‘Extreme shortage of stock’ Rental crisis takes Sydney to new low

By Sam Murden

on  August 11, 2022 


Rental vacancies in Sydney are now at a five-year low, effectively locking potential tenants out of the market.

Sydney’s rental crisis continues to worsen, with residential vacancy figures dropping to the lowest level in five years.

This has resulted in an “extreme shortage in stock” for people looking to enter Sydney’s rental market.

The latest survey conducted by the Real Estate Institute of NSW (REINSW) shows the vacancy rate for Sydney dropping to 1.7 per cent – around the same level as where it was in August 2017.

The majority of homes in this apartment block rent at exactly the Sydney average. The average price of rental homes in Sydney has risen to $500 per week for units and $530 per week for houses.

The majority of homes in this apartment block rent at exactly the Sydney average. The average price of rental homes in Sydney has risen to $500 per week for units and $530 per week for houses.

The vacancy rates in the city of Sydney are divided into rings; with the inner ring of Sydney dropping to 2.2 per cent, the middle ring remaining stable at 1.4 per cent and the outer ring rising to 1.6 per cent.

Vacancy rates outside Sydney were more varied, with the Hunter seeing decreases and the Illawarra seeing increases.

REINSW CEO Tim McKibbin said there had been recorded decreases in places like the Central Coast, the Central West, Riverina, and South East.

Residential vacancy rates across Sydney have fallen to the lowest level in five years. NSW real estate.

Residential vacancy rates across Sydney have fallen to the lowest level in five years. NSW real estate.

“REINSW members are telling us that they’ve never experienced such a lack of supply. The shortage of stock is extreme and there’s no denying that the rental crisis is real,” Mr McKibbin said.

“In the face of cost-of living pressures, many tenants would embrace the opportunity to secure a more affordable rental property.”


“However, despite rent increases, they’re choosing to stay put because they’re just not confident that they’ll be able to secure another property.”


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“It’s a very stressful time for tenants.”

Vacancy rates increased in places like Albury, Mid-North Coast, Murrumbidgee, Northern Rivers, Orana, and South Coast.


When the RBA might ease off its aggressive interest rate hikes

Megan Neil, Senior Journalist

The Reserve Bank of Australia has its foot on the rate rise accelerator and is driving the most aggressive hikes in decades – but there are hints it may soon shift into a slower gear.

While further rate increases are a certainty after an unprecedented fourth consecutive increase and third double hike in a row, experts point to signs the RBA is considering easing back to smaller moves, or taking a breather.

The light at the end of the tunnel for households juggling rising grocery, petrol, and energy costs alongside higher mortgage repayments is the potential for rate hikes to end by the end of the year.

And there’s a chance the RBA could even start cutting rates in late 2023 or 2024.

The cash rate has now increased by 175 basis points since May, which CommSec noted is the most aggressive monetary policy action since 1994.

It is still predicted to climb to at least 2.6% and as high as 3.35% by the end of the year or early next year, according to economists at Australia’s four largest banks

At this stage ANZ, Commonwealth Bank of Australia, Westpac and National Australia Bank economists expect another 50 basis point hike in September.


But they and PropTrack senior economist Eleanor Creagh pointed to changes in RBA governor Philip Lowe’s monthly statement that suggest the RBA may be thinking about slowing the pace of hikes or pausing to assess their impact.

“The RBA trimmed its GDP growth forecasts and the statement accompanying yesterday’s move signalled the Reserve Bank are not on a pre-set path, shifting to a more data-dependent stance and perhaps pointing to a return to ‘business as usual’ (25 basis point) rate rises from here,” Ms Creagh said.

Ms Creagh said how high and fast the cash rate rises – and whether the RBA pauses at some point – will be determined by the economic conditions.

“Confidence has slipped as interest rates are rising quickly and as inflation has surged, and cost of living pressures are weighing on household sentiment.

“The knock-on effect of that to household spending will certainly be important to watch in the coming months.”

A view down a major road in the Melbourne suburb of South Yarra, with a car stopped at a red light at a pedestrian crossing.


Ms Creagh expects the RBA will continue raising the cash rate target towards its estimate of the neutral rate – a level that is neither stimulatory nor contractionary – of around 2.5% to 3%, while monitoring the impact on household spending.

The new hints about future rate hikes

CBA head of Australian economics Gareth Aird said some new elements of the governor’s statement give the impression that the board is getting closer to the point at which it will pause in its tightening cycle.

One was Mr Lowe’s comment that the board placed a high priority on returning inflation to its 2% to 3% target range over time, “while keeping the economy on an even keel”.

“The path to achieve this balance is a narrow one and clouded in uncertainty, not least because of global developments,” Mr Lowe said.

