SYDNEY’S rents have fallen for the first time in three years. But they are likely to start rising again soon, analysts say, driven higher by increased interest rates and an employment market that appears to be stabilising.Across the city, rents fell slightly in the three months to the end of last month. The average, however, hides a significant divergence in rents across different parts of Sydney.The biggest falls have been in the relatively well-heeled east and lower north shore suburbs, according to figures from Australian Property Monitors.The median rent asked by landlords for houses in the city and eastern suburbs dropped from $780 a week to $700 in the September quarter. For houses in the lower north shore, the median rent fell from $800 to $750.Matthew Bell, the chief economist at Australian Property Monitors, owned by Fairfax, publisher of the Herald, said rents had either stayed flat or fallen partly because landlords were not feeling the pressure of interest rates to keep lifting them.”And people are not sure about their employment situation, which puts a bit of a ceiling on what they will accept if their landlord asks for a rent increase,” Mr Bell said.But falling rents, the figures show, are largely limited to the lower north and eastern suburbs.For houses in the inner west, the median rent has remained about $550 for more than a year. In the western suburbs, the median rent rose from $350 to $360.Apartments tell a slightly different story, with small falls in asking prices across much of the city. In the city and eastern suburbs, the median asking price for an apartment has dropped from a peak of $500 to $475.”The story about rent this year – at least for new tenancies – has been that they have levelled right out,” the policy officer at the Tenants Union of NSW, Chris Martin, said.”Landlords have not been as aggressive in their rent increases,” he said. ”I think they have accepted that some tenants may have lost jobs or hours at work.”An economist at ANZ, Alex Joiner, said rental vacancy rates also eased as increased grants for first-home buyers helped renters leave to purchase their own houses.But he said vacancy rates were set to tighten again – and rents to rise – as interest rates went up, and the lack of new housing developments started to bite.”That’s been the really big difference this time around,” Dr Joiner said. ”When rates are falling, we usually see a surge in new building.”That had not happened this year, with a lack of credit restricting new apartment developments in particular.However, Mr Martin said landlords would not be able to begin increasing rents again just because rates were going up. One reason was tenants could find ways to limit rent increases, such as through staying in share houses or the family home – the Packed to the Rafters option.Also, depictions of a housing shortage were overblown. ”We have 830,000 unoccupied dwellings in this country,” he said.
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