Sydney rents have hit record highs and experts warn the city’s rental crisis has become entrenched, escalating pressure on middle-income earners, under-40s and anyone priced out of home ownership.
Asking rents for a typical house hit $750 a week after rising 13.6 per cent – or $90 a week – over the year to March, the latest Domain Rent Report released on Thursday showed.
The median asking rent for units hit $700, a 12.9 per cent increase – or $80 a week – in the same period.
Experts say the persistent escalation of the rental crisis is a leading cause of high inflation, cost-of-living pressures on households, and homelessness.
Domain chief of research and economics Dr Nicola Powell said strong demand accelerated Sydney’s rental market.
“We’ve seen strong levels of population growth, we haven’t seen enough investment activity and affordability constraints of purchasing a home rose. The trend of greater household formation is still there, so we need more homes to house the population,” Powell said.
She said there could be some signs of the rental market stabilising throughout the year as population growth had peaked, visa applications have turned a corner and there were fewer views per rental listing.
“Budgets are stretched, and the affordability ceiling is apparent. What happens is people move suburbs, they opt for a different property type or go into a share house. For others, it might mean fast-tracking a purchase.”
The strongest rental growth was in Sydney’s inner south-west region, where rents were up 20.4 per cent – or $110 a week – to $650 a week.
That was followed by more far-flung and affordable areas, including the south-west (up 19.6 per cent), outer west and Blue Mountains (up 19 per cent) and Blacktown (up 18.4 per cent).
Powell said demand was easing but not enough to change a persistently low vacancy rate that has become entrenched.
“To see rents pull back, we do need to see that vacancy rate move much higher … we’re not at that point yet.”
Centre for Independent Studies chief economist Dr Peter Tulip said there was a long-running undersupply of homes, allowing landlords to easily fill almost any property at much higher rents than previously.
“The failure to build enough houses is the fundamental explanation for the shortage,” Tulip said.
He said rents would keep increasing if the vacancy rate remains ultra-low, affecting more renters and increasing homelessness.
“A third of the population rents, and so yes, it’s most terrible for those on very low incomes, they’re not able to pay the higher rents, but it’s a big problem for an extremely large part of society. Pretty much anyone under the age of 40.
“The biggest determinant researchers find in the rate of homelessness is the level of rent.”
He said the latest quarter of rental growth would also contribute to higher inflation for longer.
In the interim, he was not against people sleeping rough using legitimately vacant homes, which made headlines this week when it was raised as a short-term solution by rental advocates.
Ella Doyle and her housemate spent more than $9000 on short-term rentals before finding a more permanent roof over their heads.Credit: Rhett Wyman
“If there is a vacant house somewhere then I’d prefer people sleeping in that than sleeping under a bridge or in a tent. Neither of those are at all a satisfactory solution,” he said, noting it clearly depends on why some homes are vacant.
Renter Ella Doyle spent months and more than $9000 before she was able to find a rental in Sydney in February.
The 31-year-old business owner of a social media marketing agency, who relocated from Brisbane, said she submitted about 100 rental applications before she and her housemate were accepted.
“Every single inspection we turned up at, there were at least 50 people there. They weren’t cheap homes either. The places were terraces or townhouses ranging from $850 to $950 to $1500 for a two-bedder,” Doyle said.
They were only allocated five minutes to inspect the rentals, and the agents were too busy to answer many questions.
“We were missing other inspections because the lines were so long,” she said.
Ella said that in most instances, she had to pre-apply before inspecting, and in many cases, homes were whisked off the market by that evening.
After flying down twice for inspections, Doyle and her friend moved into short-term rentals for almost two months until they found a home.
“Dan and I are two singles, we’re both in our 30s and high earners. On paper, we should be in a position to buy a home, but there is no way to save a deposit with rental prices this high.”
Tenants’ Union of NSW chief executive Leo Patterson Ross said renters were making compromises to make ends meet while being pushed further away from homeownership, adding that the vacancy rate needs to be 3 per cent to keep rents steady and above 5 per cent for rents to fall.
“People do keep getting pushed away from the communities they have established. It might mean you have moved from a larger home to a smaller home, you move location,” Patterson Ross said. “All these things means a household ends up paying the same amount per week, but they’re not getting the same house and putting their health and safety at risk.”