What's Up With Sydney's Bullshit Rent Prices?

A massive 44 of Australia's 50 most expensive suburbs to rent a room are in Sydney. Over the past five years sydney rental prices have gone up 32 percent, which as you've noticed isn't in line with wage increases. An average week in a single Bondi Beach bedroom (the ninth most expensive spot in the country) costs $321.41. Even Surry Hills costs $320. For young people who don't work in banks, paying rent means you're almost broke all the time.

The reason for this is surprisingly simple, and you can get a sense of things just by looking around. Right now a total of 165 cranes are currently within a kilometre of the Sydney CBD. They're not pretty, but they're indicative of how much people want to live in cities, which is fuelling a building boom.

The national boom in CBD apartment buildings has been responsible for a fifth of economic growth over the past two years. The number of new apartment projects approved by local councils nationwide almost doubled since 2013 to 105,000, predominantly thanks to investment from China.

In that time, Chinese investors contributed six billion dollars to the Australian property market. Nowhere has seen the impact of this more than Sydney where house prices are now 13 times the average annual wage and rent can account for anywhere between 21 percent of your wage in Mt Druitt, to 90 percent in Darling Point.

"We've seen the complete pivot of housing from being a place where you live, as a form of shelter, to essentially housing as a wealth generator," says Peter Phipps who is the Chair of Urban and Regional Planning at Sydney University. According to him the property and development boom has been sold to us, most recently, on the notion that more homes will bring down the prices. But that simply hasn't happened. In fact, we're headed the other way.

New apartment blocks flush the market with supply, but not for people who are concerned with rental prices. As Professor Phipps points out, "A million dollar apartment doesn't help someone on a moderate income."

A recent study by the Australian Population Institute recommended Sydney and Melbourne are being redesigned in a way that won't serve the needs of its current population. Essentially this means cheaper, older, inner-city homes are being bulldozed to put up one and two-bedroom apartment buildings. This is despite the fact that our overwhelming need is for affordable family homes. As the study points out "this is because of the large number of young resident and migrant households who will be entering each city's housing market."

You already know this though. Rich people live in the cities; families, poor people and refugees live in distant suburbs. And in many ways this explains why prices in the cities are so high. People overwhelmingly want to align themselves with the rich, well-facilitated, culturally vibrant inner city areas. Fifty years ago the Australian Dream was to own a big backyard in the suburbs. CBD areas at that time were virtually empty at night, and surrounded by docks and heavy industry. Now industry has moved offshore, the former factories divided into apartments, and demand to live in the city is vastly outstripping supply, making it a self-perpetuating boom time for anyone who owns these places.

Watch our documentary on the property boom in London: Regeneration Game

"If you've got Sydney or Melbourne property you've seen a really sharp increase in your wealth in the last three or four years." Says Professor Phipps. "People who are in the market are doing really well, people who are not in the market—their wealth hasn't changed much. So incomes are going up quite slowly, property assets are appreciating quite quickly, so the issue is really one of inequality in the city."

For us with no hope of entering the housing market, the idea that it's all a big bubble is appealing. There's been a lot of discussion over whether the market is headed for collapse, but it's hard to get a straight answer. Some say we're absolutely in a bubble, others say we're not. Either way real estate prices have never fallen over here the way they have in the US or parts of Europe. If we're in a bubble expect a correction, but nothing significant enough to put houses in line with average wages.

"We have to admit that a large amount of people are going to be lifetime renters and we have to change the rental system to allow for that," says Phipps, adding, "Get angry about it. Politicians need to hear the message."

The long-term effects aren't just you struggling to pay rent, there's also a quieter, slower effect on how cities shape lives. The social impacts of tearing apart poorer communities would be one. Public housing is being torn down as land prices go up, while music and nightclub districts are slowly turning residential, killing nightlife.

As the Secretary Manager of the iconic Marrickville Bowling Club, Kim Townsend, put it, "Sydney is experiencing some dark days. Rest assured that even if you can't see or understand it, the cultural side of our city is dying and taking some great people to the grave." The bowling club is one of dozens of venues that have come under pressure due to residential complaints.

This is something Tyson Koh of Keep Sydney Open is rallying against. As he said, "Travelling to other cities in Europe, the US and South America, you see bars, galleries and restaurants on the street vibing until well-after midnight, with apartments directly on top. I'm interested in what it is about the Australian psyche that makes this such an offensive scenario. I think the people who appreciate that lifestyle are priced out of those areas by the people who complain."

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