Sydney’s rental market is in a state of upheaval, with skyrocketing rents, low vacancy rates, and intense competition.
This bustling metropolis, known for its stunning landscapes and dynamic lifestyle, has become a challenging place for renters. Let’s dive into the key trends shaping Sydney’s rental scene in 2024.
Sydney’s rental scenario offers a tapestry of trends, challenges, and opportunities, particularly when viewed against the backdrop of its broader property market and the economic factors influencing it.
Current Rental Market Trends in Sydney
The rental market has undergone significant changes in recent years, but now Sydney’s renters are facing a perfect storm of trends that are combining to create significant headwinds for the market. Here’s a breakdown of the key factors contributing to Sydney’s rental crisis.
1. Sydney Has Low Vacancy Rates
Extremely low vacancy rates and heated competition across the state are pushing the NSW rental market into crisis mode.
Sydney’s rental vacancy rates plummeted to just 1.3% for the first month of 2024, the sharpest fall across the country, down from 1.7% in December, according to SQM Research. By contrast, Sydney’s vacancy rate peaked at 4.3% in May 2020.
As of January 2024, there were just 9,114 available properties for rent across the city. This is much less than the 12,143 available properties recorded in June last year.
The national vacancy rate sits at just 1.1% for January 2024, with 32,108 properties available for rent. The areas with the lowest number of available rentals are the Sutherland Shire at a 0.65% vacancy rate, followed by the Northern Beaches at 0.73%, and the Eastern Suburbs at 0.9%.
Why is the Vacancy Rate So Low?
- High Demand: Demand is at an all-time high, and any available properties are being snapped up immediately by renters.
2. Sydney Has an Undersupply of Rental Properties
Sydney has been facing a rental housing shortage for several years now. This has led to increased competition for available homes, driving up rentals and making it increasingly difficult for many Australians to afford a place to live.
During the pandemic, many investors sold off properties due to uncertainty about rental demand and the opportunity to sell out with solid capital gains.
This led to a drop in the supply of investor-owned properties. By the end of 2021, 25% of properties sold across the nation were previously-rented properties, and this figure climbed higher through 2022 and 2023.
Why the Supply is Low:
- Investor Sell-Off: Many investors sold their properties during the pandemic, reducing the number of rental units.
- Owner-Occupiers: Many owner-occupiers also sold their properties and moved into rental accommodation, adding pressure on the rental market.
3. Supply of Off-the-Plan Apartments Has Tapered
The undersupply of rental properties is two-fold: many rental properties have been sold to owner-occupiers, and there is a narrow pipeline of new projects nearing completion.
Booming construction costs and a low supply of materials over the pandemic have caused many projects to stall. There has been an uptick in the number of building companies going into insolvency.
Why Off-the-Plan Supply is Low:
- High Construction Costs: According to CoreLogic’s Cordell Construction Cost Index, construction costs for NSW rose 0.6% over the three months to September 2023.
- Government Regulation: Increased government intervention and tighter rental laws have dissuaded investors.
4. Sydney’s Population is Growing
With the opening of international borders in early 2022, Sydney has become a major recipient of new residents, both skilled immigrants and overseas students, putting extra pressure on the Sydney property market, particularly the rental markets.
Sydney’s population grew 2.1% over the year ending June 2023, according to the Australian Bureau of Statistics (ABS).
Why Population Growth Affects Rentals:
- Increased Demand: More people moving to Sydney increases the need for housing, leading to lower vacancy rates and higher rental prices.
5. Sydney’s Economy is Strong
Sydney’s strong economy is also contributing to the dire state of its rental market. The city has a thriving job market, with many opportunities in industries such as finance, technology, and tourism.
As more people are employed, they can afford rental properties, further driving down the vacancy rate.
6. Sydneysiders are Moving Back to the City
During the COVID-19 pandemic, there was a huge outpouring of Sydneysiders into regional NSW and many flocked north to Queensland in search of lifestyle suburbs and more affordable properties.
But now lockdowns have eased, many businesses are calling their staff back to the office, meaning returning to the city.
Why Returning to the City Affects Rentals:
- Increased Demand in the CBD: More people moving back to the city increases the demand for rental properties, especially in central locations.
