Tenants to pay even more: vacancies at near record lows point to further rent hikes in months ahead

Sydney tenants are paying massive rent increases compared to last year – and recent market changes suggest even more rises are on the way.

Sydney tenants are being squeezed for close to a quarter more rent than last year as the supply of available rental housing sinks to near record lows.

Figures published Tuesday by property group SQM Research showed Sydney’s vacancy rate – the supply of all rental accommodation advertised up for rent – dropped to 1.3 per cent over August.

That’s near the record low of 1 per cent recorded in April 2006, but SQM noted that month was an “anomaly” driven by short term factors, while the current drop in vacancies is more sustained.

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The circa 10,000 homes available for rent in August was about half the number advertised at the same time last year.

There are more tenants, but fewer homes available. Picture: Adrian William

The national vacancy rate was 0.9 per cent – the lowest level since records began.

With tenants competing for a dwindling supply of rentals, the average rent for all categories of Sydney housing increased 22 per cent over the past 12 months.

The jump in Sydney rents was the biggest in the country.

The lower supply of available rental homes has come after years of lacklustre buying activity from investors.

Many investors also sold off their properties during the early onset of Covid-19. These properties were then occupied by their new owners and removed from the rental pool.

The pandemic drove a further shift in housing preferences: tenants who otherwise share high-density apartments began looking for their own lower density rentals or became first homebuyers.

There are half as many rentals available now as there was at this time last year.

Renewed migration intake after two years of closed international borders, coupled with lacklustre building activity, could put additional pressure on the supply of rental accommodation.

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SQM Research director Louis Christopher said it was likely vacancies would continue to drop over September in Sydney and the rest of the country.

“The national housing rental crisis has further deteriorated to unprecedented levels,” he said.

“And rental listings thus far recorded in September would suggest another fall in rental vacancy rates for the current month.”

Landlords, now paying much interest rates due to recent Reserve Bank hikes, would be encouraged to increase their rents, Mr Christopher said.

“Asking rents continue to rise across the country at a red-hot pace,” he said. “All capital cities are recording double digit percentage rental increases over the past 12 months.”

Originally published as Tenants to pay even more: vacancies at near record lows point to further rent hikes in months ahead