Sydney tenants are facing record-high house rents and unit price falls have come to an end, with rents already back on the rise in some pockets of the city, new data shows.
House rents in Sydney remained at a record high of $550 per week over the March quarter, according to the latest Domain Rent Report, released on Thursday. Weekly unit rents also held steady at $470, after three consecutive quarters of falling prices that pushed rents back to 2013 levels.
Sydney’s rental market is the second most expensive in the country after Canberra, but its rising prices are in stark contrast to Melbourne, where it’s a completely different story – plunging prices have put Melbourne on track to become the cheapest capital city to rent, nationwide.
Weekly house and unit rents have fallen there to just $430 and $375, respectively, making it the country’s second most affordable capital city, tied with Perth.
The harbour city’s market was further along in its recovery from the pandemic, Domain senior research analyst Nicola Powell said, because Sydney had a shorter lockdown and a rental market that was less exposed to the changes in overseas migration than Melbourne’s.Sydney unit rents
| Region | Median weekly asking rent | QoQ Change | YoY Change |
| City and Inner South | $540 | 3.8% | -14.3% |
| North Sydney and Hornsby | $500 | 0.0% | -13.8% |
| Eastern Suburbs | $580 | 2.1% | -10.8% |
| Ryde | $450 | 2.3% | -10.0% |
| Inner West | $470 | 2.2% | -9.6% |
| Inner South West | $410 | -2.4% | -8.9% |
| Parramatta | $410 | -2.4% | -8.9% |
| South West | $340 | -2.9% | -2.9% |
| Blacktown | $385 | -2.5% | -1.3% |
| Baulkham Hills and Hawkesbury | $498 | -0.5% | -0.5% |
| Sutherland | $480 | 0.0% | 0.0% |
| Northern Beaches | $610 | -2.4% | 0.0% |
| Outer South West | $385 | -1.3% | 1.3% |
| Outer West and Blue Mountains | $365 | 0.0% | 4.3% |
While unit rents have stabilised in Sydney, they are still $50 a week less than this time last year, having fallen by 9.6 per cent – the steepest annual decline since Domain records began in 2004.
“Unit rents have been falling annually since 2018,” Dr Powell said. “The pandemic has also created opportunities for tenants to move further afield or become homeowners, and we’ve had reduced rental demand from overseas, which has weighed more heavily on unit rents.”
There are some regions showing signs of rebounding already: in the city and inner south, where unit rents plunged 14.3 per cent over the past year, the cost of renting increased by 3.8 per cent during the March quarter.
The eastern suburbs, Ryde and inner west have also seen modest price increases this year, bouncing back from some of the worst falls over the past year.
ANZ senior economist Felicity Emmett said although the unit rental market was unlikely to recover its steepest losses quickly, the small price increases in some areas of Sydney, such as the city and inner south, pointed to improved confidence in the economy in general.
“The recovery in rents has been quite surprising given there’s quite considerate headwinds from the closed international borders as well as the lagging recovery in youth employment – and we know young people are much more likely to rent,” she said.
“I wonder whether what we’re seeing there is when you look at this breakdown, that this is a relief recovery. It’s not driven by fundamentally strong demand, but rather by a realisation that the economy hasn’t been hit as hard as we expected and that those sectors where people were hit hardest – hospitality for instance – have recovered relatively well.
“I would say though that from the fundamental perspective we still have closed borders which will limit the pace of the recovery.
“In the rental and the buyers market it’s really clear that houses are performing more strongly than units.”
House rents, by comparison, are now up 3.8 per cent over the past year, and by as much as 8.7 per cent in the Sutherland region, where they reached a record high of $750 per week. Domain has updated its regions to include more of Sydney, in line with the Australian Bureau of Statistics.
The cost of renting a house is at record highs on the central coast, northern beaches, the outer south west, the outer west and Blue Mountains.Sydney house rents
| Region | Median weekly asking rent | QoQ Change | YoY Change |
| Eastern Suburbs | $1050 | 6.1% | -8.7% |
| City and Inner South | $780 | 4.0% | -5.5% |
| Inner West | $710 | 1.4% | -5.3% |
| Parramatta | $480 | 0.0% | -3.0% |
| Ryde | $625 | 0.0% | -2.3% |
| Inner South West | $550 | 0.0% | -1.8% |
| Blacktown | $450 | 0.0% | 0.0% |
| North Sydney and Hornsby | $900 | 0.0% | 0.0% |
| South West | $480 | -1.0% | 0.0% |
| Baulkham Hills and Hawkesbury | $620 | -1.6% | 0.0% |
| Outer South West | $440 | 0.0% | 4.8% |
| Northern Beaches | $1,050 | 6.1% | 5.5% |
| Outer West and Blue Mountains | $450 | 2.3% | 7.1% |
| Sutherland | $750 | 7.1% | 8.7% |
Domain Rent Report, March quarter, 2021
“Obviously where the pain is being felt is still in that inner ring area, areas that are around universities and in the city,” said Michael Conolly, head of network property management at McGrath.
Rental demand there was still being impacted by a lack of international students and new arrivals, the preference for larger homes in outer suburbs, and the stigma surrounding new units due to construction defects at the likes of the Opal and Mascot towers, Mr Conolly said. Strong first-home buyer activity also reduced the pool of tenants.
Both Mr Conolly and Dr Powell said the return of properties to the short-term holiday rental market had reduced rental supply and curbed price falls in some pockets. Meanwhile, demand for inner suburbs and well-connected hubs was improving slowly, as more people returned to the office.
“A continued improvement hinges on the opening of international borders and the return of overseas migrants and foreign students,” Dr Powell said.
Until then tenants in the inner city would have good bargaining power, Mr Conolly said, but added they had less of an advantage elsewhere, particularly in in-demand regions like the Central Coast, where McGrath has a vacancy rate of just 0.47 per cent.
Greater Sydney’s vacancy rate was at 3 per cent in March, up slightly from 2.8 per cent in February, on Domain figures, with just over 19,000 estimated vacant rentals at the end of the month.
In the Sutherland region, where the vacancy rate sits at just 1.2 per cent, first-time renter Jessica Mahoney feels lucky to have secured a one-bedroom unit in Kirrawee for $450 per week after only a few weeks of searching.
While house rents in the region reached new heights, the weekly median unit rent has held steady at $480 a week over the quarter and the year.
“From what I have heard, the rental market is harder to get into than ever and I think we have been very lucky,” she said.
Ms Mahoney, a personal trainer, felt her business rental history helped her to secure the lease, but also noted she and her partner had to make compromises to secure a rental property within their budget.
“We went for a smaller size in order to have a newer and more central apartment. This meant one bedroom instead of two, which we weren’t too concerned about,” Ms Mahoney said.
Rising rental prices, particularly in regional NSW and the fringes of Greater Sydney, were putting more pressure on tenants, especially those who were already in the process of establishing repayment plans for deferred rent following the end of the COVID eviction moratorium, said Leo Patterson Ross, chief executive officer of the Tenants’ Union of NSW.
Mr Patterson Ross said while the transition period had prevented a sudden uplift in evictions, properties were still being vacated because tenants knew they could no longer afford to stay.
He said they were hearing a lot about people in regional areas being evicted to make way for new people with more money moving in from the city.
Although some tenants had been able to get better deals for units, it was far from a renter’s market, with tenants still unable to secure longer-term leases and often paying sizeable sums for homes in poor condition.
article by domain.com.au