Rents Surge in Sydney’s Eastern Suburbs by Alan Weiss (35 years of real estate experience)
Sydney’s rental market is booming, and nowhere is this more evident than in the Eastern Suburbs. Overall, Sydney’s median rent hit $770 per week in early 2024—an annual increase of around 9%. The Eastern Suburbs now dominate the list of most expensive rental markets in the country. For example, Vaucluse commands a median rent of roughly $2,588 per week, with Bellevue Hill and Rose Bay also exceeding $2,200 per week.
Such eye-watering rents reflect extremely tight conditions. Vacancy rates in many Eastern Suburb pockets are near record lows—around 0.5%—indicating almost no available rentals. This limited supply is keeping rents high and creating a strained affordability situation for tenants.
The story goes beyond just surging demand—it’s also about the shrinking pool of investor-owned properties. The Eastern Suburbs rental boom mirrors broader national trends, where policy changes and market pressures have influenced landlords’ willingness to stay in the market.
Private Investors Provide the Bulk of Rental Housing
One critical point is often overlooked: private investors provide the vast majority of Australia’s rental housing. Around 31% of Australian households rent, yet less than 3% live in public or social housing. That means private investors supply more than 90% of rental dwellings across the country.
With such heavy reliance on private landlords, any change in investor behaviour—whether they buy, hold, or sell—has significant consequences for rental supply. If fewer investors stay in the market, the number of available rentals shrinks. With so little public housing stock to fall back on, tenants are almost entirely dependent on what private landlords provide.
Indeed, over 2.2 million Australians—roughly 20% of taxpayers—own at least one investment property. Collectively, these investors house millions of people. But in recent years, signs have emerged that fewer investors are entering the market, and many are exiting altogether.
Rental Investment Stock Is Flattening (2018–2023)
The growth of investor-owned rental properties has stagnated over the past five years. After increasing steadily through the early 2010s, the number of individual landlords plateaued around 2.2 million by 2017–18. In 2019–20, the count of landlords even declined slightly.
While a modest uptick occurred in 2020–21 during the low-interest-rate period, industry observers note a trend of declining new investor participation since then. A decade ago, 60,000 to 70,000 people became new landlords each year; that flow has now dropped significantly.
During the COVID-era property boom, many investors sold properties to capitalise on gains. By late 2021, roughly 25% of homes sold nationally had been investment properties. Many of those homes were purchased by owner-occupiers, permanently removing them from the rental pool.
Negative Gearing: Incentive Under Scrutiny
Negative gearing—the ability to deduct rental losses against other income—has long been a key incentive for investors. While no changes have been formally announced, the government has explored options for reform, prompting concern among landlords.
Roughly 54% of property investors were negatively geared in 2019–20. For many, this structure makes long-term investment viable, especially when rental returns are low and holding costs are high. Removing or limiting this policy could prompt further sell-offs and discourage new investment.
Even speculation about changes has historically dampened investor activity. Maintaining confidence in consistent policy is essential to stabilising rental supply.
New Superannuation Tax: Another Factor on the Horizon
From July 2025, a new 15% tax on unrealised capital gains will apply to individuals with superannuation balances over $3 million. For investors with property inside self-managed super funds, this could result in tax bills on paper gains for unsold assets.
This policy has raised concerns among wealthier investors, who may now reconsider property ownership through super. Even a modest shift in this segment could reduce available rental stock if properties are sold to avoid future liabilities.
Why Some Investors Are Selling: Loans, Rates and Red Tape
Several practical factors are driving investors to sell:
Financing Costs: Interest rates have risen substantially. Many investors who initially took out interest-only loans are now being transitioned to principal-and-interest, increasing monthly repayments by 30–40%.
NSW Tenancy Laws: Stricter tenancy rules now limit how and when landlords can end leases, increase rents, or refuse pets. New compliance obligations also raise costs. For some landlords, managing a rental property has become too difficult or time-consuming.
Maintenance Costs: Insurance premiums, council rates, and repair costs have risen sharply, further squeezing returns. Investors with older properties face particularly high upgrade costs to meet current standards.
All of this adds up. For many landlords, the numbers no longer work. Selling becomes the logical exit.
Outlook: Navigating the Road Ahead
From our vantage point in the Eastern Suburbs, we see a rental market under pressure. Rents are up, supply is down, and investor confidence is wavering.
To stabilise rental supply and avoid worsening the crisis, we need a balanced approach: maintain incentives like negative gearing, ease unnecessary regulatory burdens, and give private investors confidence to stay in the market.
At the end of the day, private landlords provide homes for millions of Australians. Without them, the rental market simply cannot function.
The Eastern Suburbs will always be a high-demand location. But to keep it liveable, we must ensure that investment remains viable. Supporting investors today means supporting renters tomorrow.
