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Hyper-inflation in the upper echelons of Sydney’s rental market has taken agents by surprise and is forcing all but the most affluent prospective tenants to consider whether they really need to rent a Woollahra mansion or a harbour-front penthouse.
The prestige rental sector, which begins around the $3000-per-week mark and is almost exclusively confined to Sydney’s harbourside suburbs, has been hit by a double whammy of higher-than-expected demand and lower-than-normal supply this autumn, causing asking prices to double in some areas.
“We get these little windows in the market from time to time, but it’s quite an unusual phenomenon,” says Alison Coopes, whose eponymous agency deals almost exclusively with the cream of the Sydney sales and rental markets.
Coopes, who along with Ken Jacobs brokered the $61.8 million sale of Altona in Point Piper late last year, says current prospective tenants at the high end are, quite simply, desperate to find somewhere to live. “Something that might have rented for $3000 or $4000 six months ago will rent for $6000 to $7000 today, because there’s absolutely no supply,” she says.
Part of the reason that Sydney’s prestige rental market is vulnerable to price spikes is because it is concentrated in a relatively small area with a small total number of dwellings. Traditionally, there have been only a handful of neighbourhoods that high-net-worth individuals have considered worthy, including Darling Point, Point Piper, Bellevue Hill and Vaucluse.
“Proximity to the CBD and to leading schools is very important for a lot of these clients, so most of the activity is confined to the harbourside eastern suburbs,” says Lucinda Waugh, business development manager at The Agency.
“They’ll look at Mosman as well, but I haven’t had too much traction with people looking at the Inner West. I think that just comes back to the fact that everybody wants waterside if they’re going to be paying that much money.”
Like Coopes, Waugh says the undersupply of prestige rentals seems particularly acute this month. “We often find there is not enough stock to service people in the busier parts of the year, but that generally changes by the end of summer,” she says. “But high-quality properties are still very much in demand.”
In the background, the continued price growth in Sydney’s overall rental market is also having an impact. In Darling Point, for example, the median asking rent has hit an eye-watering $4625 in 2017, according to Domain data.
So who, exactly, has the means to rent Sydney properties at such arresting prices? According to Waugh, many prestige tenants arrive from overseas to work for multinational companies on fixed-term contracts. Others may be affluent Sydneysiders in need of a temporary nest.
“We see a lot of locals who already have homes, or they’ve purchased a deceased estate or an older property, and they’re going to renovate, so they’re looking for somewhere to keep their family for six to 12 months,” says Waugh. “Of course, those people want to be close to the property they own so they can keep an eye on the renovation and also be close to work and school. That means Eastern Suburbs.”
According to Coopes, these two types of tenants have different price thresholds. “There’s almost a consistency of capping it at $10,000 with your high-net-worth corporate individuals who are here for a two-year contract,” she says. “In the case of the renovator who really does not want to downgrade his or her lifestyle, it’s usually capped around $6000.”
But both groups may be forced to find extra cash in the weeks and months ahead.
“Longer-term leases have historically capped out around $8000 to $10,000 in my experience,” says Waugh. “But with the way the eastern suburbs property market is going at the moment, we could be in excess of $10,000 in the coming months.”
Last week, Coopes rented a $5,000 property in Darling Point and says she is already fielding prospective tenants asking for a similar address. “That property had sat there un-rented for a period of time,” she points out – “but the minute you get this lack of supply, it’s a completely different market”.
Current high priced rentals:
99 Bay Street, Mosman – $6000 per week
8C Mcleod Street, Mosman – $6000 per week
14d Eastbourne Road, Darling Point – $5950 per week
3/3 Loftus Road, Darling Point – $4750 per week
51 Village High Road, Vaucluse – $4200 per weekContinue Reading →