The headline says record rents. What I’m watching in the east says something the national figures haven’t caught up to yet.
The agent’s open-for-inspection board goes up on a Saturday, and only a handful of prospective tenants come. The lifts tell you more than the indices do. In parts of the Eastern Suburbs right now they are busy — tenants moving in, tenants moving out, a constant turnover. A two-bedroom unit in Bondi Junction was asked at $1,250 a week and sat vacant for nearly five weeks. Eventually the landlord met the market at a much lower rent. None of that shows up in the number most people quote.
Then there are the one-bedrooms. I see a lot of them leased at somewhere between $850 and $1,000 a week — comfortable for a couple on two incomes, defensible on the day the lease is signed. And lately I have watched a wave of those tenancies end. When you ask the tenants where they are moving to, the answer is often the same: nowhere together. They have separated, and neither one can carry $900 or $1,000 a week for a one-bedroom on their own. That is the tip of the iceberg. At these rents there is no slack left in the household, and a single change in circumstance — a break-up, a lost job, another movement in the cash rate the Reserve Bank now holds at 4.10% — quietly squeezes people out.
The national number, meanwhile, is a record. Cotality’s rental review, released on 9 July, put the median dwelling rent across the country at $705 a week — the highest on record — with Sydney the dearest capital at $841. Australian renters are now handing over close to a third of gross household income, also a record. On those figures alone you would conclude the pressure is still building and the only way is up.
But read the same release more carefully and something has shifted. Cotality’s head of research, Gerard Burg, said the market was likely to soften, and raised the question directly — whether renters have simply reached the limit of what they can pay. Rents are holding near record levels not because demand is surging but because listings are scarce: around 17% below their five-year average, with vacancy stuck at 1.6% for two quarters. A price held up by short supply is not the same as a price the tenant can comfortably meet.
The market has run out of room at the top first
I have watched enough cycles to know the difference between a market that is rising and one that has run out of room. This one has run out of room at the top first.
Consider what it now costs. Domain’s analysis puts the income needed to rent a typical Sydney house, without tipping into rental stress, at about $135,200. In Vaucluse the figure is $511,333. Cotality’s longer series shows the share of income going to rent climbing from 26.2% in September 2020 to 33.1% today, after roughly $202 a week was added to the typical rent in five years. There is a point at which the asking price and the household budget stop meeting, and in the most expensive corner of the country that point arrives earliest.
The evidence is no longer just anecdotal, and it is sharpest in the inner ring. The Real Estate Institute of New South Wales has inner Sydney — the band within about ten kilometres of the CBD, which takes in the inner east — climbing from 1.9% vacancy in April to 2.2% in May and 2.7% in June, against 2.0% a year earlier. That is the highest reading in its recent series, within reach of the 3% the industry treats as a balanced market, and well clear of the 1.9% recorded for Sydney as a whole. Suburbtrends tells the same story from another angle, putting the wider Eastern Suburbs at 3.0% in May — 2.1% in the south, 3.7% in the north. And SQM Research logged Sydney’s first monthly rise in vacancies in twelve months over April, naming the cause plainly — not oversupply, but affordability, as tenants at the margin begin to share, downsize or move further out. SQM treats Sydney as the country’s leading indicator. Within Sydney, the inner east leads.
The asking rents themselves have turned. On Cotality’s figures, Bondi Beach asking rents came off a June 2024 peak of around $1,250 a week to somewhere near $1,000 to $1,100. And the yield has always told the truth here: a Bondi house on Cotality’s numbers rents for about $1,850 a week against a median value near $5.4 million — a gross return of 1.8%. Rents in the east have never been about income. They have been about holding an asset while it appreciates.
The gap between the advertised rent and the paid one
Which brings me back to that Bondi Junction unit. The distance between what is advertised and what is achieved is now measurable. The ANU’s Ben Phillips has pointed out that advertised rents rose roughly 49% over five years, while the Australian Bureau of Statistics’ broader measure — which captures around one in three rental properties — rose about 19%, less than inflation over the same period. Asking rents and paid rents have parted company. When a landlord holds out at $1,250 and settles weeks later for less, that gap is the whole story in miniature.
And more supply is on the way
Now weigh what is coming. The negative gearing change in the May budget abolishes the concession on established investment properties bought after budget night, from July 2027 — but it deliberately leaves new builds and build-to-rent developments untouched. The NSW budget went further in the same direction, making its 50% land tax discount for build-to-rent indefinite. On top of that sit the federal build-to-rent concessions administered by the ATO: a reduced 15% withholding rate for managed investment trusts and a faster capital works deduction.
Read together, those settings do something particular. They discourage an investor from buying an established unit to let, and at the same time they reward a developer for holding a whole building and renting it. So stock that cannot sell into a slow market does not disappear. It is converted — held and tipped into the rental pool instead, arriving precisely as the tenant at the top of that pool runs out of income. In the Bondi Junction pipeline alone I can count close to a thousand build-to-rent dwellings, with more flowing on along the Oxford Street corridor — and this is not only the Junction. It is happening across the board. My own view, and I will frame it plainly as that: more to let, and fewer able to pay the top of the range, is not a combination that holds record rents in place.
I am not forecasting a collapse in rents, and I would distrust anyone who did. What I tell the owners I speak with is narrower and, I think, more useful: the advertised figure on the portal is no longer the figure you will bank. If you are holding an investment unit in the east on the assumption that the rent sets itself, test that assumption before the lease comes up — not after five weeks of vacancy. The ceiling is real, even if the national headline hasn’t named it yet. Out here, we’ve already met it.
