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By Leanne Jopson

Sydney’s Rental Market Trends and Forecasts

Sydney’s rental market has plunged into crisis, with ultra-low vacancy rates, high rent prices, strong demand, and a rising population putting the city’s market into a pressure cooker environment.

And recent data highlights that the distressing state of Sydney’s rental market has led to a bleak outlook for renters.

Here’s a rundown of all the current Sydney rental market trends, and what we can expect to face next.

Rent House 2

Current rental market trends in Sydney

The rental market has undergone significant changes in recent years, but now Sydney’s renters are facing a perfect storm of trends that are combining to create significant headwinds for the market.

Here’s a breakdown of the 8 key factors contributing to Sydney’s rental crisis.

1. Sydney has low vacancy rates

Extremely low vacancy rates and heated competition across the state are pushing the NSW rental market into crisis mode.

Sydney's rental vacancy rates plummeted to just 1.3% for the first month of 2024, the sharpest fall across the country, down from 1.7% in December, according to SQM Research.

By contrast, Sydney’s vacancy rate peaked at 4.3% in May 2020.

As of January 2024, there are just 9,114 available properties for rent across the city.

This is much less than the 12,143 available properties recorded in June last year, which is roughly in line with the number recorded in June the previous year also.

The national vacancy rate sits at just 1.1% for January 2024, with 32,108 properties available for rent.

This is a drop from 1.3% and 39,793 properties SQM Research recorded in its data in December last year.

The areas that have the lowest number of available rentals were the Sutherland Shire at a 0.65% vacancy rate, followed by the Northern Beaches at 0.73% and the Eastern Suburbs at 0.9%.


Source: SQM Research

Why is the vacancy rate so low?

In short, it’s because demand is at an all-time high and any available properties are being snapped up immediately by renters.

This leads to the next key trend in Sydney’s rental market…

2. Sydney has an undersupply of rental properties

Sydney has been facing a rental housing shortage for several years now.

This has led to increased competition for available homes, driving up rentals and making it increasingly difficult for many Australians to afford a place to live.

One of the aspects of the housing market boom during the pandemic was that it was driven by owner-occupier buyers.

At that time, many investors took the opportunity to sell off properties, in part due to uncertainty about rental demand but also because, in many cases, rising home prices provided the opportunity to sell out with solid capital gains.

In short, property prices skyrocketed so investors cashed in.

But as a flurry of investors sold up, the supply of investor-owned properties (i.e, rental properties) dropped.

By the end of 2021, 25% of properties sold across the nation were previously-rented properties and that figure only climbed higher through 2022 and 2023.


You can see from the above chart that the number of rental properties has flatlined since the Covid-19 pandemic when many sold off their properties.

It may be understandable that investors wanted to get in on the price boom action, but I consider it a short-sighted move, and one which has exacerbated today’s rental crisis.

But it wasn’t just investors who sold off their properties.

There were also many owner-occupiers who sold up around the time that prices reached their peak and moved into rental accommodation while they looked for their next property (or in the hope that prices would fall).

So not only has the number of investment properties sharply fallen, but there has also been an uptick in the number of renters who were once owner-occupiers, also putting pressure on the market.

3. Supply of off-the-plan apartments has tapered

Of course, the undersupply of rental properties is two-fold - on one hand, many rental properties have been sold to owner-occupiers, then on the other hand there is a narrow pipeline of new projects nearing completion.

An apartment oversupply and other regulatory and non-regulatory factors have resulted in the collapse of investor demand for Sydney “off the plan” apartments.

Booming construction costs and a low supply of materials over the pandemic have caused many projects to stall, and fail to get off the ground, and there has been an uptick in the number of building companies going into insolvency.

According to CoreLogic’s Cordell Construction Cost Index, construction costs for NSW rose 0.6% over the three months to September 2023, steady on the previous quarter but down from a recent high of 4.0% Q3 last year.

The annual increase also sank to 3.9% from 7.3% in the three months to June 2023.

While construction cost increases have cooled, prices still remain exceptionally high.

At the same time that costs of new builds have surged, increased government intervention has dissuaded investors.

