Mixed market signals

So the other week I arrived home one evening to find a massive garage sale in the park across the road. All kinds of things, beds, sofas, kitchen appliances, and a family standing around dejectedly, looking like they weren’t getting much business. I started sauntering over to take a look, when Raych stopped me. “That’s not a garage sale, you idiot,” she explained. “They got evicted.”

Oh. So this rental crisis thing is starting to bite.

On the other hand, when their place got listed, it was for $200 per week, for a two-bedroom terrace. That’s really cheap. Then when our neighbours gave notice around the same time, their place was listed for quite a bit more, $350 or so. But the agent couldn’t rent it, and it was listed again with a lower price. Next week, same thing happened. As of this week we still have no neighbours.

I have to admit that my street is unusual in that it’s in a part of Sydney with a bad reputation – Redfern, on the edge of the Block. But it’s five minutes from Sydney Uni, and just around the corner from Darlington and Chippendale, about which we are hearing all these stories of the throngs turning up for apartment viewings. So I woudn’t have thought it was completely immune to this rental market tightness.

Anyway, yesterday the NSW Department of Housing released its quarterly rental stats for the March quarter, so I thought I’d compare anecdotal evidence with the hard stuff. They’re based on bond lodgements, so I think they only track new tenancy agreements, but that should still give a good indicator of what is happening.

Overall, rents in Sydney have definitely been rising quite fast. 6.7% rise in the median rent across Sydney in the year to March. And worryingly, the March quarter itself saw a rise of 3.2%, an acceleration. But the rise is concentrated in the Middle and Outer rings, i.e. from Burwood and Canterbury west, from Willoughby north, and south of Botany Bay. In the Inner Ring (which covers a lot of ground), the median rent grew 1.3% in the quarter to March. Which isn’t that small on an annual basis, but isn’t that big either, and is a slow-down from the rest of the year.

Things are even more mixed once you look closer at the Inner Ring. Here the stats are broken down into dwelling type and unfortunately not aggregated. There are big differences between what is happening to one-bedroom apartments and four-room houses, as well as between different suburbs. (So, for example, four-bedroom rents in wealthy Mosman have skyrocketed by 40.7% over the year to March, while in Ashfield they have fallen 5.3%.)

I’m in the Sydney local government area. But those stats could be a little misleading because it includes all kinds of areas – the heart of the city, Surry Hills and Kings Cross as well as Redfern, Alexandria, etc. Overall the median rent for two-bedroom dwellings has risen 10.3% in the year, and 4.3% in the quarter to March – an acceleration. But the median rent on four-bedroom places, where a lot of students will live, has fallen by 2.5% in the year, and by 4.8% in the quarter, which implies a reverse.

In neighbouring Marrickville, median rents have completely stabilised for one-bedroom units, the rise has decelerated for two-bedroom dwellings (1.6% in the quarter, 10.3% in the year), and rents are rapidly falling on four-bedroom dwellings (4% in the quarter to March). Only for three-bedroom houses is the rental squeeze still going on.

You can even zoom in further and check it out postcode by postcode. Sure enough, in my postcode, the median rent on two-bedroom places has gone into reverse big-time, falling 5.8% in the quarter!

As for what this all means, I’ll leave that for another post. But at an individual level the moral is clear – if your landlord is encouraged by all this talk about a rental squeeze and tries to jack up your rent, check the stats and you might find out your bargaining position is better than you thought.

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Published in: on 15 May, 2007 at 10:41 am  Comments (2)  

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  1. I’m pretty suspicious of these stats, especially as they show drops – I can only think that a relatively small proportion of rentals changes hands in this quarter, and consequently it’s skewed by the specific properties that change hands in the quarter, without reflecting underlying trends. For example, Mosman, an area not known for rental accommodation, saw less than 500 bonds lodged in this quarter, making the stats particularly unreliable – there could simply have been many fewer high-rent properties changing hands last quarter than this, couldn’t it? Especially as the four bedroom statistic is actually for four or more bedrooms, whereas the stats for fewer bedrooms show nothing like this level of increase.

  2. That’s true, the Mosman stat I used as the most extreme probably has a pretty wide margin of error if it’s used as an indicator. Most of the other areas have a lot more lodgements. Going by postcode you would want to be careful not to overstate the case too much. But these stats give a better indicator than a vague media anecdotal sense of a rental squeeze, or propaganda from real estate agents and developer front groups. And I bet they could be used in a Tenancy Tribunal hearing, since the only alternative is knocking on your neighbour’s doors and asking them to sign something saying how much rent they pay.


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