Mr Aird said the remarks imply a pragmatism in how the RBA will make policy decisions over the period ahead.

“We do not believe they are in a rush to take the policy rate much above their estimate of neutral (around 2.5%),” he said.

“Indeed we expect that once the cash rate gets to around that level the RBA will pause to assess the impact that their policy tightening has had on the economy.”

CBA’s base case is a further 50 basis point hike in September, a pause in October and a final hike of 25 basis points in November, taking the cash rate to a peak of 2.6%

Mr Aird said the RBA could shift to ‘business as usual’ monthly increases of 25 basis points from here if the upcoming economic data, particularly on wages, made that case. But CBA still expected the same terminal rate of 2.6% in November even if there were 25 basis point rises at the next three board meetings.

“Financial conditions will continue to tighten over 2023 with no change in the cash rate given the big fixed rate home loan expiry schedule and we have 50 basis points of rate cuts in our profile for the cash rate for the second half of 2023,” Mr Aird said.

ANZ head of Australian economics David Plank said the key change in wording from July was that there was no longer any reference to the withdrawal of “extraordinary monetary support” during the pandemic, with the latest move described as a further step in the normalisation of monetary conditions in Australia.

“This could be a signal that the RBA board may be thinking about reducing the size of the monthly increases to 25 basis points in September. We think a 50 basis point increase is still the most likely choice,” Mr Plank said.

ANZ economists have forecast further 50 basis point hikes in October and November, which would be an an unprecedented six double hikes in a row and take the cash rate to a peak of 3.35%.

That would total 325 basis points of hikes since May, representing the steepest tightening cycle since the RBA began announcing its desired level for the cash rate in January 1990

Westpac chief economist Bill Evans said references in the governor’s statement might imply a more cautious approach after another 50 basis point increase in September. Mr Evans expects a series of 25 basis point moves at the following four board meetings.

“There does not appear to be grounds for assessing that the board will slow the pace at the September meeting – a further 0.5% is very likely,” Mr Evans said.

“But the cash rate will then reach 2.35% – within the ‘neutral zone’ from the RBA’s perspective. It is then that some of the cautious aspects of the statement can be used as a signal that the board’s preference will be to slow the pace of tightening.”

He said the two most cautious aspects were the reference to the challenge of achieving the inflation target while keeping the economy on an even keel and lifting the inflation forecast for 2023 to 4%, from 3.1% previously.

Once the cash rate reaches a peak of 3.35% in February, Westpac expects it to remain on hold before 100 basis points of reductions over the course of 2024.

NAB economists expect that after another double increase in September, the RBA will slow the pace of hikes to 25 basis points in October and November when the cash rate peaks at 2.85%. They have pointed to the possibility of rate cuts at some point in 2023 or 2024.

Household spending a key factor, as housing market slows

Mr Lowe said the RBA board will be paying close attention to household spending, which remains a key source of uncertainty.

“Higher inflation and higher interest rates are putting pressure on household budgets,” he said.

“Consumer confidence has also fallen and housing prices are declining in some markets after the large increases in recent years.

“Working in the other direction, people are finding jobs and obtaining more hours of work. Many households have also built up large financial buffers and the saving rate remains higher than it was before the pandemic.” 

Ms Creagh said how consumers react to higher interest rates and cost of living pressures, and how quickly household spending is curbed, will be key.

“How household spending holds up against a backdrop of higher inflation and falling house prices (the negative wealth effect), versus savings and wealth buffers and hopefully stronger wages growth, will be crucial in determining the loss of conditions in the economy and how high and fast the cash rate rises.

“This dynamic will also be a key source of uncertainty for the housing market and the pace and depth of price falls.

According to financial comparison site Canstar, the four rate hikes so far have added about $600 to monthly repayments for a borrower with an average loan of $600,000 and $1000 for a $1 million loan.

Ms Creagh noted higher mortgage rates reduced the borrowing capacity of prospective buyers, who also faced greater uncertainty about future borrowing costs.

“Market conditions have cooled as buyer confidence has waned, and auction volumes and clearance rates have fallen, sales volumes have slipped from last year’s extremely elevated levels and home prices are falling.”

The latest PropTrack Home Price Index showed nationally prices had fallen 1.66% from their peak in March.

“As repayments become more expensive with rising interest rates, housing affordability will decline, pushing prices further down,” Ms Creagh said.


Landlords hold upper hand, renters set for tough conditions over next 12 months


Australian house prices set to drop further as interest rates surge. Here’s a round up of what’s happening with property prices across Australia

By Dinah Lewis Boucher

Posted on 02/08/2022Houses in Brisbane street
Property prices in five of Australia’s eight capital cities recorded falls in July.(ABC News: Liz Pickering)

Australia’s median property value has dropped by 2 per cent since the beginning of May, to $747,800— a figure that includes houses and apartments, the latest housing data shows.

