Sydney rents could plummet ‘up to 25 per cent’

Rents in parts of Sydney are set to fall by up to 25 per cent by year-end, but the outlook isn’t good for all tenants. See what rent will be in each suburb

Rents in some of Sydney’s most popular suburbs have been forecast to drop by hundreds of dollars a week this year – with landlords warned coming interest rate cuts could drive an exodus from the rental market that could ease tenant competition.

Modelling provided exclusively to the Saturday Telegraph has forecast what rents will be in each suburb within 12 months’ time, revealing mixed outcomes for tenants.

Rents were expected to rise in most areas, with nearly half of the suburbs across Greater Sydney forecast to get average rises in rents of over 7 per cent – double the current underlying inflation rate.

But there were also many suburbs where rents were expected to drop by 15-25 per cent by year-end on account of rising vacancies and other factors.

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Renters like Annushka Elyasian say they are excited to buy a home this year. Greater buyer activity is expected to ease rents. Picture Thomas Lisson

Many of the biggest falls were expected in eastern beach suburbs and “lifestyle” markets.

This included Bondi Beach, Bondi Junction, Paddington, Edgecliff, Queens Park, Dover Heights and others, with the drops expected to save tenants an average $250-$680 a week.

Rent falls of about $100-$280 were also expected for houses in Manly, Fairlight, Balgowlah and neighbouring northern beaches suburbs, according to the data from property research group Suburb Advice.

SEE FULL LIST OF RENT FORECASTS FOR EACH SUBURB

The forecasts analysed rental turnover rates, affordability measures and historical trends to accurately forecast rents.

Forces expected to push down rents in some areas included tenants pooling into share houses or staying with parents for longer, coupled with greater numbers of tenants becoming first-home buyers.

Rent for a unit in this Bondi building has dropped $100 per week.

There has also been a rapid increase in investor spending across the housing market, which has given tenants a larger choice of rentals.

These trends were expected to intensify once interest rates were slashed – a move widely expected to be announced at the Reserve Bank’s next board meeting on Tuesday.

Experts also noted that high rents in coastal suburbs often hinged on discretionary spending from tenants – who had the option to move to cheaper markets if caught in a financial pinch.

“These are places people dream of living in but they don’t have to live there. They can go somewhere else if they need to save money,” said Sam Saket, the director of Suburb Advice.

“Rental growth in lifestyle suburbs has also been slowing down because tenants are being more flexible with their location preferences and are going to areas where they can get cheaper rents.

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The rent on this Manly house dropped $50 per week.

“There’s a big move back to inner city areas as companies change their work from home policies. Apartment rents are growing faster now and there’s a reversal of some of the Covid trends when those beach and lifestyle suburbs where more popular.”

Mr Saket said it’s not a sunny picture for tenants everywhere.

Rental shortages where expected to push up rents by more than 15 per cent in some of Sydney’s more affordable markets, where competition remains higher.

Sydney’s northwest was due for particularly high rental rises, including in the suburbs Ryde, North Ryde, Macquarie Park, Meadowbank and Denistone.

Tenants in these areas were forecast to be paying an average of more than $100 extra in rent by the end of the year.

Long lines at a rental inspections were common last year, but they are declining. Picture: Sam Ruttyn

Apartment renters in parts of the southwest, one of the most affordable rental markets in Sydney, were also due for circa 15 per cent rent increases – equivalent to about $70-$75 more per week.

This included in the suburbs Hoxton Park, Hinchinbrook, Cecil Hills, Busby, Miller, Green Valley and Ashcroft.

Mortgage Choice broker Jane Vaughan said coming interest rate cuts were spurring renters to become first-home buyers.

“It’s been a crazy busy year. A lot of renting first-home buyers are seeking pre-approval for a loan. They’ve been waiting for this,” Ms Vaughan said.

“Rents are so high, many (renters) figure if they just pay a little bit more than they can get into the market.”

Many tenants are moving away from lifestyle areas back to inner suburbs. Picture: Damian Shaw

One of the tenants planning to exit the rental market this year is nurse Annushka Elyasian, 34, who said she was encouraged by the prospect of a rate cut improving her buying options.

“It’s a pretty exciting time,” she said, adding that she saw an opportunity to get better housing security.

“I have attended five inspections so far and it has been encouraging. There have probably only been about five other (people) at each of the inspections,” she said.

“I think once there is a cut I will be able to save more and my lifestyle will improve. I can maybe get a bit more enjoyment in life.”

Little Real Estate CEO Rebecca Kerr said an interest-rate cut could also increase rental supply.

“More investors could enter the market because better returns will be available,” she said. “As more people exit the rental market, that greater choice could make it easier for tenants.”

Originally published as Sydney rents could plummet ‘up to 25 per cent’