‘Crisis’ for tenants as Sydney rents explode, but worst is yet to come: SQM Research
Sydney rents have surged by a staggering margin this year and the supply of available rental housing has halved, with new analysis revealing why the crisis will get worse.
Sydney rental prices have “exploded” over the past year and more increases are set to come in what could be another city rental crisis, a report from SQM Research has revealed.
Rents for houses surged nearly 20 per cent over the past year, while rents for units increased by around 10 per cent, according to data from the property analysis group.
The rise in rents followed a gradual erosion in the supply of available rentals, with the number of vacant properties nearly halving from about 25,000 last year to 12,800 at the end of March.
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The Sydney-wide vacancy rate – which measures the proportion of all rental stock without a tenant – dropped from 3.4 per cent in early 2021 to 1.6 per cent.
SQM Research director Louis Christopher said falling vacancies were part of a larger national rental crisis that has “deepened”.
“Market rents have exploded,” he said. “Some of our capital cities and regions are recording asking rental increases in excess of 15 per cent over the past 12 months.”
Increased rents have come as real estate agents reported higher migration levels have boosted rental demand.
This has coincided with a drop in first homebuyer activity, which has meant fewer tenants leaving the rental pool.
Years of lacklustre investment activity following the Covid outbreak in early 2020 have also meant fewer new landlords entering the market, further eroding the supply of rentals.
Mr Christopher said the recent monthly data suggested the worst point of the rental crisis was still to come.
“Many localities and townships are recording zero vacancy rates,” he said. “It is likely homelessness will be increasing in this environment.
“We are not going to resolve this overnight, but I do hope the various state and territory governments will ramp up their rental assistance packages in order to cushion the rental accommodation emergency we have here and now.”
Pete Wargent, co-founder of purchaser’s agency BuyersBuyers, said one of the reasons the supply shortage may worsen was because of the absence of foreign buyers, particularly from China.
Foreign investment rules prohibit nonresidents from buying anything but newly-built properties and the demand this created for new projects helped stimulate further new projects, boosting rental supply, Mr Wargent said.
“Over the past decade, new apartment projects have largely been funded by superannuation fund investors and nonresident investors, mainly from China,” he said.
“Neither cohort is buying heavily anymore as credit has tightened, and as the HomeBuilder stimulus impact recedes, we’re heading squarely for a shortage of rental properties in some cities and locations.”
“The number of residential real estate approvals reported by the Foreign Investment Review Board fell another 38 per cent in the 2021 financial year to sit at the lowest level in a decade-and-a-half, with no sign of the multi-year slowdown reversing,” Mr Wargent said.
Originally published as ‘Crisis’ for tenants as Sydney rents explode, but worst is yet to come: SQM Research