CoreLogic research director Tim Lawless says Australia’s housing market conditions were likely to worsen as interest rates ticked higher through the remainder of the year.

Here’s a state-by-state breakdown of Australia’s latest housing figures.

Sydney: home prices down

Average change: 2.2 per cent decrease in July

Sydney median house value: $1,346,193

Median unit value: $806,310

Five of the eight capital cities recorded a month-on-month decline in July, led by Sydney dwelling values recording a drop of 2.2 per cent.

“Although the housing market is only three months into a decline, the national Home Value Index shows that the rate of decline is comparable with the onset of the global financial crisis (GFC) in 2008, and the sharp downswing of the early 1980s,” Mr Lawless said.

“In Sydney, where the downturn has been particularly accelerated, we are seeing the sharpest value falls in almost 40 years.”

The harbour city still has a median house price of $1.35 million and median unit price of $806,300

Adelaide: home prices up

Change: 0.4 per cent increase in July

Adelaide median house value:  $705,634

Median unit value: $431,409

Corelogic data  shows Adelaide dwellings have recorded a 24.1 per cent annual increase

Brisbane: home prices down

Change: 0.8 per cent drop in July

Brisbane median house value:  $884,336

Median unit value: $504,520

Brisbane edged into negative territory for the first time since August 2020. 

Mr Lawless says the trend in rising rents is seen in each capital city, led by Brisbane with a 4.2 per cent rental rise over the three months to July.

“Rental markets are extremely tight, with vacancy rates around 1 per cent or lower across many parts of Australia,” he said.

Canberra: home prices down

Change: 1.1per cent drop in July

Canberra median house value:  $1,047,912

Median unit value: $626,128

Canberra’s median house value sits at $1.05 million.

Mr Lawless said that unit values across the combined capital cities are generally recording smaller falls compared with house values.

“This trend is most apparent across the three largest capitals as well as Canberra, where housing affordability challenges may be deflecting more demand towards the medium to high-density sector,” Mr Lawless said.

“Such widespread and rapid rental growth is likely to remain one of the key domestic factors pushing up inflation, along with construction, food, transport and energy costs. 

“While some of these can be attributed to global supply chain issues, the rental situation is a domestic one caused by a combination of tight supply and amplified demand,” Mr Lawless said.

Darwin: home prices went up

Average change: 0.5 per cent increase

Darwin median house value: $589,748

Median unit value: $374,340

Grey roofs in a Tasmanian suburb
The RBA decided to hike interest rates for a fourth straight month, taking the cash rate to 1.85 per cent.(ABC News)

Hobart: home prices down

Change: 1.5 per cent decrease

Hobart median house value: $782,748

Median unit value: $577,307

Corelogic data shows Hobart’s dwelling values recorded a 10.1 per cent increase over the year to July.

Melbourne: home prices down

Change: 1.5 per cent decrease

Melbourne median house value: $964,950

Median unit value: $614,351

Melbourne dwelling prices are now down for five months in a row with prices recording a 1.5 per cent decline in July. 

The data shows that major regional centres Geelong, Ballarat also recorded a decline in home values over the three months to July.

Perth: home prices slightly up

Change: 0.2 per cent increase

Perth median house value: $587,024

Median unit value: $411,460

Looking at annual figures, Perth dwellings have recorded a 5.5 per cent increase.

Mr Lawless says that Perth, Adelaide, and Darwin property markets had recorded a sharp slowdown in the pace of capital gains since the first interest rate hike in May.

A table showing that Australia's median property price dropped 1.3 per cent in July 2022 to $747,812.
Property prices in Sydney, Melbourne and Hobart fell sharply in July.(CoreLogic)

How will rate rises change things? 

The RBA has lifted the cash rate by 1.75 percentage points since its first rate rise in May to 1.85 per cent.

Just as the cut in interest rates to record lows was the key driver of the price boom coming out of the pandemic lockdowns, AMP Capital chief economist Shane Oliver says the surge in interest rates now underway will be the key driver of the property market ahead.

“Being able to borrow at a fixed rate of 2 per cent or less was a key driver of the boom in prices with fixed rate lending accounting for 40-50 per cent of new lending about a year ago,” he said.

“But with fixed mortgage rates now up nearly three-fold from their lows and variable rates rising rapidly this has substantially reduced the amount new home buyers can borrow and hence their capacity to pay.

“As a result, the rug has effectively been pulled out from under the property market.”

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