The Sydney property market has become something of a dichotomy

It was reported last week by the Real Estate Instititute of New South Wales (REINSW) that residential vacancy rates in inner ring Sydney had fallen by 0.6 per cent to just 1.3 per cent in February.

Vacancy rates in Sydney’s middle ring also tightened to 1.6 per cent. sydney-harbour

On the other hand, vacancy rates in outer Sydney look to be a bit looser at 2.1 per cent.

To some extent this reflects what we have seen in auction clearance rates in 2016, with the inner ring suburbs often recording exceptionally strong results, but sentiment waning in the outer and in the Hills District.

Of course, it is a truism to say that monthly readings can jump around quite a bit, particularly in the regional areas where sample sizes are smaller.

However, if we smooth the data on a 3mMA basis, we can see that outer Sydney vacancy rates are potentially setting themselves to rise quite sharply, just as they did at towards the end of their growth cycle late in 2003.


It’s probably a bit too early to call a trend on this with any certainty, but it’s definitely one worth watching.

I noted here yesterday how labour market conditions appear to have improved somewhat in Newcastle and much of the Hunter region, which also seems to be reflected in steadily tightening rental markets.

On the other hand, residential vacancy rates have all but doubled in Albury since August of last year to 3.7 per cent.

Asking rents up

There have been some early suggestions that parts of the inner Sydney property market are tightening.

The regulator APRA has certainly been successful in hosing down investor demand since a frenzied investor market around April and May last year.

And so with population growth in Sydney remaining very strong, there is a possibility that the rental market could be tightening again.

SQM Research‘s latest asking rents index shows an annual increase of +5.5 per cent for Sydney units and +5.6 per cent for two bedroom units in the harbour city.


Source: SQM Research

Of course, at this stage in the residential construction cycle, the supply of new units can on average command higher rents than much of the older or obsolete stock, which might skew indices north a little.

Asking rents for units in Brisbane are also up by +2.6 per cent, and in Melbourne by +4.1 per cent.

In any case, the answer will become clear in the next few months.

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Pete Wargent


Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog

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