Empty homes: Rental vacancies tipped to rise as job losses mount
Mounting job losses, limits to international travel and ongoing property development are expected to leave homes in some Sydney areas empty for months, with effects on rents.
A large share of Sydney rental properties could become “ghost” homes left empty for months because the landlords cannot find tenants.
Housing experts said rental demand has already starting to drop as the economic fallout from the coronavirus pandemic worsens, with vacancies expected to rise sharply.
Real Estate Institute of NSW chief executive Tim McKibbin said the market was in “uncharted waters” and mounting unemployment made vacancies imminent.
“Many renters are facing job losses or reduced pay,” he said.
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“Notwithstanding the six-month moratorium on evictions, this will likely cause more tenancies to be given up: for example, by people moving in with other family members.”
REINSW’s monthly vacancies survey revealed March vacancies were actually lower than over February, but the results were skewered by a large drop in agent participation in the study.
The Real Estate Institute said this was likely due to the disruption caused by COVID-19 and property managers focusing on the volatile rental market.
Vacancies were highest in Sydney’s middle ring at 3.6 per cent, followed by the outer ring at 3 per cent. Only 2.5 per cent of inner Sydney properties were vacant.
Mr McKibbin said vacancy rates were almost certain to rise because properties used as short-term accommodation would become long-term rentals.
Many of these properties were rented out on sites such as Airbnb but were not feasible as holiday rentals now that international travel was restricted.
SQM Research director Louis Christopher estimated in a recent column that more than 120,000 properties were used as Airbnb or other short-term accommodation nationally.
The empty short-term accommodation would increase the supply of vacant properties, Mr Christopher said.
“I can’t tell you how many property owners are going to switch back to longer term leasing but there will be a number, especially if this plays out for longer,” he said.
Limits on international migration and travel would also increase the supply of vacant property, leading to falls in rent, Mr Christopher said.
“Underlying demand for housing, which has been predominantly driven by net overseas migration has now stalled for this year,” he said.
“This will be a different experience to the Spanish flu of 1919, whereby population growth still expanded at a very strong rate (1.9 per cent) due to our soldiers returning home as well as the settling of European refugees.”
Realestate.com.au chief economist Nerida Consibee said rental demand was dropping, particularly for properties in large housing developments.
“There is still demand for family-friendly properties,” she said, adding landlords would find it harder to tenant cookie cutter-style units in big buildings.
Suburbs with vacancy rates over 5 per cent – indicating landlords were struggling – included Kellyville, Ryde, Olympic Park and the Sydney CBD, SQM Research figures showed. All were areas with a high supply of new housing.
Vacancy rates were at about 4 per cent in other new housing enclaves such as Ryde, Strathfield and Mascot.
Landlords in these areas and surrounding suburbs are offering generous rental discounts or weeks of free rent to entice new tenants and stave off costly vacancies.
Apartments in a high-rise building on Gardeners Rd in Mascot are being offered with the first two weeks of tenancy rent free.
In Western Sydney suburb Toongabbie, a four-bedroom duplex on Burrabogee Rd was offered with a waiver on the first month’s rent. The $650 per week listed rent was below the 2018 advertised rent of $775.
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Homes in the Pagewood Green estate in Eastgardens are being offered with four weeks’ free rent.
The Kingston Quarter in Meadowbank has numerous homes offered free for the first three weeks.
Originally published as Empty homes: Rental vacancies tipped to rise as job losses mount