Could Sydney become a city of renters anytime soon?
Today property prices in Sydney are some of the highest in Australia and simply unaffordable for many Sydneysiders. The median property price now sits around the $1 million mark after seeing high levels of growth these last few years.
As the Sydney property market starts to slow down and come out of peak, one question that needs to be asked is with property prices so high, who can afford to buy Sydney property and could Sydney become a city of renters anytime soon?
According to Peter Hendy, he predicts that Sydney will become a city of renters in just 30 years, compared to a city of property owners.
Looking back in time to last century, it took decades for Australia to become a nation of homeowners and according to Bill Randolph, the head of City Futures, the University of NSW’s urban research centre, it would take a similar amount of time to unwind this.
"It'll take a fair number of years to get us to a majority rental population – if we ever do," Professor Randolph said. "Maybe over 20-30 years you'd start to get a majority shift."
So with property prices so high, is renting becoming a way of life in Sydney? Today, it is all about convenient and timely living for many of Sydney’s working professionals who want to live close to work, or close to public transport including trains and buses, as well as have shops and amenities on their doorstep. Many of Sydney’s rental properties are within apartment developments that cater for this contemporary style of living, and some even include on-site facilities such as gyms and pools.
In 1961, home ownership accounted for a massive 72 per cent, up from 53 per cent in 1947. More recently, home ownership in 2011 accounted for 67 per cent, which interestingly is still higher than a number of developed countries including Germany (53.4 per cent) and the US (65 per cent) according to a 2013 comparison by the United States-based Pew Research Centre.
However, many countries in Europe who have large rural populations have a higher number of people owning their home including Italy (72.9 per cent) and Spain (82.7 per cent), whilst Romania had 96.6 per cent of people who were owner occupiers.
According to Core Logic Quarterly Rental Review, the median rental rate for units in Sydney was $536, whilst the median rent for houses was $610. This quarter has actually seen a fall of -0.2%, whilst rents are still +2.5% over the year and +3.9%pa over the last five years.
With interest rates currently at their lowest record, this could spur more people on to buy property. However, there is also the trend where first home buyers will buy a brand new property to take advantage of the $15,000 government grant (which will reduce to $10,000 in January 2016), and then then turn this property into an investment property and rent this out to reap in the rewards, whilst continue to rent in an area they want to live in, but might not necessarily be able to afford to buy in.
Already, parts of Sydney are already home to a majority of renters, including Sydney CBD, spurred on by the apartment boom and investor market.
Renting is a preferred option for many as to some extent it gives renters the freedom of where they want to live, and they don’t have to worry about maintenance issues, whilst soaring Australian house prices is making the great Australian dream of home ownership more a dream and less a reality.
A 2014 survey, Affordable Housing and the New South Wales Rental Market, which was carried out by the Tenants’ Union of New South Wales found that 57 per cent of respondents rented because they could not afford to buy.
Not only are there more people renting these days, but Professor Hal Pawson, an expert on city housing at the University of NSW also commented that people are renting for much longer, with almost a third of all private renters residing in rental properties for a minimum of 10 years.
So yes, Sydney is starting to become a city of renters; however, it is important to note that some of these renters are property owners, but choose to continue renting in their desired area, whilst have bought an investment property in a high growth area with the intention for this property to grow in value, to fuel investment property number two.
The belief of buying a property to live in is not as commonplace as it once was and today it is all about growing your property portfolio to make your money work harder for you, whilst enjoy living in an area you love.
To find out more about this approach to buying property and how you can grow your property portfolio, whilst learn why renting can still be a good idea call the iBuyNew team today on 1300 123 463.
Published on 23rd of November 2015 by Marty Stanowich