Sydney suburbs set to be hit hardest by rent rises

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Sydney tenants have been told to brace for another financial squeeze due to the government’s controversial decision to axe negative gearing.

Economic modelling from property analytics group FoundIt has forecast rents will rise by up to $34 a week in some Sydney areas over the next three months alone.

These rises would occur as new landlords await confirmation of negative gearing restrictions announced in the Budget, currently before parliament, which will restrict negative gearing tax benefits to new builds from mid-2027.

Rent hikes were expected in most areas this year largely due to the changes putting a stranglehold on the supply of new rentals at a time of rising tenant demand.

This would come as interest rates hikes put further pressure on the rental supply by encouraging some landlords to sell.

Sydney tenants have been told to brace for another financial squeeze due to the government’s controversial decision to axe negative gearing.

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The report added that Treasury estimates in the Budget showing the negative gearing reforms would add “$2” to the average home rent were a “pipe dream” and increases over the next three months alone would be “well clear” of the forecast rise.

House rents in Manly were forecast to soar by $34 a week in the next three months, while the Eastern Suburbs-North would see a $32 weekly hike. Renters in North Sydney-Mosman face a $28 a week jump.

These increases would add about $1450-$1750 to tenants’ total rent bill for the year.

Quarterly rent rises of $20-$26 a week were forecast for Botany, Canada Bay, Warringah, Pittwater, Chatswood-Lane Cove and Ku-ring-gai. Unit rents in these regions were expected to rise by about $14-$17 a week.

According to the FoundIt report’s “Drift Model”, the gap between tenant demand and available rental supply was widening.

Some landlords were already exiting the market ahead of the expected tax reforms, and with little immediate replacement of that rental stock occurring, rents would continue to go up, FoundIt revealed.

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“Most of the markets where rents are going up the fastest are affordable markets.”

The group’s head of research Kent Lardner warned a “perfect storm” of forces will squeeze the exact people the policy was supposed to help.

“Most of the markets where rents are going up the fastest are affordable markets. There is a huge concentration of people competing for cheaper units,” Mr Lardner said.

He noted that the tax benefit previously acted as a “subsidy of sorts” that flowed back to renters, allowing landlords to hold properties during tough times without immediately raising the rent.

“Rent rises for the full year could be over $50 a week in a lot of areas,” Mr Lardner said.

Prabhat Kumar, who owns four regional properties with his wife, said they have been “backed into a corner” by exploding holding costs and the government shifting the tax goalposts.

Because their properties are grandfathered under the new rules, Mr Kumar said selling now would trigger higher capital gains taxes and permanently cost them their negative gearing buffer.

“The only option is to hold that property, and to make it sustainable, the only other option is to raise that rent,” Mr Kumar said.

Mr Lardner noted a “herd mentality” had emerged among landlords since the Budget changes were announced, with property owners realising others were increasing rents and jumping on the bandwagon.

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Rental advocate Jordan van den Lamb.

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There had been a lot of recent “chest beating” about rent hikes online, he observed.

Rental advocate and S — t Rentals Australia founder Jordan van den Lamb echoed this observation, noting that landlords on social media were openly planning to raise rents as a deliberate protest against the tax changes.