Sydney’s property market is worsening for those wanting to rent, and there’s little prospect for it getting better.
“It’s a nightmare,” said would-be renter Melissa Griggs. “Places are basically unliveable but unaffordable.”
Rental vacancies in Sydney have gone down since the start of last year while rents have gone up, according to a report from CoreLogic, an organisation that collects and analyses data on property markets in Australia.
The January 2023 Quarterly Rental Review shows Sydney’s rental vacancy rate in January was 1.6 per cent, down from 3.1 per cent 12 months prior, and that rents increased 11.4 per cent in the same 12-month period.
Real Estate Institute of New South Wales CEO Tim McKibbin said the current rental vacancy rate is 1.4 per cent.
“We’ve seen it dropping since March last year,” he said. “In March last year it was 2.2 per cent, now it’s 1.4, so it’s all headed in that direction. So it is very hard out there. We’ve got people desperate to find a property.”
He said the low rental vacancy rate was fundamentally due to supply and demand.
“We simply need more property in NSW,” McKibbin said, “so I think we have two stark options. So option one is to build more property. Option two is to reduce NSWs population. That’s the only two ways that I can see us taking the pressure off the available stock.”
The CoreLogic report states: “Sydney had the highest median rent valuation of the capital city house and unit markets, with a median weekly rent value of $735 across houses, and $616 across units.”
The report also breaks the data down across houses and units, showing a 1.9 per cent vacancy rate for houses and a 1.4 per cent vacancy rate for units in January as well as a 12-month period increase in rents of 8.9 per cent for houses and 15.5 per cent for units.
|Sydney Rental Properties
Jan 2022 – Jan 2023
|Median Weekly Rents
*Data from CoreLogic Quarterly Rental Review, January 2023
McKibbin said a large amount of immigration late last year, as well as an influx of international students, had increased demand for properties and recent government policies have worsened the supply.
“The government has come out and announced that they’re going to implement a series of reforms and that is driving landlords out of the market,” he said. “So we’ve got landlords who are either selling their property and putting the money into other investment opportunities or what they’re doing is putting that property into the short-term rental market where they maintain greater control over it.
“Either way we can see that the amount of rental properties, rental stock is diminishing.”
Australia’s base interest rate has risen to 3.6 per cent with the Reserve Bank announcing 10 consecutive rises since May 2022 in an effort to curb inflation.
Dan MacKenzie recently started looking for a rental property. He said the process hasn’t changed since his last search.
“It feels the same as any other time, just going around to houses and doing inspections,” he said.
“I think the real thing comes when you actually look on the rental apps and they show you the map of things that are available and you kind of start to realise that the prices that you are able to afford show you way less options than what it used to be like two or three years ago.”
McKibbin said recent negative media attention around the practice of rent-bidding – offering to pay more than the asking rent for a property – has actually made rents higher.
Things like rent-bidding and all of this sort of stuff is just a symptom of a bigger problem.
“They banned agents from participating in [rent-bidding],” he said. “Landlords can still do it and obviously tenants can… Instead of dealing with the problem, in other words, instead of making it go away, what’s actually happened is we now have more would-be tenants offering above the asking rent and they’re doing that because they’ve been educated that that’s what everybody else is doing.”
He added rent-bidding wasn’t the only act of desperation among people seeking to rent property, and some monitor properties that sell.
“When they see a property sold, they’re contacting the agent and they’re saying ‘is that going to be an owner-occupier or an investment property?’” McKibbin said. “And if it’s an investment property they say to the agent, ‘well, we’d like to put an offer in to be the tenant.’”
MacKenzie said from what he’s heard, rent-bidding seems common.
“I’m not doing that because that just makes everything even more unaffordable,” he said, “but I haven’t actually seen it myself. I mean I assume it’s the kind of thing that’s happening behind the scenes individually between people, so I don’t know of how prolific it is, but I’ve been told about it and one of my flatmates actually said ‘maybe we should consider that’, but I’m like, no, let’s try not to do that.”
McKibbin said the fundamental issue was lack of supply.
“Things like rent-bidding and all of this sort of stuff is just a symptom of a bigger problem,” he said, adding that in his view the government was trying to deflect blame from a lack of supply.
“We need to forget about the symptoms and we need to start and look at the underlying problem,” he said.
Main image by Jason Dunn.