Is Sydney's rental affordability becoming an issue?

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A new index developed to measure rental affordability has claimed Sydney’s rental market is in a critical condition.

According to the Rental Affordability Index (RAI), developed by SGS Economics & Planning for housing advocacy group National Shelter, the index claims that the average household in the Greater Sydney area is dangerously close to experiencing housing stress, while the situation is worse for those in lower income brackets.

“Rental affordability in Greater Sydney is in a critical position with the average household required to spend 28% of household income on rent to access a rental dwelling, putting them very close to the 30% rental stress threshold,” the index claimed.

“All households in the lowest two quintiles are facing severely and extremely unaffordable rents. Non-family households in the lowest income bracket are being hit hardest with the cost of rent.”

According to the index, the most affordable areas for those on an average income are “located in the outer areas of the metropolitan region, to the west of the central city and to the far north towards the Newcastle region.”

Black Springs, Mount Druitt, Bluehaven, Lake Haven and Silverdale were named as the five most affordable suburbs in the Greater Sydney region, all of which are more than 40km from the Sydney CBD.

For Sam Saggers, chief executive officer of Positive Real Estate, the index’s findings aren’t a major surprise.

“Without a doubt rents in Sydney are at a very high level and have been for long time,” Saggers said.

“In some ways it’s a tale of two cities, there are those who can afford to rent in the city and then those who are being driven out by the cost to areas like the city’s western fringe,” he said.

While the RAI doesn’t paint a great picture for tenants on average incomes, Saggers said he can’t see anything changing in the Sydney market anytime soon.

“I think as the Sydney market cools down we’re going to see less development and less stock coming becoming available, which is going to put more pressure on the market and cause more issues.

“I think we’re going to see more people push out to areas like the Central Coast or Wollongong that have good transport links.

“There’s always going to be people who will climb over others though, so I don’t think there’s going to be a situation where landlords can’t find tenants or we see a flattening or drop off in rents.”

According to figures from the Real Estate Institute of NSW, Sydney's vacancy rate is currently below 2%. 

In Saggers’ opinion there will likely be another phenomenon inflamed by Sydney’s rental prices, as more and more people are priced out of living in Sydney.

“I think there will be a lot of interstate migration. Last time Sydney had a boom we saw a lot of people look to more affordable areas like south east Queensland and that’s already happening again.

“We do a lot of property management in Brisbane and other places up there and probably one in eight people we get who are looking for a rental are coming up from Sydney due to affordability.”

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