Sydney rents defy predictions to continue their rise

Sydney rents have surged to an all-time high, new figures show.

The median asking rent for Sydney apartments increased by 2 per cent over the June quarter to $500 a week.

And after a prolonged period of flat growth, house rents also rose by 2 per cent to $510 a week, Domain's APM Rental Report says.

The persistent surge of investors, who make up more than half of all home loans, was expected to lead to an oversupply of rentals and push weekly rents down. But the senior economist for the Domain Group, Dr Andrew Wilson, said several factors had prevented this.

One is the ongoing demand for rentals from would-be first-home buyers who can't afford to buy.

Sydney rent rising: The median house rent has risen by 2 per cent to $500 a week. Photo: Antony Lawes

Sydney rent rising: The median house rent has risen by 2 per cent to $500 a week. Photo: Antony Lawes

BresicWhitney leasing executive Kathryn Pearce said close to the city there was huge rental demand from young couples who had been priced out of owning. As a result, the typical weekly rent for one-bedroom apartments has skyrocketed.

"It use to be that people would pay between $300 and $500 for a good one-bedroom apartment," Ms Pearce said.

"Now people are paying between $550 and $700."

In Chippendale's Central Park development, studios without parking are renting for $560 a week, while the average for all apartment types is $770 a week.

Deborah Colebrook from Morton and Morton said she was surprised to hear the median rent had risen but also noted the ongoing demand for rentals from young professional couples wanting to be close to the inner city.

"It is still quite expensive to buy in Sydney, so if you are a first-time buyer it is difficult to get on the ladder," she said.

Dr Wilson said strong population growth, particularly from migrants, had also propped up demand for rental properties.

The latest figures from the Australian Bureau of Statistics indicate that NSW grew by more than 110,000 people last year when net overseas migration accounted for 71,400 of the new residents.

Some incomes have also improved, Dr Wilson says, which has meant tenants renting "can now afford to pay a little more".

The other factor that had offset a potential oversupply was that many investors had cashed in on the recent price growth by selling their properties to owner-occupiers.

"So in short, at the moment it's all good," Dr Wilson said. "Unless you're a tenant in Sydney."

Even so, the high level of investor activity in Sydney prompted Reserve Bank governor Glenn Stevens to pay special attention to Sydney investors at an economic conference in Hobart last week.

He offered this blunt warning: "Investors should take care in the Sydney market, which is the main area where a large increase in borrowing has been occurring."

Mr Stevens pointed to the fact that investor loans in NSW were up by 130 per cent on 2008 and said there was evidence of some increase in lending with loan-to-value ratios of 80 per cent. 

Although rents have increased over the past year, yields have deteriorated due to the rapid growth in property prices. The gross rental yields for houses have fallen 4.6 per cent over the year to 4.32 per cent, while apartment yields have dropped by 5.6 per cent to 4.65 per cent. 

This has been felt most at the more expensive end of the rental market as some agents struggle to find tenants for prestige properties.

Ms Pearce said she had a $1900-a-week rental property that sat empty for five months.



Discuss "Sydney rents defy predictions to continue their rise"

Please note: All comments made or shown here are bound by the Online Discussion Terms & Conditions.