NSW Rental Market Overview Q4 2011
Sydney Greater Metropolitan Region
The Sydney Greater Metropolitan Region (GMR) is a statistical area consisting of the Sydney Metropolitan region and adjacent regions to the north and south. Vacancy in the Sydney GMR remained low in October, recording an average vacancy rate of 1.4 per cent for Sydney, with the Inner ring recording a tight 1.3 per cent vacancy. The GMR also captures the Hunter and Illawarra regions, where vacancy rates averaged 1.7 per cent.
A sharp escalation in the median rental price has been recorded in inner city LGAs and in the Hunter region, with the Leichhardt LGA in Sydneys Inner West experiencing the largest increase for a two bedroom unit and the second largest for a three bedroom house. The Randwick LGA in Sydneys east recorded the largest growth in median rent for a three bedroom house, equating to 14.3 per cent between September 2010 and 2011. The median rent for a three bedroom house in both Randwick and Leichhardt LGAs was $800 per week as at September 2011. The average increase in median rent across all LGAs in Greater Metropolitan Sydney equated to 5.8 per cent for a three bedroom house, while a two bedroom unit averaged a rise of 6.4 per cent. These figures represent a slower growth in prices from an average of eight per cent per annum (three bedroom house) and 8.3 per cent pa. (two bedroom unit) recorded over the past five years.
The highest statistically reliable rent price for the period was recorded in the Waverley Council, with a median rent of $980 per week for a three bedroom house. The most expensive median rent for a unit was recorded in the City of Sydney, where a two bedroom unit returned $600 per week in September 2011.
An analysis of the number of new and existing bonds lodged in the region provided understanding of the movement of people into different areas of the GMR. The New Bonds Lodgement map portrays the Local Government Areas to record the largest increase in lodgements of new rental bonds in the 12 months to September 2011 .
The analysis reveals the LGAs that experienced the highest increases in new bonds, with Maitland in the Hunter Valley recording growth of 29.7 per cent in the 12 months to September, followed by Kiama on the South Coast with 23.7 per cent. Around Sydney the local council of Botany Bay recorded strong increases in new bonds for the past three consecutive quarters, with a September growth representing an 18.4 per cent increase on the same period in 2010. While growth around the Hunter is generally related to the intensification of mining activities, the Botany Bay LGA recorded strong growth in new unit bonds, and a decline in new bonds for separate houses. This is likely to be the result of recent completion and consequent occupation of a number of high rise apartment buildings in the Mascot area.
Of the total 531,838 bonds held in the Greater Metropolitan Region the highest share of rental bonds is held within the city of Sydney, accounting for 9.5 per cent of total bonds. Other regions include Randwick (4.2 per cent), Blacktown (3.6 per cent) and Newcastle (3.5 per cent). Sydney and Randwick were also found to contain some of the highest concentration of rental properties of the total dwelling stock, corresponding to 63 per cent in Sydney and 47 per cent for Randwick.
The New Bonds Lodgement graph depicts the trend in lodgements of new bonds between comparable quarters in 2010 and 2011 in the most active GMR LGAs. The largest increase for the September quarter occurred in the Maitland LGA, increasing 29.7 per cent from the September quarter in 2010. Other than Maitland and Botany Bay, another consistent performer was the Fairfield LGA in Sydneys west, which experienced consistent growth in lodgements over the past 12 months.
Rural Local Government Areas
Strong increases in rental prices in rural LGAs were largely associated with mining activity. In the Gunnedah LGA, the coal mining industry has attracted workers from urban areas, interstate and across the Tasman, which resulted in a sharp increase in demand for rental properties. This trend has been extended to the Tamworth Regional LGA, with several employees who work in Gunnedah basing their families in Tamworth, which offers a higher level of amenities. In the Mid-Western Regional LGA the significant growth in the property market was also driven by the expansion of mining activities. The increased number of new residents who took up mining positions and the increase in short term contractors has placed significant demand on the availability of rental accommodation in the region. In the Orange LGA mining in the Cadia Valley has been responsible for much of the growth in rental prices. While the median rent price for a three bedroom house in the region increased 15.8 per cent, rent for two bedroom units rose 18.8 per cent in the 12 months to September 2011 resulting in a median weekly rent of $238.
The highest median rent price for the period was recorded in the Queanbeyan Council, with a median rent of $460 per week for a three bedroom house and $300 per week for a two bedroom unit. The Byron LGA in NSW North Coast followed, with a median weekly rent of $420 for a three bedroom house and $293 per week for a two bedroom unit.
In an environment of softer house prices, an increase in rent is welcomed by landlords and normally indicates a strong economy and large changes in population. However, around NSW and indeed Australia local residents who are not part of the mining industry are often being priced out of the market by companies that pay above market rents. This in turn leads to negative social consequences and increases the pressure on government housing.