This month, Sydney’s real estate market highlights significant challenges and shifts for both renters and buyers. With rising rents, a shortage of affordable options, and intense competition among investors and home-seekers, affordability issues continue to deepen. New regulations targeting landlord maintenance standards and proposed lending changes indicate a push for better quality rental housing. Meanwhile, despite a slowdown in construction cost growth, high expenses and limited supply keep property prices elevated. The latest data underscores how affordability pressures in Sydney are spilling into regional areas, reshaping the Australian housing landscape.

1. Crackdown on Rental Breaches in Fitzroy

https://www.domain.com.au/news/black-mould-broken-toilets-crackdown-on-rental-breaches-1325282/

Not exactly Sydney news, but perhaps in a sign of things to come, a recent sweep by Consumer Affairs Victoria (CAV), Melbourne’s Fitzroy suburb—where two-thirds of residents rent—underwent inspections to ensure rental properties meet basic standards. Landlords must provide safe, habitable conditions, such as functional toilets, weatherproof structures, and spaces free from mould. Penalties for breaches include fines up to $57,000 for companies. CAV’s intensified effort includes anonymous reporting and severe penalties for non-compliance, reflecting Victoria’s commitment to rental integrity and tenant safety.

2. Sydney Suburbs See 30% Rent Surge

https://www.domain.com.au/news/the-sydney-suburbs-where-rents-jumped-up-to-30-per-cent-in-a-year-2-1324956/

Rental prices in certain Sydney suburbs have surged by up to 30% over the past year, driven by high demand and a cost-of-living crisis. The median weekly rent now stands at $775 for houses and $720 for units, with a low vacancy rate of 1.1%. Suburbs like Collaroy, Wiley Park, and Warwick Farm saw significant increases, forcing many tenants to compromise on location and property type. While some experts expect rent growth to slow, others, like Dr. Peter Tulip, believe inflation will keep rents high, potentially driving renters to more affordable areas or even out of Sydney.

A sunny day at the Rocks markets

Sunset over Church Street, Parramatta

3. Obstacles to Falling Rents in Australia

https://www.domain.com.au/news/the-drastic-changes-needed-for-australian-rents-to-fall-below-their-peaks-2-1325478/

Australian renters face little hope of rent reductions, as experts suggest only drastic measures could lower rents significantly. Factors such as high interest rates, inflation, and increased investor costs have kept rents high, with recent figures showing house rents up from $430 to $650 weekly over five years. Experts like Dr. Diaswati Mardiasmo and Dr. Peter Tulip argue that substantial rent declines would require significant housing supply increases, interest rate cuts, and policy shifts prioritising rental affordability—a scenario deemed unlikely in Australia’s current housing landscape.

4. Decline in Housing Development Amid Rising Costs and Labour Shortages

https://www.abc.net.au/news/2024-10-09/australian-dwelling-approvals-fall-contruction-costs-labour/104443492

New data from the Australian Bureau of Statistics reveals a 6.1% drop in housing approvals in August, largely due to rising construction costs, labour shortages, and competition with non-residential projects. High-density housing approvals saw the sharpest decline at 16.5%, while free-standing home approvals remained stable yet sluggish. Experts, including Tim Lawless and Nicole Gurran, emphasise that stabilising prices and boosting economic confidence could aid housing approvals, while increased investment in social housing and government-backed projects might alleviate supply pressures.

5. Millennial and Gen Z Buyers Fuel Granny Flat Market

https://www.domain.com.au/news/millennial-and-gen-z-buyers-dominate-the-granny-flat-market-1328247/

Millennials and Gen Z are increasingly purchasing foldable granny flats, driven by affordability and the housing crisis. VanHomes, a NSW-based company, offers movable, compact dwellings starting at $36,800, rising to $136,000 for a four-bedroom unit. Originally popular among older downsizers, these dwellings now appeal to young first-home buyers priced out of traditional housing. Erected in backyards, they bypass certain permit requirements, though inconsistencies in council regulations present obstacles. Experts highlight the need for streamlined planning laws to meet the growing demand for affordable, alternative housing solutions.

