Worst suburbs in Sydney that affect renters – realestate.com.au

NSW renters are at a breaking point – and the government has been accused of misplaced priorities with the expansion of first home buyer schemes, which critics say could worsen the plight of some renters.

A shock report has found that four in five renting households in the state are now in ‘rental stress’, spending an unsustainable portion of their monthly income to keep a roof over their heads.

This amounted to almost 850,000 renting households across the state, according to data from financial research group Digital Finance Analytics.

Rental stress levels were particularly alarming in Sydney’s suburbs.

This included Campbelltown, along with Central Coast hub Gosford, where more than 90 per cent of renting households were in ‘rental stress’.

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Tenants’ Association CEO Leo Patterson Ross said support for first-home buyers could make it harder for renters to leave the rental market if prices rise. Photo: Richard Dobson

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Digital Finance Analytics director Martin North said stressed households were often delaying bills or going deeper into debt to make ends meet.

“Stress shows that households are under pressure on cash flow, so they cut back on spending and continue to withdraw, leading to lower economic activity,” North said.

NSW Tenants Union CEO Leo Patterson Ross said the federal government’s expansion of the First Home Guarantee Scheme in October brought new challenges for tenants.

The scheme, which helps eligible first home buyers buy property with a 5 per cent deposit, seemed useful at first glance, but the reality was more problematic, Mr Patterson Ross said.

He explained that there was a game of chance that would drive up prices by encouraging more buyers to enter the market with higher debts.

Renter Jess Gallagher said finding a rental property in Sydney was difficult. Photo: Rohan Kelly

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This would make it more difficult for the next round of hopeful tenants looking to become buyers.

“It’s harder for the people behind the first buyers to get their hands on properties,” he said.

“The scheme encourages people to take on more debt and that is the core problem with the housing market in general.

“People have to borrow more and more to get into the market and that only drives prices up further.”

Mr Patterson Ross added that the scheme will ensure that high-paying tenants enter the market, as higher incomes are required to repay the larger loans.

These types of tenants leaving the rental market would not create a meaningful change in rental demand, he said.

“Many of the properties that first-home buyers are purchasing were owned by investors,” he said.

“If a tenant buys a property that was rental, he or she is out of the rental market, but that includes the former rental property, so the supply and demand dynamics don’t change.”

Economist Eleanor Creagh of the REA group noted that rent increases have slowed this year, but households remain “stretched” after “significant” increases in recent years”.

Rents are unlikely to become more affordable without a significant increase in housing, Creagh said.

“Without a greater supply response, we are unlikely to see rents decline,” she says.

Mr North explained that pressure on rents continues to increase as families spend more on other costs.

He said unaffordable rents were the result of high migration at a time of moderate construction activity.

Martin North of Digital Finance Analytics said rental stress levels were higher than mortgage stress levels. Photo: Hollie Adams

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“Excessive migration is the icing on the cake, again adding to the stress, and note that the most stressed rental cohorts are the first generation migrations to Australia,” Mr North said.

“So in addition to taking property directly from existing Australians, they have also become part of the stress story in their own right.”

Jess Gallagher was recently on the hunt for a rental property and said the competition was fierce. She currently rents a share house in Surry Hills with three other housemates and explains that her rent is “substantial”.

“People get their offers in so quickly that sometimes you can’t even attend the viewings because they’ve already agreed to move in with someone else,” she said.

Finding quality was a problem, she added. “I went to a few viewings and found that they just weren’t really liveable. They were a lot cheaper, they just weren’t quite up to par.”

She said she would like to see government processes put in place to give renters “a fairer chance” as the prospect of owning a home felt “out of reach”.

“It feels quite unfeasible in the current climate.”

SYDNEY AREAS WHERE TENANTS FIGHT THE MOST

(by share of tenants in rental stress)

Liverpool 82.60%

Westmead 78.30%

Campbelltown 91.70%

Zetland 88.90%

Parramatta 86.40%

Goford 95.00%

Miller’s point 87.60%

Zwartstad 80.60%

Surry Hills 83.10%

Bondi Beach 89.80%

Naremburn 93.80%

Source: Digital Finance Analytics