New research points to high migration and fewer new homes for Sydney’s rental crisis

“Rapid” population growth and a drop in new housing are causing further strain on Sydney’s rental market, according to latest research.

There has been a “renewed tightening” across the rental market over recent months. Picture: Jeremy Piper

Rapid increases in population and a drop in new housing are causing further strain on Sydney’s rental market.

SQM Research has revealed Sydney’s rental vacancy rate dropped from 1.6 per cent in July to 1.4 per cent in August with vacancies falling to 10,281.

The Harbour City is moving quickly towards the $1000 mark for average weekly rent, now at $977.65 a week and by far the most expensive across the country.

The national median weekly asking rent for both houses and units is $584.32.

SQM managing director Louis Christopher said the market had tightened again in recent months.

Competition remains high at open homes for rent. Picture: Adam Yip

SQM managing director Louis Christopher.

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“This renewed tightening mostly likely was caused by ongoing and rapid increases in our population plus a decrease in new dwelling completions compared to 2022,” he said.

“Going forward, I expect the low rental vacancy market to be maintained.

“In response to shortages, housing formation will continue to contract and unfortunately, I am

expecting a very large increase in homelessness.”

Mr Christopher said Sydney, and the rest of the nation, were not building enough houses and units to cater for the record migration.

He pointed to recent building figures showing the country had about 160,000 builds in the pipeline between 2024 and 2029 – well short of the 240,000 dwellings needed to account for population growth.

Mr Louis said he was expecting an increase in homelessness.

“Rapid” migration numbers are adding to the rental shortages. Picture: Damian Shaw

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“It’s creating shortages,” he said.

“I would strongly argue there should be a short-term cap on migration over the next two years while supply catches up. If we cap migration to 90,000 people over the next two years, the rental crisis would come to an end by the midpoint of 2025, based on our modelling.”

The rental vacancy rate in the Sydney CBD fell back to 4.6 per cent after recording an increase in July.

Mr Christopher said the first half of 2023 saw a “mini reprieve for tenants” with a slight lift in rental vacancy rates, especially across regional areas.

“Tenants increasingly sharing accommodation together somewhat assisted in the easing,” he said.

SQM research showed most regional areas experienced drops in rental vacancy rates to August, including the North Coast of NSW dropping to 1.6 per cent however the Blue Mountains remained steady at 1.5 per cent.

Originally published as New research points to high migration and fewer new homes for Sydney’s rental crisis