House rents in Sydney climbed to a record high of $580 per week over the September quarter, rising 5.5 per cent or $30 in the first increase in a year, according to the latest Domain Rent Report, released on Thursday.
Unit rents are also back on the rise for the first time in a year-and-a-half, lifting 3.2 per cent or $15 over the quarter to a median of $485 – though still $65 lower than the 2018 record.
Sydney’s rental market continues to be the third most expensive in the country, coming in cheaper than Canberra, where the house median sits at $645, and Darwin at $620. But it sits well above the Melbourne market, where the median has held at $430, making it the most affordable capital city in Australia.
Domain’s chief of research and economics, Nicola Powell, said Sydney’s rental market had turned a corner in recent months, with price hikes driven by strong demand for larger homes and lifestyle locations.
Houses continued to outperform units – the $95 price gap is the largest on Domain records, which began in 2004 – but affordability constraints were pushing more tenants to apartment living, helping the recovery in inner-city markets hard-hit during the pandemic.
More homes may have been left vacant in lockdown, Dr Powell added, if not for the eviction moratorium and financial support put in place to support tenants who lost work.
House rents right across the city are now up year on year, while unit rents were up or steady across about two-thirds of Greater Sydney – only falling over the quarter in the outer west and the Blue Mountains, where prices are still close to an all-time high.
House rents jumped by at least $50 per week over the quarter in the inner west, eastern suburbs, and also on the northern beaches and north shore – which were among seven regions where rents reached record highs. Unit medians also hit a peak on the Central Coast and northern beaches.
Strong competition on the northern beaches meant tenants were increasingly offering to pay above the advertised rent to try to secure quality homes in good locations, offering anywhere from $25 to $200 more, depending on the price point, said Stone Real Estate Seaforth manager Todd Baker.
| Region | Median | Quarterly change | Annual change |
| Baulkham Hills and Hawkesbury | $670 | 3.1% | 8.1% |
| Blacktown | $460 | 2.2% | 4.5% |
| Central Coast | $510 | 2.0% | 15.9% |
| City and Inner South | $780 | 1.0% | 4.0% |
| Eastern Suburbs | $1,150 | 4.5% | 15.0% |
| Inner South West | $580 | 5.5% | 5.5% |
| Inner West | $750 | 7.1% | 7.1% |
| North Sydney and Hornsby | $955 | 6.1% | 8.5% |
| Northern Beaches | $1,125 | 7.1% | 15.4% |
| Outer South West | $450 | 0.0% | 4.7% |
| Outer West and Blue Mountains | $460 | 2.2% | 7.0% |
| Parramatta | $490 | 2.1% | 1.0% |
| Ryde | $650 | 3.2% | 3.6% |
| South West | $500 | 2.0% | 6.4% |
| Sutherland | $750 | 0.0% | 10.3% |
With the city’s rental vacancy rate at its lowest level since 2018, tenants were facing rising rents in a market with short supply, Dr Powell said, adding that more landlords were already opting to hike rents in the middle of advertising campaigns.
Competition for rentals could increase further as record property prices make it harder for aspiring first-home buyers to leave the rental market, and as borders reopen, bringing back demand from international students, new migrants and returning expats, on top of demand from Sydneysiders returning from sea and tree changes.
Alexandria renter James Wright faced more competition than expected upon his return to Sydney after a year working remotely in Yamba.
He and his beloved Labrador, Miss C.C. Babcock, were knocked back from five rentals before he pounced on an Alexandria apartment. He offered a same-day deposit to secure the keys after a friend inspected the property for him.
“Before I left I was renting a two-bedroom house in Redfern with a yard and study for $700 a week, that was definitely discounted for COVID, and now I’m back in a one-bed apartment in Alexandria for $560 a week,” he said, adding he felt such a property would have gone for $500 at best last year.
Dr Powell said increased rental demand could be counterbalanced by rising investor activity in recent months. While this could be stalled by a further tightening of lending standards, few investors were likely to be impacted by the recent announcement by APRA to increase the interest rate buffer – used by the banks to assess a borrower’s ability to meet higher repayments when rates rise – which would reduce how much home buyers could borrow.
Westpac senior economist Matthew Hassan said the change was unlikely to dent investor activity or have a significant impact on the rental market, though he noted it could leave some first-home buyers having to save for longer.
Sydney’s rental market had seen a pretty quick turnaround, he said, but noted it was too early to tell what impact the reopening of international borders would have, as the return of overseas arrivals would likely be slow to start due to vaccine and quarantine requirements.
Though there was strong competition in some pockets, Kasey McDonald, head of leasing at :Different, warned landlords against increasing their rent expectations just yet, having seen little success with rent rise requests across their Sydney portfolio – with some landlords still having to drop rents to hold onto good tenants.
While there were pockets of higher demand, there was still some uncertainty for the market and tenants as Sydney emerged from lockdown, and properties that may have drawn up to eight applications earlier this year were still drawing just one.
This article was sourced from domain.com, written by Kate Burke