7. What We Want in a Home Has Changed
Sydneysiders are increasingly prioritising spacious living and separate study areas in their next home following the height of COVID-19 restrictions. The COVID-19 pandemic significantly changed homeownership goals and what Sydneysiders wanted most in their next home.
Why Housing Preferences Have Shifted:
- More Space Needed: With more Australians working from home, spacious living areas and home offices have become top priorities.
8. Sydney’s Rental Prices are Surging
All these factors are causing Sydney’s rental prices to surge. According to realestate.com.au data, rental demand has risen significantly in the inner and middle rings of Sydney, as measured by the number of potential renters per listing.
Some suburbs have seen weekly rents surge by up to 50% in the past year, adding over $200 to the weekly rental cost.
Current Rental Prices:
- Houses: The median weekly rent for houses is $1,037.08, an increase of 13.4% year-on-year.
- Units: The median weekly rent for units is $694.61, an increase of 13.3% year-on-year.
It’s always wise to gain a comprehensive rental estimate before making a move. From professionals to students, every renter in the city now juggles between the desire for prime location and the reality of rental affordability.
Deciphering the Sydney Rental Crisis
Terming Sydney’s current rental situation as a ‘crisis‘ isn’t mere hyperbole. Tenants and property enthusiasts alike are witnessing a tangible strain, marked by escalating rent prices and a dwindling supply of available rental properties in Sydney.
Delving deeper, this perturbation stems from a confluence of factors. The allure of Sydney as a global city, coupled with spikes in overseas migration, has surged the demand for rentals.
However, this demand isn’t mirrored with a proportional increase in housing supply.
Economic factors, historical housing policies, and investment trends have all played a role in tilting the balance. But how exactly have the rents increased? Gain insights on the average rent increase in Sydney over the years to get a clearer picture.
Sydney’s Suburb Dynamics: A Closer Look at Rental Trends
Understanding the dynamics of Sydney’s rental market requires a deep dive into the specific trends in various suburbs. Here’s a detailed look at how different areas of Sydney are faring in 2024.
Rental Prices by Suburb
The disparity in rental prices across Sydney is significant, with some areas commanding much higher rents than others. Here are the most expensive and most affordable suburbs to rent in Sydney:
Most Expensive Suburbs to Rent in Sydney
| Rank | Suburb | Median Value (Million) | Property Type | Median Rent (per week) | Gross Rental Yield (%) | Vacancy Rate (%) |
|---|---|---|---|---|---|---|
| 1 | Vaucluse | $9.06 | House | $2,588 | 1.67 | 4.8 |
| 2 | Bellevue Hill | $9.54 | House | $2,240 | 1.43 | 3.2 |
| 3 | Rose Bay | $6.41 | House | $2,174 | 1.83 | 2.0 |
| 4 | Double Bay | $6.24 | House | $2,078 | 1.79 | 4.5 |
| 5 | Dover Heights | $6.30 | House | $1,994 | 1.87 | 3.6 |
| 6 | Bronte | $5.15 | House | $1,962 | 2.07 | 2.9 |
| 7 | Mosman | $5.48 | House | $1,921 | 1.87 | 2.5 |
| 8 | Clovelly | $4.16 | House | $1,918 | 2.44 | 0.6 |
| 9 | Woollahra | $4.73 | House | $1,890 | 2.00 | 4.0 |
| 10 | North Bondi | $4.46 | House | $1,888 | 2.23 | 1.5 |
Most Affordable Suburbs to Rent in Sydney
| Rank | Suburb | Median Value ($) | Property Type | Median Rent (per week) | Gross Rental Yield (%) | Vacancy Rate (%) |
|---|---|---|---|---|---|---|
| 1 | Carramar | $401,034 | Unit | $389 | 5.16 | 0.8 |
| 2 | Cabramatta | $432,483 | Unit | $391 | 4.67 | 0.3 |
| 3 | Canley Vale | $439,313 | Unit | $402 | 4.72 | – |
| 4 | Berkley Vale | $379,669 | Unit | $410 | 5.63 | 1.4 |
| 5 | Fairfield | $396,190 | Unit | $420 | 5.54 | 0.3 |
| 6 | Leumeah | $452,742 | Unit | $424 | 4.98 | – |
| 7 | Jamisontown | $462,139 | Unit | $429 | 4.66 | 0.8 |
| 8 | Wyong | $483,430 | Unit | $430 | 4.91 | 2.9 |
| 9 | Warwick Farm | $409,386 | Unit | $434 | 5.72 | 1.0 |
In these areas, renters often find themselves caught in a game of strategy, assessing the pros and cons of each suburb, weighing amenities against costs, and frequently using tools like rental estimate to gauge the most value for their buck.
