With no sign of a recovery in lending for investment properties on the horizon, Australia's rental crisis is expected to worsen.
The Housing Industry Association said that despite a slight seasonally adjusted rise in investment lending in November - up 1.8% to $5.44bn - the more reliable trend remains in steep decline.
In NSW, the supply and demand of rental properties is already translating into rent rises. In the year to September 2006, figures from the NSW Department of Housing show a jump of 7.1% and 6.4% in rents for units and houses in Sydney respectively.
Nationwide, the Real Estate Institute of Australia reported rent increases over the past 12 months as high as 9.8%.
Businesses may also feel the brunt of the rental crisis, according to the Sydney Chamber of Commerce. It believes low-income employees could be priced out of the city - a scenario that may be worsened by businesses struggling with the current skills shortage.
Patricia Forsythe, executive director of the Sydney Chamber of Commerce, referred to the rental crisis as a "triple whammy of falling building approvals, low vacancy rates and higher interest rates".
"Businesses need Sydney rents to remain affordable in order to keep their workforce from moving elsewhere," she added.
Forsythe said that in order to maintain Sydney's interstate competitiveness it is critical that affordable housing is available to cater for the city's diverse workforce.
President of the Real Estate Institute of NSW, Cristine Castle, said that people should weigh up the true costs of renting in the CBD.
"There are savings on time and transportation, so people should find a balance between working out their priorities of where they want to live."
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