The affordability of renting in Sydney has significantly worsened! — Sydney’s auction clearance rate at 71%.

Week’s Key Focus

Recent data reveals that the affordability of renting in New South Wales has deteriorated to the worst level on record.

As of December last year, only about a quarter of the rental properties advertised were deemed affordable for households earning an annual income of $113,000. According to PropTrack, the number of properties considered affordable has never been so low.

PropTrack economist Moore states that tenants are currently in a very dire situation, a result of years of significant rent increases coupled with slow wage growth. Renters with lower incomes (earning $69,000 annually, belonging to the lowest third of income earners) could afford less than 3% of the rental stock in New South Wales. The PropTrack Rental Affordability Index indicates that their choices are so limited if they wish to spend less than a quarter of their income on rent.

PropTrack reveals that low-income families prepared to allocate 35% of their income to rent could still only afford 16% of the rental properties in New South Wales. In Sydney, where rents are the highest nationwide, the situation is even grimmer for low-income families. The level of strain is more severe than during the 2008 Global Financial Crisis, which was when the rental affordability index began. Moore points out that to find a similar situation for tenants, one must look back to the recession of the early 1990s. The difference now is that the economy is not in a recession, and a much larger proportion of households are renting compared to 30 years ago. At the end of the 1980s, nearly 27% of households in New South Wales were renting, with a quarter of these from the Housing Commission or other government agencies. Since then, the proportion of renting households has inflated to about 33%, with half of those renters living in government housing. Moore notes that the recent rent hikes have been driven by a severe shortage of rental properties and a surge in tenant demand. Immigration is a major factor, as there is not enough housing available, but it’s not the only one; rents began to rise even before the borders reopened, largely due to changes in housing composition. Renters are moving out of shared accommodations, so a family of four now needs to live in four separate places.

The president of the Real Estate Institute of Australia, Pilkington, suggests that unless the government changes course, the shortage of housing could continue to impact the market. One of the causes of the housing shortage is the excessively high stamp duty, as it hinders families from selling their homes to investors to become part of the rental pool, or to first-time buyers, allowing the latter to exit the rental market. Families are staying in their own homes much longer than before, with stamp duty being a significant factor.

Predictions by Suburbtrends show that the average rent for detached homes in Australian suburbs is expected to rise by 11% this year. Unit rents are predicted to increase by 27%. Models indicate that rents in the southwestern parts of Sydney, the Parramatta area, and the southern suburbs are expected to see even larger increases.

Auction Results Last Week

Sydney: 847 properties were auctioned, with 539 auction results reported. Of these, 384 properties were sold, achieving a clearance rate of 71%. The total auction value was AUD 427,995,462, with a median house price of AUD 1,520,000.
Melbourne: 359 properties went to auction, with 234 auction results reported. Out of these, 157properties were sold, resulting in a clearance rate of 67%. The total auction value was AUD 117,473,138, with a median house price of AUD 840,000.