Sydney rental growth lags despite strong tenancy: BIS Shrapnel report
Studios and one-bedroom apartments in Sydney have the largest proportion of rental tenants, while it’s the least for three-bedroom apartments, a new paper from BIS Shrapnel suggests.
Contributing factors include NSW’s strong population growth, net overseas migration, and a record low net interstate migration outflow. The findings were taken from the BIS Shrapnel report titled 'Apartments in Sydney Suburbs Market Brief'.
Studio and one bedroom apartments are dominated by rental tenants, who account for 70% of households moving into these apartments over the prior five years.
For two-bedroom apartments, 57% of movers were tenants, while it was just around 40% for three-bedroom apartments.
Vacancy rates in both Inner and Middle Sydney have consistently remained below 2%, with occupancy being underpinned by strong population growth over overseas migration, with many migrants’ first accommodation being rental dwellings, says the report.
Rental growth, however, is a different story. While median unit price growth remained high at 14.9% in 2014/15, rental growth was just 1%.
Long-term median two-bedroom unit rental growth has lagged the growth in prices, ranging from 4.0% per annum on the Lower North Shore, to 5.3% per annum in the Middle South West.
The result has been that indicative unit yields in Sydney are now around their previous lows of 2003 to 2005, at 3.7% in June 2015.
This would point to little potential for further growth in unit prices (and eventually the possibility of price declines), as occurred during the mid-2000s.