Developers cashing in on demand for boarding houses as Sydney rents continue to climb
Sydney’s tight rental market and soaring rents are increasing the demand for other forms of accommodation such as boarding houses and student housing, as renters look for more affordable options.
Across the city agents say that sites with development approval for these properties are being snapped up by developers, while there are an increasing number of DAs for boarding houses being submitted to councils.
Nick Tuxworth of CBRE has marketed several boarding-house approved properties in Sydney over the past three years.
High yields and the rarity of DA-approved sites meant these properties were in high demand, he said.
Investors were “really starting to wake up to” the incomes achieved by boarding houses.
“Definitely in the last six to 12 months I’ve really seen a massive spike in people lodging DAs and they’re all wanting a piece of the action,” Mr Tuxworth said.
Sydney’s expensive rental market meant many people were now sacrificing the space of a regular apartment for a cheaper room in a boarding house, he said.
“It’s affordable and the people who are leasing them are happy to live in a 25-square-metre room where they can save $200 – it can vary from students to middle-aged people who can’t afford rent.”
Developers in particular were buying them because of the low establishment costs and the ability to provide much-needed cash flow during the building of other projects, Mr Tuxworth said.
Yields ranged from just under 7 per cent in the city’s west to 5 per cent in premium suburbs such as Bondi, he said.
He currently has a listing at 285 Canterbury Road, Canterbury, with a price guide of $3.5 million.
The site has an approved DA for 42 self-contained rooms, with a potential income of $600,000 a year.
In May a seven-bedroom property in Frederick street, Rockdale, with DA approval to extend into a boarding house with 15 self contained rooms sold for $1.8 million to a local developer after receiving 120 inquiries.
In late 2014 Mr Tuxworth sold a site at 28 Cavell Avenue, Rhodes, with approval for a 15-room boarding house, for $1.9 million.
He said part of the reason for the high demand was the scarcity of approved boarding house sites.
Boarding houses were difficult to get approval for, owing to regular objections from neighbours.
“They’re very hard to get through councils because they’re generally surrounded by residential properties,” Mr Tuxworth said.
“Councils tend to be more agreeable when they’re close to an amenity such as a train station.”
In Glebe, the two terraces housing the Glebe Private Hotel boarding house were listed on the market earlier this year, but have since been withdrawn after the owner decided not to sell.
The boarding houses at 225A and 225B Bridge Road, Glebe were up for sale earlier this year. Photo: McGrath Leichhardt
The hotel’s manager Donald Goord said the 26 rooms were almost always full, with students and CBD workers who didn’t want to pay the high cost of renting in surrounding suburbs. The longest tenant had been there 19 years, he said.
“There are a lot of permanents – people who work in the area.”
Inside one of the boarding house rooms. Photo: Supplied
Mr Goord said that rates started at $240 a week for single rooms.
In Redfern a development site slated for student accommodation was also attracting plenty of interest, said agent Todd Owsnett, of Chambers Fleming Professionals Padstow.
The market for student accommodation in Redfern was ”really strong”.
“You’re in the zone for Sydney Uni and UTS…the demand for student accommodation is outstripping the supply. So we would expect it to be filled immediately (upon completion). Redfern now has got a good name,” he said.
The property, at 48 Regent Street, goes to auction on June 14.
