Despite strong levels of population growth, Sydney rental vacancy rates have lifted to the highest level in 13 years. This increase in supply has placed downside pressure on rents - which makes now a good time to move to a new rental property.
Sydney home prices have fallen by 4.9% over the past year, according to latest data from CoreLogic, succumbing to a combination of tighter lending standards, reduced activity from local and offshore investors, higher listings levels and deteriorating sentiment towards the outlook for prices.
From being the hottest capital market for several years, Sydney is now one of the coldest, only outpaced by Darwin in terms of price declines over the past year.
Sydney's unprecedented home building boom has been another factor that has contributed to recent price declines with 63,779 new dwellings built in New South Wales in the year to March, according to the ABS, just shy of the record levels seen early last year and more than double the number regularly built earlier this the decade.
The vast majority of this new housing supply occurred in Sydney.
With demand softer than what it once was, this increase in supply clearly had a pronounced impact on prices, along with new housing sales.
Even with the estimated resident population in New South Wales increasing by 116,800 in 2017, according to the ABS, such has been the scale of Sydney's building boom been, rental vacancy rates in Sydney are now starting to trend higher, bucking the trend seen in most other capital cities at present.
This excellent chart from property guru Pete Wargent, shows the gradual lift in Sydney vacancy rates based off data released by SQM Research today.
According to SQM Research's vacancy report for June, Sydney's vacancy rate stood at 2.8%, the highest level in 13 years.
While still below the levels seen in most other Australian capitals, Sydney's vacancy rates is nearly one full percentage point higher than the levels of a year ago.
"There is now a greater supply of rental accommodation at a time when the growth in rental demand is probably falling a little," Louis Christopher, SQM managing director, told the Australian Financial Review.
"I think this is the only time in my career that I can say with certainty that Sydney is now a buyer's and a renter's market, simultaneously."
According to the report, the Hills District, Kellyville and Box Hill in Sydney's northwest — where new housing supply has been particularly strong — have vacancy rates of 4.9%, 7.1% and 6.9% respectively, above the city-wide average.
Even vacancy rates in the lower north shore and eastern suburbs, popular with professionals working in Sydney's CBD, also sit above the city average at 4.1% and 3.1% respectively.
"The Hills District is clearly supply-driven. But the lower North Shore and the East are demand-driven. And for some reason, it is getting worse," Christopher said.
Given recent trends, and like home prices, Christopher says weekly rental rates, already falling for houses and apartments in Sydney based on SQM data, could fall even further in the quarters ahead.
"Sydney rents are now down for the year and it is likely rents will continue to slip as there is still a lot of supply coming in the pipeline," he says.
"I believe Sydney will shortly record a fall in its population growth rate due to a relatively-recent steep rise in interstate migration towards Queensland."
If you're in the market for a new rental property, or approaching the end of your existing lease, be sure to remind your real estate agent about the recent trends.
In a city like Sydney, home to the highest median rental rates across the country, it could save you a pretty penny.
There's more at the AFR here. You can follow Pete Wargent on Twitter here. If you'd like more granular detail on rental rates and vacancy levels across Sydney or any of Australia's remaining capitals, SQM Research has the answers here.