One of the most attractive advantages of being a property investor is control – you have full control over how you use and improve the asset.

Tighter rental laws (that favour tenants) reduce the amount of control investors have over their property.

They also increase the cost to run a rental property thereby reducing investment returns.

Whilst tighter rental laws have reduced investor demand (and therefore the number of rental properties available), I think it’s only been at the margin.

That said, any further regulation would most likely have a material impact on rental supply.

Tenants must be protected, but a healthy rental market is equally if not more important.

Not only that but residential property investment by foreign buyers has also tapered, again thanks to new government regulations, rules, and fees put on overseas buyers.

Confidence issues following the deterioration and defects of many high-profile high-rise blocks such as the Opal Tower have also weighed on confidence.

International property firm, CBRE estimates that a severe undersupply of new apartments will be with us for at least the next five years.

CBRE estimates Sydney apartment delivery will average 14,000 per annum over 2024 -28, while the demand for housing stock is likely to average 33,000 per annum over the next five years.

Of course, this will only drive down vacancy rates further and push up rentals.

Off-the-plan apartments are an investment plan I would always tell investors to steer well clear of, but the problem is that without new housing our rental crisis will never improve.


4. Sydney’s population is growing

With the opening of international borders in early 2022, Sydney has become a major recipient of new residents, both skilled immigrants and overseas students, putting extra pressure on the Sydney property market, particularly the rental markets.

Sydney’s population grew 2.1% over the year ending 30 June 2023, according to figures by the Australian Bureau of Statistics (ABS).

Exclusive forecasts by demographers consulting business, Informed Decisions (.id), reveal that the nation’s population is forecast to grow by 7.4 million by 2041, requiring an additional two million dwellings across our four major cities which will account for over 65% of the forecast population growth.

And New South Wales population will account for 1.7 million of this forecast, with 1.2 million occurring in Greater Sydney and requiring 582,000 additional dwellings.

According to the ABS data, New South Wales' population of 8.2 million is projected to grow by between 0.4% and 1.2% per year, slightly higher than the average annual growth rate projected for Australia, and reach between 9.2 million and 9.6 million by 2032, and between 10.8 million and 13.8 million by 2071.


Sydney has become a popular destination for people moving to Australia, and this influx of newcomers has put pressure on the city's housing market.

As more people move to Sydney, the demand for rental properties increases, leading to a decrease in the vacancy rate.

And all these people need somewhere to live…

5. Sydney’s economy is strong

Sydney’s strong economy is also contributing to the dire state of its rental market.

The city has a thriving job market, with many opportunities in industries such as finance, technology, and tourism.

As more people are employed, they are able to afford rental properties, further driving down the vacancy rate.

Despite the decrease in the vacancy rate, Sydney remains an attractive destination for both locals and newcomers.

6. Sydneysiders are moving back to the city

During the COVID-19 pandemic, there was a huge outpouring of Sydneysiders into regional NSW and many flocked north to Queensland in search of lifestyle suburbs and more affordable properties.

But now lockdowns have eased and the pandemic is past its worst, many businesses are calling their staff back to the office… and that means returning to the city.

The vacancy rate for Sydney’s CBD offices came in at just 14.4% for Q4 of 2023, meaning occupancy rates were around 85% which is up around the pre-pandemic level.

Also, Sydney transport data shows that foot traffic at one of the city’s most major train stations (Wynyard) in June last year reached the highest level since February 2020, shortly before the pandemic lockdowns first began.

Opal data also shows that the number of Sydneysiders using the transport network has risen to around 80% of pre-pandemic levels.


Source: Transport for NSW

7. What we want in a home has changed

Sydneysiders are increasingly prioritising spacious living and separate study areas in their next home following the height of COVID-19 restrictions.

The COVID-19 pandemic restrictions significantly changed homeownership goals and what Sydneysiders wanted most in their next home.

The research by major bank Westpac has found that with more Australians working from home and juggling school and family commitments under one roof, spacious living is now the top priority.

Outdoor space, a larger kitchen, and extra living areas are now in higher demand than before the pandemic.

