Sydney is officially operating over capacity.
Inadequate housing supply, transport facilities and clogged infrastructure mean one of the nation’s most popular destinations is overpopulated, a new study has revealed.
Research from Monash University and their Institute of Transport Studies has revealed the optimal number of residents an Australian city must maintain for peak sustainability and liveability.
It revealed the ideal capacity where housing, jobs, transport and services are balanced to fit the number of residents, with Sydney deemed to have more residents than its infrastructure and amenities could support.
The Monash analysis figures showed Sydney was the seventh most overcrowded city in the country and was operating with just under 5 per cent more people than it should.
Sydney is revealed in the Monash study to be operating over capacity. Picture: Supplied
Higher populated cities reported an over-reliance on cars and increased traffic. Picture: NewsWire / John Appleyard.
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With the city home to around 5 million people, according to the Australian Bureau of Statistics, the findings would suggest Sydney has about 250,000 more residents than the optimal number.
The Gold Coast was deemed the most overcrowded, with the population 12 per cent above capacity. The Central Coast, Murray Bridge, Newcastle, Sunshine Coast and Melbourne also had more residents than the optimal number.
Cities like Perth and, in South Australia, Port Pirie were found to be operating close to their ideal size.
The study determined the “magic number” for a city’s size by using four measures of growth and function: capital city status, access to jobs, the mix of services and how well it’s connected.
Cities with population over capacity tended to have higher costs and infrastructure strain, as seen in Sydney.
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Sydney ranks among the top cities operating above capacity. Picture: Monash University.
The study shows Sydney is operating above what it can theoretically support. Picture: Monash University.
Lead study author, associate professor Liton Kamruzzaman, revealed solutions around transport, job locations and fair land-use rules could help cities evenly distribute to find “the Goldilocks rule”: capacity at the “just right” size.
“When a city grows too big, the signs are clear; longer commutes, traffic jams, soaring rents, and overcrowded services,” Mr Kamruzzaman said.
“But when it’s too small, valuable infrastructure and opportunities go to waste.
“Using this research as a benchmark new cities could be designed with a population range that avoids the pitfalls of over- or under-capacity, while existing ones can be recalibrated through policy levers like transport links or decentralised jobs.”
Perth was found to be operating at almost the “just right” size, near capacity. Picture: iStock
He stressed the size of the city alone did not determine if it its infrastructure was stressed.
“This study shows it’s not about being large or small,” he said. “It’s about whether a city’s population matches what its systems can handle. That’s the key to sustainability.”
Sydney is already feeling the effects, with Aussies concerned the governments housing targets won’t be met.
The National Cabinet expects Australia to build 1.2 million new homes by 2029, but building approvals are slowing, falling by 8.2 per cent in July 2025, the ABS revealed. Only 188,727 new dwellings were built nationally in the year to July 2025.
Master Builders chief economist Shane Garreete said construction progress has been too slow and the circa 188,000 homes built over the year to July was not enough.
“We’re likely to have suffered a 60,000-home shortfall during the Housing Accord’s first year so we need to average 255,000 homes annually over the remaining four years of the Accord,” he said.
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