We Seem to Have a Rental Crisis in Sydney and Melbourne. How Is It That It's a Buyers' Market Then?

MaxPowerz on 15/06/2022 - 13:00
Last edited 15/06/2022 - 13:05

Sydney and Melbourne have turned into buyers’ markets:
https://www.smh.com.au/property/news/sydney-and-melbourne-ha…

However:

Melbourne faces a fresh rental housing crisis
https://www.theage.com.au/national/victoria/melbourne-renter…

Sydney is currently what you call a “landlords’ market”.
https://www.abc.net.au/news/2022-05-21/rental-crisis-in-sydn…

Will Sydney and Melbourne being the buyers' ( i.e. investors') market ease the rental crisis? Or will the rental crisis turn the market back into sellers' market?

Financial

Comments

  • Quantumcat on 15/06/2022 - 13:04
    +1

    The problem is nobody wants to buy because of the threat of high interest rates. Lots of people wanting to sell doesn't necessarily translate to lots of people buying.

    • HeWhoKnows on 16/06/2022 - 21:27

      There is no rental crisis at all that I can see.
      The market has simply returning to normal.
      Its still very difficult to find a good tenant from a landlords perspective.
      Obviously as a tenant if you are not well prepared and presented, and have issues with your rental history you will always find it difficult.
      In Sydney most rents are still way below Pre-COVID levels

      • Quantumcat on 16/06/2022 - 23:27

        Depends where you are but in Canberra you could easily have 20+ applications to choose from.

  • Hybroid on 15/06/2022 - 13:04
    +5

    Sydney and Melbourne have turned into buyers’ markets:

    Where did you get this notion from? The ABC link says Landlord's market.

    House prices are indeed dropping and will do so further with the new rate hike but we're far off a "buyer's market".

      • Hybroid on 15/06/2022 - 13:07
        +1

        Ah you changed the link, that's why was confused.

        I don't think it's a buyer's market yet, the demand at auctions still remains as high as when was searching 6 months ago.

        • Boogerman on 16/06/2022 - 08:58
          +2

          Incorrect. Auction clearance rates in Melbourne & Sydney are under 60%, which is low & hence a buyer's market

          • Hybroid on 16/06/2022 - 11:39

            @Boogerman: Well the couple of auctions I’ve seen passed in are because the sellers have set excessively high reserve prices trying to capitalise on current demand. There’s no shortage of bidders and interest though.

            • Boogerman on 16/06/2022 - 12:15

              @Hybroid: I'm just referencing the available data - the general consensus is when its under 60% - 65% house prices are falling.
              Sydney's finalised auction clearance rate for last Saturday due out tomorrow is expected to be 48% - it hasn't been this low in over 2 years

            • GG57 on 16/06/2022 - 13:20

              @Hybroid: If the seller has set an excessively high reserve price, their expectation is not in line with the current demand.
              Plenty of bidders and interest, but if the price is considered to be high then those bidders are not bidding to the level to achieve a sale. That could go either way longer term:
              - The seller drops their reserve price to meet the market demand
              - The market changes (again) and buyers are willing to increase offers to meet the reserve
              - The seller loses interest and doesn't sell (if they haven't bought elsewhere)

    • HeWhoKnows on 16/06/2022 - 21:32

      Buyers market will come in due course.
      This is plenty of stock around. Thats a fact. But vendors are still sticking to thier guns as they are not being forced to sell yet..
      Just wait till 2023 when people are coming off Fixed rate loans and those on variable rate loans start to feel the effects of interest rate rises as they surpass the 2.75% buffer imposed by APRA over the last 3 years (3% since late 2021)

  • Drakesy on 15/06/2022 - 13:08
    +10

    There are a few forces at play here.

    1. Interest rate rises are reducing the leverage ability for investors to buy apartments/houses, reducing the upward pressure on house prices as well as imminent devaluation of housing assets.

    2. Investors stop buying properties in this climate - less investment rentals on the market and less people building investment properties (apartments etc.)

    3. classic scare tactic by media to write articles, property is the in vogue topic right now. (FWIW now is not the time to be buying a house, the rate uptick has only just started).

    Only this time its being smashed from both sides, renters cant afford higher rents due to inflation and lack of wage growth while investors can't afford to buy more homes due to lack of leverage.

    TBH shambolic policy making, unlimited immigration and handling of this by the RBA is to blame.
    Oh and they need to bring in a vacancy tax, the number of homes just sitting there as asset value dumps is phenomenal while they use it as a tax write off/wait for capital gains (as much as 3% of all houses).

    • mskeggs on 15/06/2022 - 14:02
      +3

      Well said.

    • MaxPowerz on 15/06/2022 - 14:22
      +1

      Thanks for the informative reply.

      …."Only this time its being smashed from both sides, renters cant afford higher rents due to inflation and lack of wage growth while investors can't afford to buy more homes due to lack of leverage"

      It's quite interesting, I don't recall having ever witnessed such situation before! I guess this will make the rental situation even worse, like a vicious cycle if you will… What's your take on that?

