By Kate Burke and Jim Malo
Sydney house rents have soared to new heights, jumping by $100 per week in some pockets in just three months.
But the pace of rental hikes has slowed for the second straight quarter as cost of living pressures bite.
Sydney’s median house rent has reached a record of $730 per week, rising 1.4 per cent over the December quarter and 12.3 per cent over the year, the latest Domain Rent Report, released on Thursday shows. Rents are now 40 per cent higher than in December 2019.
In the apartment market, median asking rents held flat over the quarter, at a high of $680, after two-and-a-half years of growth – ending the longest stretch of Sydney rent rises on Domain records. The median was up 17.2 per cent year-on-year, and 33 per cent since December 2019.
Domain chief of research and economics Dr Nicola Powell attributed the slowdown to affordability constraints, given continued low vacancy rates and the ongoing imbalance between housing supply and demand.
“Affordability barriers are really playing out,” Powell said. “Rents can’t continue to rise at the pace that they were, it was unsustainable.
“Tenants have had to adjust, that might come in the form of getting a housemate, or moving to a cheaper location or property type, and that’s what we’ve seen unravel.”
The slow return of investors in 2023 and a rise in larger households, as residents tried to split rising costs, was helping ease demand. Net overseas migration was easing, and expected cash rate cuts and new and expanded first home buyer schemes could make it easier for some tenants to purchase later this year, Powell said.
The city’s vacancy rate reached a 12-month high of 1.3 per cent last month, but that was the lowest for December on Domain records, leaving “tenants staring down the barrel of the most competitive change over period they’ve ever experienced,” she said.
Rents climbed sharply over the quarter in areas like the eastern suburbs and city and inner south – their house medians up $100 per week, but only after declining the previous quarter. Rents held flat in areas like Parramatta and Ryde, though both recorded substantial growth over the year.
St Leonards tenant Ayaki Ito has copped a 33 per cent rent increase on his one-bedroom unit, after two hikes, from $420 to $460, then $560 a week. Unit rents in the suburb increased 26.9 per cent year-on-year.
The 27-year-old, who works in marketing, moved there in 2021 when rents were “tanking” amid the pandemic, so was understanding of his rent rise and saw little point trying to negotiate.
“[As] there is more demand than supply I feel like the tenants don’t have much power … [the landlord] was basically saying that if you can’t afford this we’ll have to look for another tenant, and it was not worth trying to move.”
While he feels fortunate to be able to manage the increase, it has pushed him to the top of his limit and cut his ability to save. If his rent were to rise again, he’d consider moving, though hopes to avoid returning to share housing.
Ayaki Ito at his St Leonard’s apartment.Credit: Louise Kennerley
“My salary is probably quite competitive for my age, and I’m living in a pretty average place and still having to see that my cash flow is negative at times, is quite crazy,” he said.
AMP chief economist Shane Oliver expects Sydney rents will continue to climb, but at a slower rate, forecasting 5-7 per cent annual growth.
“It does seem as if momentum is cooling, reflecting cost of living pressures, possible signs that rental demand might be slowing and the market being up against affordability constraints.
“Wages have not been keeping up with the cost of living … so the ability of renters to pay higher and higher rents is somewhat limited.”
Grattan economic program policy director Brendan Coates said while advertised asking rents were stalling, actual rents would continue to rise as they played catch up to market rates.
“People in existing leases have not seen anywhere near the increases as people [who] have had to move. The fact that advertised rents have stopped rising is a positive step, but you would expect the actual rents to keep rising for a year or two,” he said. “All being equal, those two should equalise.
“If asking rents stay at that level, we would see actual rents go up 20 per cent. But if they were to fall, they would converge at a lower level.”
Tenants’ Union of NSW policy and advocacy manager Jemima Mowbray said slowing rent increases would offer little reprieve.
“These are still incredibly high rents and people are struggling,” she said. “[Those having to move] are really worried ... when they look at the market it’s clear there is nothing they can afford.“
Mowbray said their holiday hotline had been slammed, as tenants continued to seek help with rent rises, inaction on repairs, and no grounds evictions. Some facing eviction feared they would end up homeless if not given more time to find another property.
“NSW needs to make implementing better rental protections, like getting rid of no grounds evictions, a priority,” she said.
Rent regulation also needs to be on the table, Mowbray said, noting housing supply was only part of the solution.