Comparative Analysis: Sydney vs. Melbourne
Sydney and Melbourne are Australia’s two largest cities, each with unique attractions and rental markets. Here’s a comparison of the rental costs, property prices, and living expenses in both cities.
Rent Per Month
| Category | Sydney | Melbourne | Difference |
|---|---|---|---|
| Apartment (1 bedroom) in City Centre | 3,270.85 A$ | 2,222.42 A$ | -32.1% |
| Apartment (1 bedroom) Outside of Centre | 2,281.44 A$ | 1,832.46 A$ | -19.7% |
| Apartment (3 bedrooms) in City Centre | 6,450.94 A$ | 4,206.65 A$ | -34.8% |
| Apartment (3 bedrooms) Outside of Centre | 3,766.81 A$ | 2,693.32 A$ | -28.5% |
Short Analysis:
- City Centre Rents: Sydney’s city centre rents for 1-bedroom and 3-bedroom apartments are significantly higher than Melbourne’s by 32.1% and 34.8%, respectively.
- Outside Centre Rents: Even outside the city centre, Sydney’s rents are higher by around 19.7% for 1-bedroom apartments and 28.5% for 3-bedroom apartments.
Buy Apartment Price
| Category | Sydney | Melbourne | Difference |
|---|---|---|---|
| Price per Square Foot to Buy Apartment in City Centre | 2,121.70 A$ | 995.65 A$ | -53.1% |
| Price per Square Foot to Buy Apartment Outside of Centre | 1,331.60 A$ | 771.66 A$ | -42.1% |
Short Analysis:
- City Centre Prices: Buying an apartment in Sydney’s city centre is 53.1% more expensive than in Melbourne.
- Outside Centre Prices: The cost to buy outside the city centre is also significantly higher in Sydney, by 42.1%.
Salaries and Financing
| Category | Sydney | Melbourne | Difference |
|---|---|---|---|
| Average Monthly Net Salary (After Tax) | 6,328.28 A$ | 6,274.56 A$ | -0.8% |
| Mortgage Interest Rate (%), Yearly, for 20 Years Fixed | 6.35% | 6.39% | +0.6% |
Short Analysis:
- Salaries: The average monthly net salary in Sydney is slightly higher than in Melbourne by 0.8%.
- Mortgage Interest Rates: Mortgage interest rates are almost the same, with a negligible difference of 0.6%.
Restaurants and Cost of Living
| Category | Sydney | Melbourne | Difference |
|---|---|---|---|
| Meal, Inexpensive Restaurant | 24.13 A$ | 25.00 A$ | +3.6% |
| Meal for 2 People, Mid-range Restaurant, Three-course | 120.00 A$ | 120.00 A$ | 0.0% |
| McMeal at McDonald’s (or Equivalent Combo Meal) | 15.00 A$ | 15.00 A$ | 0.0% |
| Domestic Beer (1 pint draught) | 10.32 A$ | 10.00 A$ | -3.1% |
| Imported Beer (12 oz small bottle) | 12.00 A$ | 10.00 A$ | -16.7% |
| Cappuccino (regular) | 5.03 A$ | 5.25 A$ | +4.4% |
| Coke/Pepsi (12 oz small bottle) | 3.81 A$ | 3.97 A$ | +4.2% |
| Water (12 oz small bottle) | 3.19 A$ | 3.45 A$ | +8.3% |
Short Analysis:
- Meal Costs: The cost of a meal at an inexpensive restaurant is slightly cheaper in Sydney by 3.6%, while mid-range and fast-food meal prices are identical.
- Beverage Costs: Imported beer is significantly cheaper in Melbourne by 16.7%, while domestic beer, cappuccino, Coke/Pepsi, and water are marginally more expensive in Sydney.
Many potential renters are recommended to delve deeper into city metrics, often consulting comprehensive studies like the one on average rent increase in Sydney before finalizing their domicile decisions.