6. Limited Impact of Loan Increases on Rent Hikes

https://www.domain.com.au/news/for-every-1-loan-repayments-increase-renters-cop-it-too-1328181/

New Reserve Bank of Australia research shows that for every $1 increase in mortgage repayments, landlords raise rents by only around 3 cents. While rising interest rates slightly affect rents, the main factor driving rental inflation is housing supply constraints, which, along with high construction costs, labour shortages, and increased demand, have pushed rents up 48% for houses and 40% for units since 2020. The RBA economists suggest that higher pass-through rates may occur with the recent unprecedented interest rate hikes.

7. Proposal for Banks to Assess Landlord Maintenance Affordability

https://www.domain.com.au/news/banks-to-check-if-landlords-can-afford-maintenance-under-new-proposal-2-1327907/

A new proposal suggests that banks should evaluate if landlords can afford necessary property maintenance when approving investment loans, aiming to ensure better rental quality and affordability. The Consumer Policy Research Centre argues this would reduce substandard rentals and deter financially unprepared landlords. NSW Tenants’ Union supports viewing investment loans like business loans, requiring maintenance plans. Though some experts fear rental shortages, proponents believe this shift could improve the market for responsible landlords and make housing more accessible for first-home buyers by easing property prices.

8. New Home Build Costs Remain High Despite Moderation

https://www.domain.com.au/news/new-home-build-costs-may-be-moderating-but-they-wont-fall-back-to-pre-pandemic-prices-1327560/

The cost of building a new home in Australia surged by 41% from 2019 to 2023, reaching $465,000 due to rising material costs, labour shortages, and increased demand. While price growth has slowed, experts like Timothy Hibbert and Maurice Tapang assert that a return to pre-pandemic costs is unlikely as inflation and persistent demand keep prices elevated. Even with some easing in material costs, labour remains costly, sustaining high building expenses as the housing market faces ongoing supply chain and workforce pressures.

9. Australian Property Market Reaches $11 Trillion

https://www.therealestateconversation.com.au/news/2024/10/11/australian-property-market-reaches-11-trillion-value-corelogic/1728594689

Australia’s residential real estate market reached a historic $11 trillion valuation, with property values increasing by $900 billion over the past year, CoreLogic reports. Despite this, national home values grew modestly by 1.0% in Q3, indicating a slowing trend. Elevated investor activity, driven by low rental yields and the prospect of capital gains, has intensified competition, impacting first-home buyers. Key cities like Sydney, Brisbane, and Perth reached record-high dwelling values, while Melbourne and Hobart saw declines. Increased listings are expected to moderate future price growth.

10. Bank of Mum and Dad Crucial for Sydney Homebuyers

https://www.domain.com.au/news/how-much-you-need-from-the-bank-of-mum-and-dad-to-buy-a-home-in-your-sydney-suburb-1330254/

Data from CoreLogic and Canstar shows that even with loans and standard deposits, average-income singles in Sydney would need around $900,000 in additional family support to buy a house and $300,000 for a unit. High property prices are forcing some buyers to look outside Sydney, though this has led to rising demand and affordability issues in nearby regional areas. Dual high-income households find 94% of unit markets accessible, while low-income singles face limited options in Sydney, highlighting affordability challenges across the housing market.

Monthly Summary

October’s analysis of Sydney’s real estate market reveals ongoing affordability struggles and a competitive rental landscape. Rising property values, increased investor demand, and limited new builds sustain high housing costs, placing pressure on renters and prospective buyers alike. With young Australians increasingly reliant on alternative housing options, such as granny flats, affordability remains an elusive goal. New policy recommendations seek to enforce higher maintenance standards for landlords and restrict loans for underprepared investors, aiming to stabilise the market. These evolving dynamics highlight both the resilience and strains within Sydney’s housing sector.