Sydney’s property prices will inevitably fall for 18 months — and “maybe even beyond that” — because of coronavirus, an economist has warned.
Key points:Demand for rental properties in Sydney has been decliningEconomist Sarah Hunter says landlords could look to sell, but prices could decline for 18 monthsSydney property market described as “very challenging”
While it may not be a sharp drop in prices, BIS Oxford Economics chief economist Sarah Hunter believes a sustained decline in property prices looks inevitable as Australia’s borders remain closed.
“The economic conditions are obviously very challenging right now and from a demand and affordability-to-pay perspective, that’s a negative,” she said.
“You sort of put those things together and you do get falling prices and we think we are going to see falling prices for at least the next 12 months and even 18 months and maybe even beyond that.”
Demand for rental properties is dropping on the market due to the lack of international students, tourists and overseas workers living in Sydney.
Ms Hunter said that may result in property owners withdrawing homes from the rental market and selling them instead.
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“We might see some landlords look to sell their properties if they can’t see a quick resolution to the situation, which does seem likely in the next 12 months. It does look very challenging.”
The most recent figures from property research company SQM Research show Sydney has the highest rental vacancy rate in the country at 3.8 per cent in June, a 0.2 per cent decline from the previous month.
In Sydney’s CBD there were more than 1,200 empty homes in June, compared with 764 at the same time last year.
“I think the odds of us seeing a sharp fall back to vacancy rates, to what they were before, are very limited until we get a return to much more normal conditions, particularly around migration,” Ms Hunter said.
Ray White real estate agent Com Magias outside a house in Camperdown.(ABC News: Jack Fisher)
Ray White’s Con Magias said a rise in vacancy rates and the number of days a home is on market was visible.
“Things are taking about double the amount of time to lease.”
One of the homes he is managing includes a newly renovated three-bedroom, two-bathroom terrace in the inner-west suburb of Camperdown.
It has been on the rental market for three weeks now, which he said was unusual.
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“Traditionally in this area … it’s leased in around 14 days.
“Generally a house like this would go very quickly because of its condition, its close proximity to the university and we are also within 4 kilometres of the Sydney CBD, so it’s great for professional sharers and students.”
For the first time in years, tenants have the confidence to upsize or look for more affordable options in the rental market.
Sydney has recorded declines in asking rents of 7.3 per cent for houses and 6.2 per cent for units of the past year, according to SQM Research.
Chris Buckingham managed to negotiate a rent reduction.(ABC News: Jack Fisher)
Chris Buckingham and his three housemates took advantage of the opportunity to negotiate a rent reduction on their Petersham house.
“With the sudden change in everyone’s working conditions — three of us on JobKeeper, one of us was on a visa — there was a lot of uncertainty and the best thing we could do was reach out to the landlord and ask if there was anything they could do to help.”
He admitted the four of them did explore cheaper options but eventually decided to remain in the same house after their landlord agreed to a $100-a-week discount on their rent.
“If we didn’t get a rent reduction, we were for sure going to leave the house.”
He said it was the first time ever he’d had a rent decrease.
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“I’ve been renting for many, many years and it’s the first time that the status quo has been shuffled,” he said.
“It’s always been one way [but] coronavirus has given us renters a bit more say.”
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