Sydney unit rents surge, maybe time for a mortgage?

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Apartment rents for Sydney units rose from $500 to $520 per week this March quarter, new data from Domain Group's March Quarter Rental Report shows. It is now almost at par with the weekly rental for houses at $530 a week.

Predictions of oversupply have hounded the Sydney apartment scene, yet Doman Group chief economist Andrew Wilson now regard these theories as "highly questionable," even if some lenders are already placing restrictions on some high-density areas. In fact, Wilson reiterates that Sydney remains to be "chronically undersupplied," which means that rental rates will continue to increase.

Rental rates in inner west apartments proximal to the city increased by 1.9 per cent over the quarter. However, the strongest rental growth was the northern beaches, with a 2.6 per cent increase to $595 per week. This shows that renters are willing to pay higher rates for the beachside lifestyle, especially those belonging to the 22 to 30 age group who grew up near beaches.

According to University of NSW City Futures Research Director Bill Randolph, the figures could be a result of investors increasing their asking rent as the broader property market slows down.

"Property prices in the frothy apartment market probably are falling back and landlords may well be adjusting their total returns balance between rents and lower capital growth," he said.

However, there are some areas where apartment rents are actually slipping, such as in Baulkham Hills and The Hills Shire, where rental rates dropped one per cent this quarter. This provides renters an opportunity to save money.

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