Regional NSW asking rents soar while metro locations continue to struggle

As more Sydney-siders seek a lifestyle overhaul, asking rents are soaring in popular New South Wales towns.

However, while asking rents are soaring in lifestyle locations, other city suburbs are experiencing the opposite market conditions.

BFP Property Buyers Founder and Principal Ben Plohl commented on SQM Research’s weekly asking rent and vacancy rate data, revealing there are vastly different rental market conditions happening across the state.

Mr Plohl said the situation was also a reflection of the oversupply of inferior rental stock that was purchased towards the peak of the boom four years ago in Sydney. 

“In the last year or two of that boom some buyers were mostly speculating on the market, so they bought cookie-cutter units in areas that were already tipping into oversupply territory,” Mr Plohl said. 

“Areas such as Parramatta, the Inner West, and Liverpool were struggling with more rental stock than supply long before the pandemic, which has just made that situation more difficult.” 

Mr Plohl said many regional lifestyle areas on the other hand had been experiencing more demand than supply for a number of years with vacancy rates well below the equilibrium point for some time. 

“While the pandemic has accelerated the exodus of people away from the city, that is a situation that had been under way for a while already, mainly because of the high property prices in the Harbour City,” he said. 

“On top of that, the lending restrictions that came into play in 2017 also prevented many financially capable investors from borrowing to purchase a strategically located investment property in areas like the South or Central Coast.” 

According to the analysis, weekly asking rents for houses increased by more than 35 per cent in Broken Hill-Dubbo, nearly 28 per cent on the South Coast, and about 23 per cent on the Central Coast over the year to early July. 

“All of these locations have had undersupplied rental markets for some time, with vacancy rates currently sitting at just one per cent or below,” Mr Plohl said. 

“Also, with areas like these seeing the lion’s share of internal migration from Sydney, this situation is not likely to change anytime soon.” 

Mr Plohl said the rental markets in a number of city areas were bearing the brunt of people moving to lifestyle locations but were also struggling due to the underwhelming rental markets they had before the pandemic. 

In Parramatta, the vacancy rate has been trending up since 2017 and is currently at 4.2 per cent, while in the Inner West, the vacancy rate has increased from 1.1 per cent four years ago to 3.5 per cent in June, according to SQM Research. 

“Many of these locations are also feeling the pinch from the loss of international students and tourists,” he said. 

“However, when you also consider that there was a net loss of 9300 people from Greater Sydney in the December 2020 quarter, and 7800 in the previous quarter, it seems quite likely that these locations while have challenging rental markets for a while yet.”