Rental-geddonThe Looming Crisis in Sydney's Eastern Suburbs Rental Market
If you believe the rental market in Sydney's Eastern Suburbs is expensive now, brace yourself for what's coming next. I’m reminded of the classic line from Randy Bachman and Turner Overdrive? "You ain't seen nothin' yet. B-b-b-baby, you just ain't seen na-na-nothin' yet." Current residential rental levels and increases are the direct result of underlying factures in the housing market, that continue to go unaddressed.
Wills Property has taken a closer look at the key factors currently driving the rental market in Sydney's Eastern Suburbs.
Population
As of June 2023, the estimated population of New South Wales (NSW) has reached a staggering 8,306,158 (ABS, 2023). Over the past year, the state's population has surged by 127,000 people. This is on top of a long-term average annual growth of 90,000 people.
Sydney's Eastern Suburbs make up around 3.4% of NSW's population, roughly 282,400 people. Recent data indicates an annual growth rate of 1.3%, adding 3,671 people annually or about 302 per month. This might not seem like a significant figure, but let's delve deeper.
Dwelling & Vacancy Levels
In the Eastern Suburbs, there are approximately 116,687 dwellings, with 90% being privately occupied. This leaves around 11,668 dwellings either empty or available for the rental market. As of June 2023, the vacancy rate has risen to 2.3% from a low of 1.1% in February, resulting in 268 vacant properties. Keep in mind that these properties come in various sizes, from studios to multiple bedrooms. We also must factor in current tenants moving in the same market. This begins to highlight the issue: the supply falls far short of the demand.
Dwelling Approvals & Construction
According to data from the Australian Bureau of Statistics (ABS), NSW approved a total of 3,399 dwellings in June 2023. This marks a 50.50% decrease from the previous month and a 13.86% drop over the past year. Ideally, Sydney's Eastern Suburbs should have seen around 115 development applications (DAs) approved, but only 53 were given the green light. Why the shortfall?
Multiple factors contribute to the decline in approvals. A significant factor is the lengthening approval process driven by bureaucratic consent authorities. The cumbersome nature of the process, frequent requests for information, and a reluctance to make decisions due to potential consequences are directly impacting the property market. Government agencies need to recognise the cost of these delays. Each DA corresponds to a societal demand that rises in proportion to the number of people needing housing. We're approaching a critical point, and poorly conceived policies aiming to regulate rents are likely to worsen the situation.
Conclusion
Housing rents have surged by 19.5%, and apartment rents by 25% in the year leading up to June 2023, signalling a severe lack of rental supply. With immigration and student arrivals predicted to stay above the long-term average for the next three years, rents will face more upward pressure, especially in highly sought-after areas like Sydney's Eastern Suburbs. But that's not all.
Approvals and construction of properties are dwindling, and the time between approvals and completions is stretching out. The Eastern Suburbs simply don't have enough properties to meet demand.
The policies, processes, and actions of bureaucratic government agencies related to the residential property sector are broken. The excessive cost to societal demand, which often takes a back seat to politics, will lead to further rent increases.
Get ready for it. Rental-geddon is on the horizon. The struggle to afford a place to live is about to intensify. An annual increase of 20% might seem insignificant compared to what is looming ……
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