Sydney unit rents jumped 18.6 per cent in the 12 months to December 2022,reaching a record $575,the latest Domain Rent Report released on Thursday shows. It’s the sharpest annual rise since records began in 2004.
That outpaced Sydney house rents,which grew 12.1 per cent in the same time and remained at their record of $650. Renting a house is much more expensive than pre-COVID – in March 2020 the median was $530.
Experts warn rents will continue to rise,and renter groups say the city is in a “permanent state of crisis” as tenants have very limited homes to choose from at affordable prices.
Most regions in Sydney cracked double-digit rental growth in 2022,defying the sales market which is in the midst of a steep downturn.
It comes as more renters are looking for a space of their own rather than share housing. At the same time international borders have reopened and interstate migration and tourism have resumed.
While the city and eastern suburbs led the way in rental growth,more affordable pockets of Sydney followed closely behind.
Unit rents in the city and inner south grew 27.3 per cent – or $150 – in the year to December 2022. Eastern suburbs unit rents grew 25 per cent.
A similar trend played out for house rents,with the eastern suburbs growing 21.7 per cent in the year to December to $1400 a week.
That was followed by Parramatta house rents jumping 20 per cent to $600 a week.
Domain’s chief of research and economics Dr Nicola Powell said a number of factors were driving up rents.
“The new uni year is starting,overseas migrations,tourism and interstate travel has resumed. That is all weighing heavily on rental markets,” Powell said.
“Unit rents are in their sixth consecutive quarter of rental growth. It puts into perspective the unprecedented run of rental growth. That means many tenants will be impacted as their leases have expired.”
Renters chasing more affordable leases added pressure to unit rents,Powell said.
“Conditions remain tight for tenants … it’s firmly still in a landlord’s market.”
Grattan Institute economic policy program director Brendan Coates said the crisis would deepen until a significant number of homes were built or made available for rent.
Rents are tipped to keep rising in 2023.Peter Rae
He said the pandemic caused Australians to value having their own,larger space,which meant more homes were occupied.
“In the short term you’ve got a big increase in demand with migration going up against a static supply,so in the short term rents will keep going up,” he said.
Coates is also concerned about the effect the crisis will have on low-income Australians.
“A tight rental market means renters will be spending more of their incomes to keep a roof over their heads,which means they can’t spend as much money on essentials,” he said.
“We see rising rates of homelessness with rising rents. That’s the consequence.”
Centre for Independent Studies chief economist Dr Peter Tulip echoed the Grattan Institute’s concerns.
“One of the big effects on society is that higher housing costs are making Australia more unequal.
“That high housing costs hurts lower income earners because they tend to be renters while benefiting the wealthy because they own the housing. This is a major factor driving inequality in Australia.”
Tulip said the rental crisis would drive more hardship for lower income earners.
“The bigger division is not the kind of housing you have,but it’s where you’re located,” he said.
“The single biggest cause of homelessness is high rents … We are seeing growing homelessness,it’s obviously not by choice,people are being squeezed and left without an affordable alternative.”
Igor Silva was renting with two other housemates in Blacktown last year when he received notice his rent was going to increase.
Igor Silva purchased his first home last year just before rents went up for him and his housemates.Kate Geraghty
He was already searching for a place of his own amid the falling property market,and took out a no-deposit home loan thanks to a family member who agreed to go guarantor.
The 30-year-old eventually bought a unit in Wentworth Point,originally for the same mortgage repayments as his rent. He is relieved he tapped out of the rental market just as his rent was going to increase.
“The minimum apartment rent went up from $600 to over $700 a week. I kind of just stopped renting in the nick of time,” Silva said.
“In terms of mortgage repayment,it’s definitely more than rent now. I do think the mortgage rose more than the rent.”
Silva and his housemate were each able to buy their own homes faster than their third housemate could find a new rental.
Silva’s mortgage broker Samuel Philipos of BFG Loans has noticed more people trying to enter the property market as rents skyrocketed last year.
He said one family who were hoping to buy are chipping away at their deposit to cover rent. They have not been able to purchase because rising rates reduced their borrowing capacity.
NSW Tenants’ Union chief executive Leo Patterson Ross said Sydney’s rental market is in a permanent state of crisis that is almost created by design.
“People are very desperate and there are not enough options,” Patterson Ross said. “Is it this hard to access water or energy? Would we think it’s OK? We wouldn’t.
“Are people able to find a home? When the answer is no for so many people we clearly have entered this permanent state of crisis. It’s almost a designed state of crisis – it’s supposed to work this way.”