Because even though restrictions have eased, people are spending more time at home than before lockdowns took hold, which means we want more from our properties.

And falling rents, particularly for inner-city apartments, and share houses losing their appeal meant smaller renting households in particular.

Census data shows that the share of households with just one person in them increased significantly from 2016 to mid-2021.

There were fewer households with three or more people.

In aggregate, the average household size fell from 2.59 to 2.55 and while it doesn’t sound like a large fall, it translates to around 160,000 additional dwellings nationwide.

Renting Property

8. Sydney’s rental prices are surging

And all these factors are causing…. Sydney’s rental prices to surge.

According to data, rental demand has risen significantly in the inner and middle rings of Sydney, as measured by the number of potential renters per listing.

This trend is especially pronounced for unit rentals, indicating that these markets continue to be fiercely competitive.

Over the past year, the most competitive regions for renters have experienced demand that more than doubled, as seen in year-on-year growth in the number of potential renters per listing.

These highly competitive regions, such as Canterbury and Merrylands-Guildford are home to suburbs where weekly rents have surged by as much as 50% in the past year.

This translates to an increase of more than $200 per week in rent.

Recent SQM research shows that Sydney has the highest median rent valuation of the capital city house and unit markets, with a median weekly rent value of $1,037.08 for houses and $694.61 per week for units.

That’s a huge increase of 13.4% and 13.3% year-on-year respectively.

Sydney's Rents Index

Property type Avg. rent Δ quarter Δ 12 month Δ 3 years (pa) Δ 7 years (pa) Δ 10 years (pa)
All Houses $1,037.08 2.40% 13.40% 16.10% 4.90% 4.60%
3 br Houses $969.49 0.70% 13.60% 12.50% 4.20% 3.70%
All Units $694.61 2.20% 13.30% 15.00% 4.50% 4.00%
2 br Units $716.37 2.10% 14.00% 15.00% 4.50% 3.90%
Combined $833.72 2.30% 13.40% 15.30% 4.60% 4.20%

Source: SQM Research

Is there a rental crisis in Sydney?

In short, yes.

Ultra-low vacancy rates combined with a low supply of new dwellings, investors exiting the market, high demand, and a rising population have created a perfect storm of factors pushing Sydney’s market into a rental crisis.

Not only that but there is no end in sight… in fact, it’ll probably just worsen further.

Here’s why.

Given the stark imbalance between supply and demand, it is unlikely there will be much relief for renters over the short- to medium-term with stock levels unlikely to increase substantially anytime soon.

Net migration into Sydney is forecast to remain strong for some time yet and this will only add further upward pressure on rental values.

Tenants coming up against affordability constraints have limited opportunities and unlike homeowners can’t borrow to pay rent.

It’s likely some tenants are now sacrificing the spare room or home office and re-forming shared houses that disbanded throughout COVID in order to share the rental burden.

Those who have the financial means to pull together a deposit might be taking the plunge into homeownership sooner while others are locking in longer leases, rather than brave the hunt for a new rental.

And government attempts at intervention are only making matters worse…

Current policies are not supportive of attracting more private property investors to supply rental accommodation.

Sure the government is looking for large corporations to get into the ‘build to rent’ segment, but this will take time and only occur in certain locations meanwhile an uptick in international students will create even more demand - and where will all these people live?

The new government policies won’t even tackle half the issue, while some might even make it worse.

For example, NSW has appointed its first rental commissioner to help tackle the rental crisis in Sydney, with plans to focus on making the rental market fairer for tenants.

Promoting longer-term rental agreements, monitoring existing laws, and ending terms like no-ground evictions or portable bond schemes.

While the changes might be good news for tenants, they will also act to remove some rights and protections for landlords and investors.

Tighter rental laws (that favour tenants) reduce the amount of control investors have over their property.

They also increase the cost to run a rental property thereby reducing investment returns.

Whilst tighter rental laws have reduced investor demand (and therefore the number of rental properties available), I think it’s only been at the margin.

That said, any further regulation would most likely have a material impact on rental supply.

Tenants must be protected, but a healthy rental market is equally if not more important if we want to avoid the level of rental stock trending further downwards.


