04.04.2024 Local News

What’s Behind The Housing Crisis?

What’s Behind The Housing Crisis?

Sydney is going through what many have labelled a housing crisis, and the eastern suburbs aren’t immune.

Sydney has been going through what many have been calling a ‘housing crisis’, with high rents, rising prices, a growing cost of living and a scarcity of property combining to put real pressure on many home buyers, home owners and tenants. We explore what’s behind it, and how it’s impacting the market here in the eastern suburbs.

What is the housing crisis?

Property prices in Sydney have been growing over the past year. In the 12 months to 2024, the median citywide value rose 9.6% to $1,139,375, according to CoreLogic’s Hedonic Home Value Index.

On one hand, that may come as little surprise. Sydney property prices tend to rise more often than they fall. On the other hand, what makes this growth unusual is that it has come at a time when interest rates and the cost of living have been rising.

In fact, ABS data shows that, as of 2024, the average mortgage repayments across NSW were $4,641.86. This compares with a statewide median mortgage repayments of $3,188 in January 2022.

But prices aren’t just rising rapidly in the sales market. The median Sydney rent has also skyrocketed, going from $527 in January 2020 to $846 today (a rise of 60.5%).

This means Sydney’s median rent has climbed 16.7% in the last year alone, and in some parts of the eastern suburbs, it has been growing faster still. For instance, Bronte rents have climbed 31.7% over the same period, with rents on three-bedroom houses lifting an eye watering 59.9% in just 12 months.

What’s causing this crisis?

Property prices and rents are both set by the laws of supply and demand. We’re seeing strong demand meet low supply.

Greater Sydney took in a net additional 146,702 people in the year 2022-2023, according to the ABS and each one of those new arrivals needed somewhere to live. New arrivals tend to be overrepresented in the rental market. However, within five years many end up choosing to buy.

CoreLogic observed that the growing cost of rent could even be speeding up this phenomenon, with people tending to enter the sales market earlier than before.

But our growing population isn’t the only demand factor at play. We’re also witnessing additional demand factors such as changes in demographics (with more people looking to downsize), changes in lifestyle preferences (such as a growing number of people wanting to live near the beach or in popular parkside or inner city suburbs), putting demand on specific sections of the market.

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Perhaps most importantly, at the same time as this happens, we’re seeing supply genuinely constrained. SQM Research shows roughly half the number of rental listings on the Sydney market between 2022 and 2024 compared with the period between 2020 and 2022.

We have also tended to see lower sales stock levels over the past few years – although the gap is not quite as large.

We’re not developing enough

The only way the gap can be narrowed is if we develop more properties to accommodate Sydney’s growing population.

In December last year, we listed the five types of developments the eastern suburbs desperately needs more of. These included downsizer stock, apartments for long-term living, adaptive reuse and the ‘missing middle’ (ie townhouses and terraces).

More than anything, we also need affordable housing.

After all, many people who work in the eastern suburbs can no longer afford to live here. Instead, they face long commutes from Sydney’s outer suburbs.

The State government has recognised this. However, its solution has been controversial. It has announced plans to designate the land around eight railway stations as ‘high-density zones’. Meanwhile, greater development will be allowed with 400 metres of 31 stations across Sydney—although none will be in the east.

More relevant to our area may be the government’s decision to introduce a fast-track approval procedure for developments over $75 million that contained at least 15% social housing.

Want more?

If you’re interested in buying property in Sydney’s Eastern suburbs, get in touch.