The BIGGEST property opportunity of the decade?

Have your neighbours ever had a raging party going through the night, whilst you were sitting in your home next door with nothing to do?

I am not talking a small get together either, I’m talking something that sounds so wild you would think it was the Brazilian Mardi Gras. With the music beating through your wall and all your furniture is jumping to the beat, you can actually smell the vodka fumes permeating through the brickwork.

That’s exactly how most apartment owners across Sydney must have felt over the last 2 years, hearing about massive gains in the Sydney property market that really only applied to houses.  That’s right, the huge property gains of the last 2 years mostly only benefited houses, with units not increasing very much in value.

As news of Covid started to spread, our borders closed up….. and with no tourists hitting our shores, thousands of Airbnb apartments moved to the long term rental market. This absolutely flooded the supply of units across Sydney.

In addition to this, as many younger workers lost their jobs and were unable to make rental payments, thousands more moved back home. The result? High apartment vacancy rates coupled with anaemic demand. Rents dropped & values followed.

In the famous words of Bob Dylan, ‘times, they are a changing.’

Sydney apartment commencements have fallen to 7,700 in the latest financial year, down from the 2017 peak of 31,000. This is a whopping 75% reduction in new apartments being built in Sydney!!!

At the same time, the government has announced they have reopened the doors to international migrants. Raising the target of permanent migrants by more than 20% to 200,000 this year in an effort to address a crippling labour shortage. So where the hell are these people all going to live?

Would you believe that of the 3.3 million properties in Australia  used for rental purposes, less than 1% (32,948) were advertised for rent at the end of August? Whereas 10 years ago that number was 50,803 whilst the population was 3.2 million smaller!!!

Finally, add to this the 10,000 applications per week from international students that we so desperately need (has hospitality service ever been so bad?)

You do not need to be DiCaprio to see the iceberg approaching.

SQM Research shows the national vacancy rate has just fallen to 0.9%, the lowest figure since early 2006. A healthy rental market vacancy rate is deemed to be 2-3%.

Rents are quickly climbing all across the country and with dropping apartment values this is starting to pique the interest of investors. We certainly have seen a massive increase in interest from our investor clients over the last few weeks.

Think about it. Land values have risen considerably since 2017, as has the cost of construction. As such, the cost of bringing new apartments to market has sky rocketed. Adding to this Banks have made it even harder for developers to obtain funding. All of these ingredients mixed in together results in a situation where there is a massive apartment shortage fast approaching. In fact you can buy an apartment today in Sydney for less than it will cost you to replace it!

Surely that only leaves one direction for apartment prices to head over the coming years. So jump in the elevator while the doors are still open, and no one else wants to get in.

Kiril Ruvinsky