With vacancy rates now at an all-time low of 1%, renters in Sydney are adjusting their expectations and anticipating the worst as legislation keeps new property developments in gridlock, according to Sam Elbanna, founder and managing director of CPM Realty.
“The harsh reality is that while property development plans sit waiting for DAs, many smart investors have jumped on the AirBnB bandwagon as a clever way of increasing their returns,” Elbanna said.
While a one-bedroom apartment in Surry Hills might get $750 a week under normal circumstances, investors are making $900 - $1,000 a week via AirBnB. “Unfortunately, this takes away from the already limited supply of properties for tenants looking for long-term homes, and jacks up rental prices to an all-time high.”
Tackling this crisis involves increasing supply. “If the number of properties out there for sale doubled, housing affordability would improve and developers would be forced to compete on quality and price,” Elbanna added.
In order for this to happen, the wait time for DAs would have to be reduced and other red tape cut through. “The legislated wait to get a DA is 40 days, yet most developers are expected to wait anywhere up to 18 months for an approval,” Elbanna said. “Then, when they finally get the go ahead, banks impose a ‘presale quota’ for construction finance before building can commence. Although the increased demand often ensures that quotas are met, this can delay the process further.”
Not only is there a long wait on developments, Sydney is also seeing widespread construction of properties that have already been purchased. At that point, developers are free to hike up prices, as they’ve already met the required presales quotas.
“Yet, instead of providing more housing availability, the government has advocated to helping buyers out by increasing their capacity to purchase land and property, with grants, loans and stamp duty reductions,” Elbanna said. “Effectively, the government is giving these buyers more buying capacity, leading to increases in demand and even higher prices. So, the same people that the governments are seeking to help are in fact being forced to either pay more or [are being forced] out of the market altogether.”
Acording to Elbanna, the state government should be focusing at ways to make more property available, be it for rental, investment, or own-home purchase. “The faster we can develop rental stock, which would lower prices, the more opportunities there are for investors, especially those looking for long-term tenants and in areas where AirBnB is not likely to claw away at a share of the rental market, which would ease the rental situation.”
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