What happens a few years after a real estate bubble has burst, and no one builds any new housing? Sydney is starting to find out, three years after the last boom collapsed. Vacancy rates fell last month to an all-time low of 0.9 per cent, so renters are staying put even where their landlord wanted to increase the rent. This has shown up in the number of lodgments of new bonds which has slumped 6.5 per cent in a year.
BIS Shrapnel predicts vacancy rates will stay below 1 per cent and median house rental prices will increase 10 per cent a year in Sydney for the next two years. Home loan interest rates are currently rising, which is discouraging first home buyers and has so far kept a lid on house prices. However, if rents rise 10-15% in real terms over the next two years and interest rates peak there is likely to be another 'boom' where house prices increase by more than the long-term average of around 6% pa.
Copyright Enough Wealth 2007