The July rental vacancy results spell bad news for landlords across Sydney, as rental days on market rose and increased stock continued to place downward pressure on rents.
The number of rental properties sitting vacant jumped again in July, with Sydney now having the second highest vacancy rate of any capital city in Australia.
There are currently 20,000 properties sitting vacant in Sydney, an increase of 5,000 properties. This increased supply makes it tougher for landlords as it increases the time it takes to find a tenant and inhibits the ability to increase rents.
Conversely, renters continue to have an abundance of properties to choose from and increased bargaining in terms of rents.
To put the impact of this in perspective, it now takes an average of 37 days for a tenant to be found for a property in Sydney — a week higher than this time last year. Landlords are increasingly realising that vacancies are a meaningful cost that has substantial impacts on the overall returns of their portfolio, and particularly their cash flows.
The prospect of 37 days without rental income is giving landlords pause, with many landlords being much more amenable to reducing rents or providing other incentives to retain their existing tenants.
The impact of this is seen through the fall in average rents, with rents for houses falling by $10 per week in the June quarter and $5 per week for units in Sydney.
This comes at a time when the economy is weakening, and despite record low interest rates, property investors are feeling stretched as property prices remain well off their peak from several years ago.
Cameron Black is the managing director of Certainty Property.