the end of the first-home owners’ stamp duty exemption, properties in the eastern suburbs priced around $500,000 continue to experience strong levels of demand. 

“For both houses and units between $500,000 and $1 million there has been a slight decrease in buyer demand, with agents reporting conditions have decreased from mid-2011,” he says. 

Sydney CBD 

The Sydney CBD market experienced solid demand for units priced below $500,000 although units up to $1 million faced weaker conditions. 

Sydney’s north-west and western suburbs 

Prices remain relatively stable across the quarter, with steady demand particularly evident in the lower to mid-market ($400,000 to $650,000). 

CBRE says property priced up to $1 million is experiencing consistent levels of buyer enquiry, which is a positive sign. 

The south-west market, including growth centres around the Macarthur area, has slowed for lower-priced properties ($280,000 to $400,000), with reduced buyer demand and contracting sales volumes. 

The south-west middle market between $400,000 and $500,000 has attracted steady levels of demand. 

South Sydney 

Prestige properties in Sydney’s south fared best in the quarter, with steady demand for well-presented properties in good positions between $1 million to $2 million. 

Wollongong and Illawarra 

Wollongong and Illawarra had the strongest $500,000 price bracket for all NSW dwellings in 2012 to date, while pressure was evident in the same bracket in Sydney’s southern suburbs, including the Sutherland shire, after strong growth at the end of 2011.