Whenever negative gearing comes up, so does the argument that winding it back pushes rents higher. There’s historical precedent for it, and there’s a growing view that the upcoming reforms will produce the same result.
How Tight are Sydney’s Vacancy Rates?
Sydney’s vacancy rate has been tight for years, regularly sitting below the 2.5%–3% range generally considered a balanced market. It hit a record low of 0.9% in late 2023. It has since eased to around 1.7%, according to SQM Research, but that’s still well short of balanced, and the market remains firmly in the landlord’s favour.
How the Reforms Could Change Investor Behaviour
The national rental market has been in crisis since the pandemic. Now, changes to investor behaviour following the budget reforms, combined with high migration and limited new supply, are expected to push vacancy rates lower and rents higher.
Population Growth vs Housing Supply
Sydney’s population keeps climbing. The metro area reached roughly 5,185,000 in 2024, up about 1.25% on the year before, according to the Australian Bureau of Statistics. Projections point to more than a million additional people across the region by 2034, with over 650,000 of them in Sydney.
So will the rental market face greater pressure? Absolutely, especially if supply doesn’t keep up which it isn’t considering NSW dwelling approvals fell 19% in June.
Investors are Leaving the Market
Property analytics group FoundIt has recorded a drop in new landlords entering the market. Around 2,160 rental bedrooms were added across Sydney in May, far fewer than the 3,744 lost through sales. FoundIt notes the trend began before the reforms were announced, but expects it to accelerate in the coming months.
Will Renters Become First-Home Buyers?
With less investor competition, could more renters finally buy? FoundIt head of research Kent Lardner doesn’t think so. He argues not enough renters can afford the deposit, pointing to weak wage growth and rising rents that make saving harder.
What This Means for You
Sydney’s market still has plenty of opportunity, but choosing the right property type and location matters more than ever. The market is highly fragmented: affluent suburbs, where owners hold substantial equity in their properties, are expected to outperform cheaper ones, unless those cheaper suburbs have major infrastructure on the way.
Sydney’s south-western corridor is a live example, already showing dramatic growth thanks to the Western Sydney Airport and the accompanying Metro line.
If you’ve spotted an opportunity, or you’re simply wondering whether your investment still stacks up, talk to the finance experts at It’s Simple today. We can help you finance your next investment or run a FREE home loan health check to make sure your loan is still competitive.