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Oversupply hurting Sydney rental market

By Staff Reporter
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Property investors should be cautious of buying in areas where there is a surge of new apartment developments, which may affect rentals nearby.

Managing director of Let’s Rent, Lisa Indge, points to Alexandria as one property market in Sydney’s metropolitan precinct that had been flat due to an oversupply.

“January is usually the strongest month, and what we found is that it’s a little bit flat in most areas, but it was particularly flat in Alexandria late last year and early this year,” Ms Indge told Smart Property Investment.

“There have been a lot of buildings in Alexandria constructed over the last few years, and therefore the amount of stock in that area, in terms of rental, would have definitely increased.”

She also advised investors to be cautious of areas such as Camperdown, which is set to have a huge influx of investment properties come onto the market.

In the seven years of running her business, Ms Indge said it was the first time she had seen rents decline in metropolitan Sydney early to mid-last year.

Another trend she had witnessed in the Sydney property market had been the decline of people renting properties in the “plus-$1,000” market, which she attributes to the abolishment of the living away from home (LAFH) allowances and benefits in October last year.

“That was a pretty hefty tax benefit, and without that, the attractiveness of moving to cities is reduced. It also means that people who are relocated are looking at rentals at lower levels, and quite significantly lower too,” Ms Indge said.

Ms Indge said the LAFH allowances have been artificially holding the plus-$1,000 market up, and that this market is unlikely to recover.

“We aren’t seeing people coming into the city on contract where they are willing to pay those sorts of rents anymore. They’re being much more conservative because, effectively, they’re seen on the same basis as everybody else.”
 
In a job market where employment is likely to be soft to stable in the next few years, Ms Indge said she would be cautious.

“I would go with established areas, not areas where there is going to be a lot of development, where you know that the rental prices are very stable,” she said, “[What] I’d be looking for is properties that tick all the boxes.”

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