Why is rent so expensive in Sydney?

Sydney has always been notorious for its high-priced real estate, continuously holding the title of having the country’s most expensive rental properties.

But now, the average rent in Sydney is at a record high.

Sydney’s median dwelling rent reached $833.72 in January, up 2.3% over the quarter and up 13.4% over the year.

That’s far higher than the $614 median nationwide.

So why is rent so expensive in Sydney?

Sydney’s property market has long suffered an imbalance between its housing supply and strong demand.

The city is also home to some of the country’s most elusive suburbs, which have helped to drag the city’s median rental price up.

In 2023, Sydney also ranked as one of the top 10 most expensive cities in the world, further making it exclusive and in strong demand, which would also push up rental prices.

Why is there a rental shortage in Sydney?

Again, the imbalance between supply and demand is to blame here.

There are fewer rental properties in Sydney today because there are fewer investors buying property (owner-occupiers have dominated the market) and more investors have exited the market and sold up.

According to data by PropTrack, approximately 15% of vendors are investors (i.e., people selling their investment properties), versus 20-25% during the Covid property boom when investors took the opportunity to cash out while prices were high.

For the 6 years between 2017 and 2022, 31% of all new loans were made for investment purposes compared to 38% for the previous 14-year period between 2002 and 2016.

This suggests that over the past 6 years, there have been 20% fewer investors, probably due to the government/regulator intervention (e.g., interest only, tax policies, etc.), as mentioned at the beginning of this blog.

At the same time, the supply of new builds is also thin.

During the pandemic, soaring materials and construction costs meant that fewer new dwellings were completed.

Significant government support for the construction industry, such as HomeBuilder, increased the number of houses that were constructed (and are still under construction).

But this was offset by reduced unit construction which has longer construction times meaning overall fewer properties have been constructed versus before the pandemic.

At the same time, things such as higher building and materials costs, worsened by inflation mean there has been an uptick in the number of building companies going into insolvency.

Sydney Suburbia

Sydney's rental prices by suburb

Corelogic’s latest quarterly rental review report for Q3 of last year shows that Sydney remains the country’s most expensive rental market across all property types, with the typical dwelling costing $726 per week.

It was Sydney’s harbourside suburb of Vaucluse which came in as the city’s (and also the nation’s) most expensive suburb to rent a home, with the median weekly rental costs sitting at a whopping $2,588 and a 1.67% yield.

It’s somewhat unsurprising though given that the median house price in the area comes in at just over $9 million.

Second and third on the list are also located in Sydney’s affluent eastern suburbs.

Bellevue Hill has a median rent of $2,240 and a 1.43% yield, while Rose Bay’s $2,270 median rent gives a gross rental yield of 1.83%.

In fact, Sydney’s Eastern Suburbs account for 9 of the top 10 most expensive suburbs on the list.

Mosman in Sydney’s North is the exception, with its $1,921 per week rent and 2.07% yield.

Sydney’s Eastern Suburbs, Northern Beaches, and North Sydney also dominate the top 30 on the list.

Meanwhile, one Sutherland Shire suburb, Burraneer, came in 28th place - renters in the area can expect to pay $1,482 per week for a property.

Here’s the full list of the most expensive rental prices in Sydney, all of which are houses.

