COVID-19 has undoubtedly ruffled more than a few feathers amongst Sydney’s housing market. Eastern Suburbs and Inner West property owners copped the brunt of the pandemic’s wrath, with residents temporarily fleeing the concrete confines of the hustle and bustle.
Let’s look at why such areas have been hit so hard and what’s predicted for the year ahead.
A demand for space
Sydneysiders are escaping the big smoke, opting to swap their inner-city dwellings for, (at least a little more) living space. And mostly here, we’re talking about older-style smaller apartments that lack balconies or that have limited access to green space.
Larger homes have been hot property for the past eighteen months, as well as units with balconies and features allowing tenants to more conveniently access outdoor spaces.
The attraction of this type of living arrangement is pushing renters further out of the CBD to secure rentals at a similar price to their previous inner-city rental while getting more square footage and room to breathe. Even fringe suburbs like Zetland or Alexandria offer more square footage, although without the inner-city vibe.
The regional boom
Over the past 18 months, we’ve seen regional rents soar in parts of New South Wales. While we’re noticing small town and suburban rents readjust, landlords are still very much reaping the benefits of higher asking prices. This is most likely due to high demand and low supply.
Cashed-up city folk have somewhat dictated the market in regional cities and country towns, with many locals voicing that they’re finding it more challenging than ever to secure a home. While these regional areas have benefited, the flight to the country has left many inner-city properties vacant. Add to this the fact that many properties that had been rented via platforms like Airbnb were sold off or became long-term rentals. We understand that these short-term rentals were picked up by those still financially capable of servicing hefty mortgages.
The push to work from home
Offices and businesses are closed or operating with a skeleton staff on site on any one day. Workers need to commute less often or, in some cases, not at all. (We’ve heard of several companies that closed offices permanently as senior leaders realised that having their people work from home could lead to greater productivity.) As workers spend less time commuting, they can indulge in a longer commute less frequently with the trade-off of renting a larger property.
No international travellers or students
Student accommodation, private backpacker lodgings and overall lack of international travellers has been bad news for rentals in the Inner West and rentals in the Eastern Suburbs.
Young people also bolted from their share-housing arrangements at the beginning of the pandemic, many moving back in with parents or setting up temporary boarding situations with family. However, with the Australian Government announcing the gradual return of international students, and the NSW Government offering a pilot plan to welcome 250 international students a fortnight back to Sydney, we expect to see some inner-city properties absorbed over the next 6 to 12 months.
The gradual return to normalcy
Having large numbers of inner-city properties sitting vacant has seen rent prices continue to be lowered just so landlords have their properties occupied. On the upside, it’s made inner-city housing more affordable for those on lower incomes such as service workers. Inner West rental prices were down almost 10% looking at year-on-year figures. However, some suburbs have shown signs of recovery over the past quarter, albeit from a low base. As borders reopen in 2022, we expect to see a rebound in the market, one that despondent landlords will welcome.
Should I be selling my inner Sydney property?
While landlords’ circumstances tend to vary markedly, we recommend that you ‘hold’ not ‘fold’ as long as this doesn’t cause you undue financial stress. If, however, your property needs renovations you can’t afford, or you choose to invest elsewhere, then you might consider selling.
The property cycle will find its way back on track; it’s a matter of when. Although you might be achieving lower returns, you need to consider capital growth, which is still strong in many areas. We believe it’s vital to contemplate your options realistically and to avoid making rash decisions.
Reach out to an expert for further information on Sydney property market trends and an insight into the Inner-West and Eastern Suburbs’ profile outlook for 2022.
The bottom line with Sydney rentals
Hold on to your properties while trying to absorb the blow as the back end of 2022 looks like a more promising period for landlords. View what’s happening as a short-term setback and remember this time, too, shall pass.
As Australia reconnects with the rest of the world, our student and backpacker communities will thrive again, pumping some much-needed life back into our rental markets Sydney-wide.
Can we help with your Eastern Suburbs or Inner West investment property?
Chat to an experienced property manager today.
