Sydney rental tenants face rental price hikes of $80
Sydney is now home to a rental affordability crisis with the median monthly rental price in May rising by a whopping $80.
Even with the unprecedented supply of new property coming onto the Sydney property market, supply is still not keeping pace with demand. And with the tightening of investor lending policies alongside government incentives being removed, this will discourage investors further, reducing the number of rental properties available.
But it’s not just Sydney seeing its median weekly rental price rising. Canberra and Melbourne are also experiencing rental price hikes with Canberra’s median weekly rental price rising by 6.4 per cent, 5 per cent in Melbourne and 4.8 per cent in Sydney over the same period last year.
According to Domain Group Chief Economist Dr Andrew Wilson, the annual rent increases were now outpacing income growth.
Supply vs Demand
In May, the median rent in Sydney was $570 a week according to rent.com.au, where supply was unable to keep up with the growing demand of people moving here for work, from around Australia as well as people moving here from overseas.
Even though there is new housing supply coming onto the market for inner city apartments and outer suburban house and land projects, rents are still rapidly rising, which is good news for property investors, but not so good for rental tenants.
Focus on lifestyle
Today, there is a greater focus on liveability and a higher quality lifestyle, with more and more people, particularly young professionals preferring to live closer to their workplace to cut down their commute times. Unfortunately, these areas that are most attractive to Sydney renters are also the areas that have supply issues.
There is stock coming into the Sydney housing market; however, to meet this growing demand, stock needs to be in places where people want to live and where they can enjoy a lifestyle outside of work hours.
Property prices and rents are cheaper the further out you live, but the infrastructure and transport network isn’t sufficient to cope with this growing population, making commutes into the city lengthy and frustrating by train and by car.
Not enough Sydney investment properties to keep yields low
There simply are not enough investment properties available in the Sydney market today to keep up with demand and to yields low. With more investment properties on the market, the faster affordability will come about. However, with tougher lending restrictions from the banks and a cut back on investors, this rental affordability won’t be reached quickly enough.
NSW Premier Gladys Berejiklian, under the NSW Budget 2017-18 commented that housing affordability was a major focus of her government. Under the NSW Budget 2017-18, first home buyers will benefit from having to pay zero stamp duty from 1 July 2017 on properties up to $650,000 and receive a reduction of stamp duty on properties valued between $650,000 and $800,000. This affects both new and established properties.
However, investors now require to pay stamp duty within three months from the date of the contract, rather than previously being allowed to defer this payment for 12 months for off the plan purchases, making it less attractive to invest in this state.
With median rents rising, and wages growth not keeping pace, saving up for a deposit for a first home is still hard work. The banks therefore need to do more to ease this property pressure and increase the number of rental properties in the marketplace, or the government needs to slow down this population growth, by reducing overseas immigration.
Get in touch To find out more about Sydney’s rental affordability crisis and what it means for you as an investor or rental tenant, get in touch with the iBuyNew team today and discuss this further with one of our friendly Property Consultants.
Call us now on 1300 123 463.
Published on 3rd of July 2017 by Marty Stanowich