Good intentions drive rentals

Gaps in the Sydney property rental and investment market are being filled by high levels of immigration, with real estate agents citing most new Australians are renting with the intention to buy.

This stability and demand in the rental market is driving strong investor activity as Sydney cements its reputation as the key destination in which to settle when arriving in Australia. 

Over the last financial year investors accounted for more than half of all sales in Sydney, with the median house price increasing 16.3 per cent over the last financial year – the highest financial year result since 2001/2002 and the second highest on record. 

The Domain Group Spring State of the Market Report said the less expensive outer suburban areas of Sydney will be the best performers over the next financial year and gross rental yields are stable, driven by low vacancy rates and rising rents.

Domain Group senior economist Dr Andrew Wilson said the balancing effect for the surge in rentals and investments is the record level of immigration. According to Australian Bureau of Statistics figures, 70,000 immigrants were homed in New South Wales last financial year.

In an exclusive interview with Real Estate Business, Dr Wilson said the current level of immigration creates a solid investment profile for property investors.

"Sydney is the key destination for people coming to Australia to settle, and they don’t bring houses with them – they are looking to rent and this level of immigration overshadows organic population growth,” Dr Wilson said.

"Sydney’s geographic constraints for detached housing means the population is spreading outwards in a funnel to south west and north west Sydney, which may drive the development of broad acre estates. Now Badgery’s Creek airport is being developed many areas may shift back to greenfield developments because of the economic advantages."

Speaking to Real Estate Business, Strathfield Partners managing director Robert Pignataro confirmed the Sydney rental market is extremely strong, with a majority of tenants renting with the intention to buy.

Mr Pignataro, a winner in the 2014 Real Estate Business Top 100 Agents, said despite the intention to buy, the rental vacancy rates have not changed for the last year.

"I’m not seeing immigration levels fill in any gap in the rental market at the moment," Mr Pignataro said.

"But the beauty of the rental market at the moment is a lot of people are looking for accommodation in ‘icon’ apartments, which is just a normal phase the market is going through."

 

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