Top 30 most expensive suburbs to rent in Sydney

Rank Suburb Median value (million) Property type Median rent (per week) Gross rental yield (%) Vacancy rate (%)
1 Vaucluse $9.06 House $2,588 1.67 4.8
2 Bellevue Hill $9.54 House $2,240 1.43 3.2
3 Rose Bay $6.41 House $2,174 1.83 2.0
4 Double Bay $6.24 House $2,078 1.79 4.5
5 Dover Heights $6.30 House $1,994 1.87 3.6
6 Bronte $5.15 House $1,962 2.07 2.9
7 Mosman $5.48 House $1,921 1.87 2.5
8 Clovelly $4.16 House $1,918 2.44 0.6
9 Woollahra $4.73 House $1,890 2.00 4.0
10 North Bondi $4.46 House $1,888 2.23 1.5
11 Bondi $4.11 House $1,846 2.32 0.7
12 Clontarf $4.78 House $1,784 2.06 2.2
13 Balgowlah Heights $4.22 House $1,773 2.27 n/a
14 Queens Park $3.96 House $1,767 2.32 1.4
15 Coogee $3.75 House $1,765 2.48 2.4
16 South Coogee $3.59 House $1,752 2.55 1.7
17 Waverly $3.64 House $1,674 2.33 1.3
18 Paddington $3.25 House $1,652 2.48 1.5
19 Bondi Junction $2.87 House $1,618 2.78 1.7
20 Seaforth $3.58 House $1,613 2.39 2.4
21 Fairlight $3.83 House $1,597 2.21 0.5
22 North Bridge $4.84 House $1,589 1.73 4.2
23 Castlecrag $4.32 House $1,501 1.77 3.8
24 Longueville $5.06 House $1,501 1.56 1.4
25 Randwick $3.17 House $1,498 2.45 0.9
26 Castle Cove $3.93 House $1,498 1.92 2.2
27 North Curl Curl $3.34 House $1,496 2.31 n/a
28 Burraneer $3.21 House $1,482 2.34 3.0
29 Balgowlah $3.32 House $1,479 2.38 1.0
30 Curl Curl $3.70 House $1,444 2.05 3.4

Source: Corelogic quarterly rental review

But Sydney’s most expensive suburbs for rental prices don’t give the full picture of the city’s rental market - reviewing the list of the most affordable suburbs for rent also helps to give a good idea of how rental prices differ across the city.

Corelogic’s data also shows the city’s most affordable suburbs to rent a property are all clustered in the Inner West, Outer West, and South West regions, with some Central Coast suburbs also making the list - and all but one are units.

Renters might not be able to afford the $2,588 per week required to live in Vaucluse, but in the West and South West, there are 2 suburbs where the median unit rent is under $400 per week, and a further 11 suburbs where unit rent is under $450.

Carramar comes in with the lowest price, at just $389 per week and giving a huge rental yield of 5.16%.

Cabramatta, Canley Vale, Berkeley Vale, Fairfield, Leumeah, and Jamisontown all also make the lower end of the list, with median unit rents ranging from $389-430 per week.

Then up on the Central Coast, renters can secure a unit for around $430 in Wyong, $437 in Gorokan, $473 in The Entrance, and $488 in Long Jetty.

The most affordable houses on the list are found in Tregear, Blacktown, where renters can expect to pay $487 per week.

Top 30 most affordable suburbs to rent in Sydney

Rank Suburb Median value ($) Property type Median rent (per week) Gross rental yield (%) Vacancy rate (%)
1 Carramar $401,034 Unit $389 5.16 0.8
2 Cabramatta $432,483 Unit $391 4.67 0.3
3 Canley Vale $439,313 Unit $402 4.72 -
4 Berkley Vale $379,669 Unit $410 5.63 1.4
5 Fairfield $396,190 Unit $420 5.54 0.3
6 Leumeah $452,742 Unit $424 4.98 -
7 Jamisontown $462,139 Unit $429 4.66 0.8
8 Wyong $483,430 Unit $430 4.91 2.9
9 Warwick Farm $409,386 Unit $434 5.72 1.0
10 Cranebrook $658,165 Unit $437 3.50 2.0
11 Gorokan $498,269 Unit $437 4.69 -
12 Minto $504,327 Unit $439 4.45 -
13 Bradbury $457,804 Unit $450 5.27 0.7
14 Liverpool $438,000 Unit $453 5.52 0.7
15 Jordan Springs $575,767 Unit $453 3.97 -
16 Mount Druitt $422,833 Unit $454 5.22 0.9
17 Kingswood $512,182 Unit $455 4.67 0.9
18 Macquarie Fields $564,455 Unit $457 4.28 -
19 Werrington $548,693 Unit $459 4.65 1.1
20 Richmond $542,096 Unit $463 4.31 0.5
21 St Marys $556,185 Unit $468 4.64 0.4
22 Penrith $517,508 Unit $469 4.78 1.0
23 Ingleburn $554,367 Unit $471 4.47 0.2
24 Glenfield $616,211 Unit $472 4.02 0.3
25 The Entrance $632,715 Unit $473 4.03 2.2
26 Campbelltown $510,525 Unit $479 4.76 0.1
27 Berala $538,704 Unit $486 5.20 0.4
28 Chipping Norton $590,798 Unit $486 4.55 0.4
29 Tregear $645,195 House $487 3.77 0.9
30 Long Jetty $715,647 Unit $488 3.70 0.7

