Prestige properties in demand in Sydney CBD but rents on the slide

Up-market Sydney CBD off-the-plan apartment sales are booming but prestige apartment rents have dropped by at least 15 per cent.

Ultra-luxury apartments, such as those in the Opera Residences in Sydney’s Bennelong Point, are commanding high prices.

Up-market CBD off-the-plan apartment sales are booming, with resales at the yet-to-be-completed Opera Residences in Sydney’s Bennelong Point adding as much as 25 per cent to initial purchase prices.

But prestige apartment rents in the city and its prime Eastern Suburbs market have dropped by at least 15 per cent.

Following the instant sellout of all 104 apartments at the launch of the Opera Residences complex four years ago, marketing agent CBRE reports some units are back on the market and are achieving prices of up to 25 per cent higher than they initially sold for, despite the COVID-19 pandemic.

CBRE agent Caroline Fagerlund recently re-sold a three-bedroom apartment covering 156sq m in the complex for a record $13.5m to a local family.

A 90sq m two-bedder in the complex, developed by China’s Macrolink and Landream, re-sold for $5.8m, also through Ms Fagerlund.

“The market for prestige properties in the Sydney CBD is still very strong,” CBRE senior director Ben Stewart told The Weekend Australian.

“This building has continued to increase in value because of its position,” he said, adding that completion was expected by the middle of 2021.

Independent property economist Andrew Wilson said there was an increasing number of sales of inner city apartments, which he pointed out was interesting as rents were down 15 per cent.

“The dropping rents don’t seem to be having an impact on apartment sales and there seems to be appetite for medium and ultra-luxury apartments at the moment. We have had some good price growth over the past year — there is quite a reasonable appetite for purchasing apartments by owner-occupiers,” Dr Wilson said.

Some units in Opera Residences at Sydney’s Bennelong Point are back on the market and are achieving prices of up to 25 per cent higher than they initially sold for four years ago.

“It’s possible owner-occupier buyers are worried about the fast emerging undersupply of apartments,” Dr Wilson said. “There is nothing coming in on the back end.”

“(But) it’s a little counter intuitive in terms of the rental market where there are high vacancies and lower rental prices,” Dr Wilson added.

More than 7000 apartments stand vacant in the Sydney city area stretching down to Maroubra and taking in the Eastern Suburbs, with 796 apartments vacant in the suburb of Waverley and 271 units vacant in Woollahra.

In up-market Darling Point there are 41 vacant apartments with the suburb commanding a median rent of $715 a week. But in Point Piper there are just six vacant apartments commanding a median weekly rental of $1100.

Rretail shopping at Sydney’s Bennelong Point.

The vacancies are due to the lack of international tourists and Airbnb stock being tipped onto the rental market.

“It’s almost a perfect storm of reduced demand and increased supply particularly from the Airbnb, there is a much higher proportion of fully furnished stock which typically catered to tourists and they have been shifted into the permanent pool, that has exacerbated it.”

Dr Wilson said it was a question of how long landlords could hold out.

“The real issue is how they are going to be absorbed in terms of tenancies. There’s been a remarkable surge in vacant apartments, the question is how will these vacant apartments find tenants given the ongoing issues with student numbers, lower migration levels, and border closures. Another factor is that first-home buyers are actively looking at houses.

“These are unprecedented numbers of vacant apartments in these areas, particularly in the east.” But on the house rental market front, Dr Wilson said vacancies were falling. “There is obviously some sort of underlying factor here, with the COVID-19 factor exacerbating the lack of demand for units.”

In the Eastern Suburbs, Gordon Robinson Real Estate agent Jaidyn Gold said everyone was negotiating. “Right now prices are more a guideline, which is not good for us.”

Eastern Suburbs real estate agent Alex Tinsley said many apartment landlords had enjoyed eight solid years of year-on-year rental growth but not all of them were responding well to rent cuts.

“It’s been really difficult for them to swallow,” Mr Tinsley said.

From Bondi to Rushcutters Bay, Mr Tinsley said many renters were looking for larger apartment and house spaces, but there was also consolidation of some apartments with couples moving in together due to the pandemic while others who shared houses, which had been forced into lockdown, were splitting up.

“There’s a lot of movement in the market — rental prices have come down depending on the suburb,” Mr Tinsley said.

“Some suburbs are up to 20 per cent down such as Bondi because backpackers have left,” he added.