NSW state budget warns of further rent increases, as government works to boost housing supply

Despite rents growing by nearly 20 per cent in just a year, it appears pain for renters is only set to increase.

Rental property prices across New South Wales could spike even further over the next four years due to low supply and increasing overseas migration, according to the 2022-23 Budget Papers.

The concerning trend, which was revealed in the Labor New South Wales state budget on Tuesday, comes after rental cost across Sydney grew by nearly 20 per cent in just a year.

“House prices have increased despite higher interest rates. Looking ahead, house prices are expected to be supported by high net overseas migration and relative weakness in new housing supply,” the budget papers said.

“This will continue to drive up rents.”

Budget papers from Tuesday revealed the government expected rents to increase. Picture: NCA NewsWire/ Jeremy Piper

According to SQM Research, rents across Sydney have soared by 17.6 per cent from $676 to $795 a week in the year to September 20. The biggest shifts were seen in listings for two-bedroom units, which reported a 20.3 per cent rise from $572 to $689.

Data compiled by Homelessness NSW found the local government areas of Fairfield has the highest proportion of households in rental stress at 48.2 per cent, followed by Byron (47.9 per cent) and Tweed (45.4 per cent).

In Sydney, rental stress was also felt by more than two in five households across Canterbury-Bankstown (42.4 per cent) and Liverpool (40.9 per cent.

Tenant’s Union of NSW chief executive Leo Patterson Ross feared how already stressed tenants would cope with further upticks in rent.

“Individuals are being hurt very badly because they’re being displaced from their homes, they’re loosing their homes, or they’re compromising on the quality of their property,” he said.

“We’re certainly still hearing from people who are finding it really difficult – either they can’t find somewhere they can afford, or there’s still a level of intense competition.”

Data from Homelessness NSW revealed the LGAs of Fairfield, Byron and Tweed had the highest levels of rental stress. Picture: NCA NewsWire/ David Swift

Minns: ‘Supply is the only way to ease housing’

The government’s answer to decreasing rents and property prices revolves around supply.

Tuesday’s budget announced a $2.2bn plan designed to encourage support from the private sector to build more homes, plus $300m of funding for Landcom to build an extra 4697 homes by 2039 - 30 per cent of which has been marked for social housing.

As it stands, the agency builds between 2500 to 3000 homes a year.

Premier Chris Minns said introducing more housing supply into the market would lower house prices, and increase rental supply, and ultimately lower rents as well.

The government have also flagged incoming planning reforms to encourage collaboration from the private sector to contribute to NSW’s housing pipeline.

“The only way to ease housing prices is to ensure that we’ve got supply in the pipeline. We are committed to doing that,” he said.

“That means more urban consolidation, it means more building on transport lines (and) it means government committing infrastructure to essential parts of metropolitan Sydney in particular.

“The bottom line here is we are ensuring that the infrastructure money is made available and the red tape is removed so that we can get housing completions up and running in this state.”

The government says that increasing housing supply is the best way to bring down rents and house prices. Picture: NCA NewsWire/ Nikki Short

Mr Patterson Ross agreed that building more homes, and increasing supply, was the most effective way of bringing down rents, he said funding in the budget “didn’t go far enough”.

“Often building more homes is the most effective (way to reduce rents) because you’re investing in an asset that appreciates that’s an income generating return,” he said.

“We have a big housing problem, particularly housing that’s affordable for lower income people, but the scale of what’s needed is just so much greater than what was in the budget.”

He welcomed the funding set aside for infrastructure upgrades to support more housing, which is especially important in regional communities.

“Making sure a place has that level of infrastructure is about making sure existing communities are being supported and used, rather than creating new ones,” he said.

“When it comes to regional areas, sometimes they’re not as attractive for people to move and grow into these towns because there aren’t those employment opportunities, or they lack facilities and infrastructure.”

Rental reforms coming

While Tuesday’s budget didn’t announce any new rental support, NSW is considering clarifying laws around rent increases when tenants switch from periodic to fixed term agreements, and rules which would prevent rents being increase more than once a year for fixed term agreements under two years.

As it stands, there are only laws which prevent rents from being raised more than once a year on fixed term agreements of more than two years.

Other reforms being considered by the government include removing ‘no grounds’ termination, laws which would prevent landlords for banning pets without a valid reason, and the design of a portable bonds scheme which has already been passed through parliament.