Source: Corelogic quarterly rental review

Sydney's rental market forecast

Looking ahead, there is no end in sight for the Sydney rental crisis as immigration numbers are expected to continue to remain high, the pipeline of new property supply is thin and investors are exiting the market thanks to higher costs and concern and uncertainty about government interference and restraint.

This means we will likely see lower vacancy rates and even higher rents in the coming months.

The current tightening of all of the cities’ rental markets will reduce choice, increase competition for rentals, and exacerbate less favourable rental conditions for tenants overall.

Cameron Kusher, director of economic research at REA shared his insights:

"The rental market is tight, and rents have been rising because there is excess demand and insignificant supply.

“With mortgage servicing costs heightened due to higher interest rates, people moving back to capital cities, and overseas migration lifting, it looks unlikely that the high level of demand will reduce, particularly in capital cities.

“At the same time, the share of lending to investors is low and investors face higher mortgage interest costs than owner-occupiers.

“The most effective way to alleviate rental pressures in the short-term is to encourage more investment in housing.

“Addressing the demand and supply dynamic will take some time which means that supply is likely to remain tight and the cost of renting will increase.

“Rent price increases will be much stronger in capital cities while regional areas are likely to see rental market pressures continue to ease."

Eleanor Creagh, PropTrack's senior economist also warns that there is no sign of reprieve for tenants ahead.

“Without a meaningful increase in rental supply, there is seemingly no release valve to bring reprieve for renters,” she said.

As a result, rental prices will continue to grow in the coming months bringing more challenges for renters.

There is no easy fix or silver bullet to address the challenging rental market conditions so many Australians face.

She agrees that in the long run, the best solution is to provide more dwellings and that while the current increased activity from investors will help, it won’t be enough to match the level of demand in capital city markets.

“This is particularly the case in Sydney, Melbourne, and Brisbane, where most arrivals' first land and rental supply remains tightest,” she said.


A final note for investors

While Sydney’s property market might not seem attractive for investors right now due to high costs, government interventions, and a low supply of property for sale, it’s important to remember that property investment is a long-term game.

Don’t try to time the market - this is just too difficult.

And don’t hunt down a bargain.

All investors should focus all their efforts on buying an investment-grade property in an A-grade location.

These types of properties are in short supply but are still selling for reasonably good prices.

Plus they’ll hold their value far better in the long term.

While it might feel counterintuitive to buy at this point of the property cycle, you can also benefit from less competition, low consumer sentiment, having more time, and minimal risk of oversupply.

Remember, the rental crisis is only worsening further, with no end in sight.

Now would be a great time to buy an investment property and enjoy high demand while trying to be a part of the solution for Sydney’s rental crisis.

In the medium term, the Sydney property market will be underpinned by 3 factors:

  1. A significantly growing population
  2. Strong jobs creation
  3. Increasing the wealth with more high-paid knowledge workers.

I see the current market offering a window of opportunity for property investors with a long-term focus.

About Leanne Jopson Leanne is National Director of Property Management at Metropole and a Property Professional in every sense of the word. With 20 years' experience in real estate, Leanne brings a wealth of knowledge and experience to maximise returns and minimise stress for their clients.

Para 4 5.7%looks wrong. What a great article. As a current investor it suggests to me that: 1 Anything I own should be capable of being attractive to an owner occupier. 2. Nobody can predict the highs and lows of housing prices but always prepar ...Read full version

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Hi I’ve just read your article on the Sydney rental market and just wondering how much land tax would be payable if I purchase in Sydney vs purchasing in Victoria. . I have several properties in Victoria and interested to know if the land tax implica ...Read full version

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