As of the 1st of this month, the government’s crackdown on the Living Away from Home Allowance (LAFHA) is officially in play. The reform is aimed at tightening LAFHA tax breaks and puts new limits on accommodation and food benefits for employees working away from home. Over the past few months, many businesses have already begun to feel the sting of the legislation changes on executive rentals.
International rental enquiries dwindling
In the past, most corporate budgets for leased property would range from $750 – $3,000 per week and a mix of both local and international executives ensured that the high-end city rental market was kept buoyant. However, in 2012, we have seen international rental enquiries all but fizzle out, and any property listed for over $1,200 per week has been leased to local Aussies.
Rohan Alexander, Lifestyle’s Associate Director, has leased over 100 corporate rentals this year and said he has experienced the following major changes:
- Based on the uncertainty of the new changes, current tenants benefitting from the LAFHA are renewing their leases for only three months as opposed to 12 months.
- Tenants are on the hunt for cheaper accommodation reducing their weekly budgets by as much as $500.
- All rental properties priced $1,000 – $3,000 per week have been leased to Australian residents.
- International enquiries have taken a dramatic dive – from making up almost half of all enquiries prior to 2012, to virtually non-existent this year.
At this stage, the only positive outcome we can see is that properties ranged $500 – $750 per week will now be much more sought after, and in fact, demand has already surpassed supply.
Vacancy rates set to affect sales prices
As this trend continues, we will see a rise in vacancies for city properties in the higher end of the market which may in turn affect sales values. More often than not, many inner city vendors will hold out to achieve the price they are after. However, if they are currently in a position where they need to sell, we are finding that the high number of vacancies has led to lower offers on the sale price being accepted.
It is sad to see a shift in the diversity of the inner Sydney market, with so many international executives currently being sent to other cities.
At Lifestyle, we aim to showcase properties that embody the ultimate in Sydney city living. Perhaps, moving forward, recruiters should also focus on selling the key desirables of our city lifestyle when securing international talent. This may help to build an intrinsic affiliation with our city that outweighs remuneration benefits.