    • HeWhoKnows on 16/06/2022 - 21:35
      +1

      Close but not exactly correct………
      There is no tax write-off if the property is not generating any income
      ie If it is sitting vacant

      • Drakesy on 16/06/2022 - 23:58

        But it is a nice way to launder money ;)

  • Caped Baldy on 15/06/2022 - 13:09

    I thought it was a seller's market

    • altomic on 15/06/2022 - 14:29
      +2

      now it is a buyer's market

      • altomic on 15/06/2022 - 14:30
        +2

        wait ….. according to the media it is now a seller's market again

        • bloom on 15/06/2022 - 18:53

          The media are in the sellers market, we’re in the buying market

      • HeWhoKnows on 16/06/2022 - 21:35

        Its both at the moment

  • DingoBilly on 15/06/2022 - 13:09
    +5

    People don't want to or can't buy houses.

    Therefore those people are renting instead.

    Therefore there is more competition for rental properties, but it still remains a buyers' market.

    • skid on 15/06/2022 - 13:12

      spot on

  • GG57 on 15/06/2022 - 13:14

    OP has linked three "media" reports, one from April, one from May and one from June.

    Things change.

  • orangetrain on 15/06/2022 - 13:27
    +2

    It's landlord's market because it's too much hassle to rent out the property.

    Especially if there's a huge amount of money going into properties from overseas crime syndicates, terrorist groups, dictators, capital flights, etc.

    Vacancy tax is needed. None of the land tax rubbish that penalises those who use the land.

  • Brodo Faggins on 15/06/2022 - 13:47
    +1

    Definitely not renters market.

    Every time the landlord/agent agreement ends, the RE agents always push for landlords to up the rent. Why? Because the RE company gets a % cut from every landlord for "managing" their property. So by increasing weekly rent, the RE company gets a higher %. So if they have a rent roll book for 100 properties they manage, and they all increase rent by $20, $50, $100 whatever each, then it all adds up.

  • Trying2SaveABuck on 15/06/2022 - 13:55
    +3

    with interest rates coming up it certainly is not a 'buyers' market - the issue is it also isnt a 'sellers' market it is a sit on the side lines and let the dust settle kind of time.

    Thus, right now the entire economy is going backwards (Globally) thus is it a No ones market as if no one is investing in property then there is no one to 'rent' a property.

    I think the issue ive noticed if we have had a long period were things were 'good' low inflation, low unemployment etc then COVID and a bunch of other crap happened and now we are struggling to get back to that 'good' level again due to so much uncertainty

    Inflation is rocketing thus interest rates are rocketing

    people have wanted house prices to go down for a long time now it is happening they are realising what that 'actually' means and it isnt good for anyone

  • rektrading on 15/06/2022 - 13:59
    +1

    All bear markets eventually end.

    Don't spend time worrying about it but rather use your time stacking while prices are cheap.

    • JimB on 15/06/2022 - 15:25
      +1

      Problem is that Sydney and Melbourne aren't cheap. It's very expensive for what rent you receive.

    • reactor-au on 16/06/2022 - 09:17

      Stack up on the down?? Sure….

      • rektrading on 16/06/2022 - 09:23

        Would you rather buy ATH or at a -25.0% discount?

        “The stock market is the only place that goes on sale and everyone’s sad”

        @cvpayne @FoxBusiness https://t.co/qdJJtEgkzd

  • netjock on 15/06/2022 - 14:36

    How Is It That It's a Buyers' Market Then?

    Renters can't afford to buy. Lots of sellers want to capitalise on high prices, not enough buyers = buyers market.

    Don't know how this is going to play out if it costs $300k to build a small 12sq single story and you need the land to go with it $300k and house prices are going to drop 15%. People might be in negative equity before they even put pen to paper.

  • ULT on 15/06/2022 - 15:12
    +5

    Cash is king, its a buyers market ONLY if you have been hoarding cash until now and have a huge deposit ready to buy, otherwise the increased interest rates still reduce the buyers borrowing capacity and it continues to diminish as rates go up, even with reduced asset prices, the buyer/investor is still being squeezed. Still a sellers market until rates increase further, demand decreases (which it is but its delayed), and inventory has been on the market for longer than 100days. Quantitative tightening only favours those with large capital pools ready to deploy, otherwise everyones going to feel the pain, sellers and buyers alike.

  • JimB on 15/06/2022 - 15:26
    +1

    With the current net yield, low probability of capital gains and rising interest rates, why would you want to buy a property in Sydney or Melbourne to rent out?

    You'll only buy if you want a place to live or like to gamble.

  • Bangers on 15/06/2022 - 15:30
    +1

    We aren't going to be entering a sellers market again any time soon with the availability of credit now increasing dramatically.

    You can have a rental crisis in a buyers market. If things keep going the way they are, there will be instrumentally less buyers in the market, which puts a downward pressure on property values.

  • WreckTangle on 15/06/2022 - 17:10

    The real issue is that the government needs to try much, much harder to support the building of affordable houses in Sydney and Melbourne in order to avoid having Swings in the rental market

  • MaxPowerz on 16/06/2022 - 06:59

    How about SE QLD notably Gold Coast and Brisbane?

  • Boogerman on 16/06/2022 - 09:03
    +3

    New Zealand house prices just fell 4% IN. ONE. MONTH.
    We are about 3 to 5 months behind them in interest rate rises

    • MaxPowerz on 16/06/2022 - 09:34

      When they started rating rates, and what's their cash rate now?

      • Boogerman on 16/06/2022 - 09:40

        They started in October & its at 2.0% now

  • MaxPowerz on 16/06/2022 - 09:44

    Feds announced biggest interest rate hike since 1994

    https://www.theguardian.com/business/2022/jun/15/interest-ra…

    Will RBA be following suit?

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