Sydney’s residential rental accommodation is more important than ever

Sydney’s residential rental accommodation is more important than ever
Sydney’s residential rental accommodation is more important than ever

Over the last 12-18 months investors have become an important part of the target market for most project marketers.

The 2012-13 Annual Report of the NSW Rental Bond Board gives some keen insights to the character of the Sydney rental market. The insights are well worth sharing with investors, developers and marketers alike.

It is estimated that there are some 2.47 million private dwellings in NSW of which 703,158 (when last counted by the Board) are private sector rental properties and there’s a general trend suggesting that soon this will account for almost 30% of housing stock. By any measure the residential rental accommodation is key and seemingly ever more important.

In 2009/10 the Board held some 648,141 bonds or $840 million but in 2012/13 it held 703,158 bonds or $1.043 billion, and since the GFC the number of people in rental accommodation has been on an upward trend with the biggest increase being seen in 2012/13. It is also reasonable to expect that this trend will continue as affordability remains tight and as more new stock is completed and becomes available to rent.

There also appears to be a trend towards longer lease terms. This may in part be directly related to the improved quality of apartments that are now being developed. Investors are now very keen to purchase apartments that offer good quality, this applies to SMSF investors who are looking for long-term income and tenant stability. The sometimes termed ‘rental quality’ is no longer acceptable, as any sort of dumbing down in a development will fall short of investor expectations.

The trend towards longer leases, and hence more security for investors, is seen in some of the Board’s figures. These show that lease terms of between 13 to 24 months are the fastest growing sector of demand and that lease terms beyond 37 months are a very stable part of the market.

Two-year terms are now around 33.5% – a big increase from the level of 23.3% in 2001/02. It also appears that investors are also on a winning trend with more than 91% of bonds returned in full or only with part deductions and only 9.3% of bonds claimed by landlords. Again, I think that this points to an evolving and longer-term rental market, which for some tenants means that renting is less of a stop-gap measure and longer lease terms may also help people save for their own home, while flat-sharing of more expensive properties is also a popular option.

Peter Chittenden

Peter Chittenden

Peter Chittenden is managing director for residential of Colliers International.

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Peter Chittenden

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