Rental Market Report

Rental Market Report

Recently, Sydney rental values appear to have stabilised at record levels. After the significant 10% decline in the rental market during the first year of the COVID pandemic (2020), it took the next 18 months till mid-2021 for them to return to pre-COVID levels. The uplift in the 2021 Calendar year was about 5%.
In 2022, we experienced an increase of about 25% for units and smaller houses, followed by further 15% in 2023 – an unprecedented event to my knowledge. Earlier this year, the low vacancy for residential property continued to contribute to a stronger market. However, over the past few months, the rental market has finally flatlined.
Affordability has taken the upper hand, with inflation and the higher cost of living having the desired effect for those in charge. As the Reserve Bank recently highlighted, Average Household Size continues to decline, now at an all-time low, below 2.5 people per household. Our lower birthrate and increased family fragmentation results in more homes being required to accommodate the existing population, before adding in the highest ever yearly migration intake. No wonder, the State Governments, developers and builders can’t keep up with demand.
I expect that for the next 18 months we will see a steady rental market with small changes in rents reflecting the inflation increase and local variations. Immigration will decline and building will continue. I predict that the State and Federal Governments will eventually increase their investment in Public/Social housing after being relatively absent from the field for many years.
Population Trends
According to the latest figures of population change (2022-23) released by the Australian Bureau of Statistics, the population balance changed substantially and influenced the state of the housing market in Australia.
Capital City Growth:
For capital cities such as Sydney and Melbourne, the post-COVID years saw populations surge, as a drop in the usual losses to internal migration was complemented by more newcomers coming from abroad.
This growth has intensified rental demand, leading to a prolonged rental crisis.
Decline in Regional Migration:
Internal migration to regional areas boomed during COVID, then decreased, but remains above pre-COVID levels. Coastal and affordable lifestyle regions continue to attract residents, maintaining high demand for housing.
Diversification of Overseas Migration:
Meanwhile, NSW and Victoria, previously accounting for three-quarters of all overseas migration, have seen their share decline to two-thirds, with WA, QLD and SA hosting a greater proportion of new migrants.
Smaller capitals, such as Perth, Brisbane and Adelaide, will become attractive destinations for many migrants, supporting stronger demand for their housing markets.
Average Household Size:
Household size is continuing to decline, across both capitals and regions. Single person household remained constant at 26%, while the number of young adults living with parents increased.

Mortgage Financing

There is still a great deal of competition between the banks as they try to increase or maintain their market share. Westpac owned St George are increasingly active in this space. Their specialist local branch approached me for a referral arrangement. It occurred to me that many of our landlord clients may, like many others, be neglecting to ensure they are still getting a competitive borrowing rate on their existing loan, a new loan or if they access some of the equity for other purposes. They said: “if you are paying above 6.4%, you are probably paying too much”.

I was also told that, as they have higher approval privileges (at better rates), we can facilitate you receiving a fast, second opinion about your mortgage. It should, at a minimum, be reassuring or potentially alert you to a significant potential saving.  Send me a message and I will put you in touch with one of their people. They do offer us a referral fee, 100% of which will be donated to our two charities – MS Plus (multiple sclerosis) and Taldumande Youth Services (youth homelessness).

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