Worst Sydney suburbs to be tenant exposed

2 days ago 8

Long Iines at a rental inspection in Surry Hills. Picture: Sam Ruttyn

NSW’s renters are at breaking point — and the government has been accused of misplaced priorities with its expansion of first-home buyer schemes that critics say could worsen the plight of some tenants.

A shock report has revealed four in five renting households across the state are now in “rental stress”, spending an unsustainable amount of their monthly income to keep a roof over their heads.

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

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

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

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CEO of the Tenant’s Union Leo Patterson Ross said first-home buyer support could make it harder for tenants to leave the rental market if prices get pushed up. Picture: Richard Dobson

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Digital Finance Analytics director Martin North said the stressed families were often delaying bills or falling deeper into debt to get by.

“Stress shows households have cash flow pressure, so they cut back on spending, and hunker down, leading to lower economic activity,” Mr North said.

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

The scheme, which helps eligible first-home buyers purchase properties with 5 per cent deposits, seemed helpful on the surface but the reality was more problematic, Mr Patterson Ross said.

He explained that there was a chance scheme would drive up prices by encouraging more buyers to get into the market with higher debt.

Tenant Jess Gallagher said finding a rental in Sydney was tough. Picture: Rohan Kelly

This would make it harder for the next round of hopeful tenants wanting to become buyers.

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

“The scheme does encourage people to take on more debt and that’s the root problem with the housing market in general.

“People have to borrow more and more to get into the market and that just keeps pushing up the prices.”

Mr Patterson Ross added the scheme supported well-paid tenants get into the market as repayments on the greater loan sizes required higher incomes to service.

These types of tenants exiting the rental market wouldn’t make a meaningful change to rental demand, he said.

“A lot of the properties first-home buyers purchase were owned by investors,” he said.

“If a renter buys a property that was a rental, they are out the rental market but so is that former rental, so the supply and demand dynamic doesn’t change.”

REA Group economist Eleanor Creagh noted that rises in rents have been slowing this year but households remain “stretched” after “significant” rises in recent years”.

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

“Without a bigger supply response, it’s not likely that we’ll see rents moving backwards,” she said.

Mr North explained that rental stress levels were still rising because families were shelling out more on other costs.

He said unaffordable rents were a consequence of high migration at a time of lacklustre building activity.

Martin North at Digital Finance Analytics said rent stress levels were higher than mortgage stress levels. Picture: Hollie Adams

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

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

Jess Gallagher was recently hunting for a rental and said competition was fierce. She currently rents a sharehouse in Surry Hills with three other flatmates and explained her rent was “substantial”.

“People get their offers in so quickly that sometimes you wouldn’t even get to do the viewings because they already agreed to have someone else moved in,” she said.

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

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

“It does feel pretty unattainable in the current climate.”