SYDNEY is in the grip of a rental drought that is pushing up rents by as much as 5.5 per cent and inundating open inspections with scores of desperate tenants.
The number of vacant properties fell to a five-year low this month, and real estate experts warn that the drought will continue until the property market picks up.
They blame the squeeze on first-time buyers deciding to stay out of the market in the hope that prices will fall further, and a lack of new investment properties.
Figures from the Real Estate Institute of NSW show the vacancy rate fell to 2.1 per cent in Sydney, down 0.3 percentage points on February last year and 1.3 on February 2004. The middle ring of Sydney was hit hardest this month, with vacancy rates falling from 2.3 per cent in January to 1.7 per cent.
"There is not much to rent at all," said the institute's president, Cristine Castle. "Instead of having 10 or 15 properties, you have got two or three." Any figure below 2 per cent should set off "alarm bells", she said.
The situation is in stark contrast to the renters market of a few years ago when landlords used sweeteners of rent-free weeks and free appliances to lure tenants.
The NSW manager of Century 21, David Colman, said rentals were traditionally scarce in late summer, but this year was worse than usual.
His opposite number at RUN Property, Michael Conolly, said one open inspection in Woollahra this week had attracted more than 30 viewers. Units and houses in the inner west and North Shore attracted about three applications each, and other properties in the eastern suburbs between 8 and 10.
Between one and two applications per property was the norm, Mr Conolly said.
The squeeze on rentals has already driven prices up. Figures from the institute show rents rose most in inner Sydney, where the median price of three-bedroom properties jumped last year from $450 a week to $475.
Across Sydney the median rents of two-bedroom properties rose by $10 during the year. Mr Conolly said rentals in Crows Nest, Bondi Junction, Newtown and Coogee were the most popular and some parts of the inner-west were demanding $20 to $40 a week more for properties than they had in 2005.
"On some occasions we see people fighting for the property. They rush to get back and put a deposit down," he said.
Mr Colman blamed the problem on a lack of first-time buyers and said the situation would not improve until investors returned.
Ms Castle agreed, saying: "Whenever we sell an investment property it's not an investor buying it but a home owner, so there are less rentals." She warned that rents would continue to increase and if people wanted to avoid soaring prices "they should think about buying".
One prospective renter, Todd Sly, is already feeling the pressure. The 22-year-old has been looking for a two-bedroom apartment in the eastern suburbs for a month and has seen 15 so far.
Initially he expected to pay about $300 a week for a unit in Bondi Junction, Coogee or Centennial Park, but was now looking at between $350 and $400.
Mr Sly, who is lucky to be able to look midweek, said he shared most open inspections with between eight and 10 other hopefuls, and the competition was fierce. "If you see an older couple there, you think you're probably not in the running because they have probably both got jobs and are more stable as tenants in the eyes of the property agents."
Mr Sly has resorted to asking agents to alert him before properties come onto the market.