The Interplay of Economics and Rentals
Peeling back the layers of Sydney’s rental crisis reveals an intricate web of economic interplay. It’s not merely about spaces and structures; it’s an ecosystem powered by demand and supply, aspirations, and practicalities.
The robust economy of Sydney, marked by multinational conglomerates and promising start-ups, casts a magnetic spell, drawing professionals from across Australia and overseas. This magnetic pull invariably leads to a heightened demand for housing.
Yet, the dance of economics and rentals doesn’t end with just demand. External factors, including global economic tremors and localized policies around property investments, often step onto this dance floor. International investors, seeing the promise in Sydney’s property market, frequently inject capital.
While this global attention augments the city’s stature, it sometimes has unintended consequences, tightening rental availability. In certain instances, properties remain vacant, held as assets waiting for market conditions to ripen, all while many struggle to find a rental property in Sydney’s bustling heart.
The Influence of Overseas Migration
With Sydney’s burgeoning global reputation, it’s no surprise that the city has become a prime target for overseas migration. This influx, while injecting fresh cultural and professional dynamism, also triggers pressures on the city’s rental market.
“As migrants, both temporary and permanent, flock to Sydney’s shores, there’s an increased scramble for housing, especially in areas closer to job hubs and educational institutions.
Furthermore, Sydney’s international student population, significantly contributing to its demographic tapestry, perpetually seeks short to medium-term rental accommodations.
This persistent demand, in conjunction with other factors, keeps the rental vacancy rates relatively low. And in the world of economics, heightened demand paired with limited supply translates to higher prices.
Sydney’s Future Rental Landscape
Sydney’s rental market shows no signs of cooling down. With immigration numbers expected to remain high and the supply of new property remaining thin, vacancy rates are likely to stay low, and rental prices could continue to rise. Here’s what to expect:
- Lower Vacancy Rates: Continued demand and slow property development mean vacancy rates will likely decrease further.
- Higher Rents: The imbalance between supply and demand will keep pushing rental prices up.
- Increased Competition: As more people move to Sydney, the competition for rental properties will intensify, especially in popular suburbs.
Tips for Navigating Sydney’s Rental Market
- Research Suburbs: Look for areas with higher vacancy rates to improve your chances of finding a rental property.
- Be Prepared: Have all your rental application documents ready to act quickly when a suitable property becomes available.
- Explore Shared Housing: Sharing a home can reduce rental costs and provide access to larger living spaces.
- Stay Informed: Keep an eye on rental trends and market reports to make informed decisions.
As always, for those looking to make informed decisions, understanding the subtleties of the average rent increase in Sydney can provide invaluable insights.
Curious about the Aussie property scene? Don’t miss our detailed article on the rental market in Australia. And if you’re wondering about where to find affordable options, check out our guide on the cheapest suburb to rent in Sydney.
Should you find any discrepancies or feel there’s crucial information missing, please do not hesitate to inform us. We value accuracy and are always open to constructive feedback.
FAQs about Sydney’s Rental Market
1. How has overseas migration influenced the Sydney rental market?
Overseas migration has significantly impacted the Sydney rental market by increasing demand. As both temporary and permanent migrants move to Sydney, the demand for housing, especially near job centers and educational institutions, has surged.
This rise in demand, paired with a limited supply, has contributed to higher rental prices.
2. Are there shifts in housing preferences in Sydney?
Yes, there has been a noticeable trend towards share houses and multifamily units in Sydney, influenced by rising property prices and a preference for communal living. Moreover, property developers are now focusing more on rental-centric properties, responding to the growing rental demand.
3. What can be expected from Sydney’s future rental landscape?
While exact predictions are speculative, given the current trends and city planning initiatives, Sydney’s rental demand is expected to remain robust. It’s essential that policies and urban planning cater to this demand, ensuring a balanced rental market that benefits both investors and residents.
4. How can potential renters stay updated about Sydney’s rental market?
Potential renters can stay updated by studying current trends, understanding rental estimates, and keeping an eye on news sources like the Sydney Morning Herald.
5. Is there a difference between house and unit rents in Sydney?
Yes, there’s a distinction between house and unit rents in Sydney. Factors like location, property age, and amenities play a role in determining rents. Generally, houses command higher rents due to larger spaces and added amenities.
However, unit rents in prime locations, especially those with modern amenities, can also be on the higher side.
