Sydney risks becoming “the city with no grandchildren” as soaring housing costs force 30- to 40-year-olds out, a senior government official warns.
Between 2016 and 2021, Sydney lost twice as many people aged 30 to 40 as it gained, with 35,000 newcomers compared to 70,000 departures, according to a new New South Wales (NSW) Productivity Commission paper (pdf).
Soaring housing costs priced tens of thousands of young families out of Sydney for homes in regional NSW and beyond.
Productivity Commissioner Peter Achterstraat said without action, Sydney could be known as “the city with no grandchildren.”
“Many young families are leaving Sydney because they can’t afford to buy a home. Or they can only afford one in the outer suburbs with a long commute,” he said.
Last year, Sheree Myers moved her family from Sydney’s Lower North Shore to Newcastle, a two hour drive away.
“We now live in Warners Bay in Newcastle, and we’re in the best financial position we’ve ever been in. We left for lifestyle,” she said.
“To live close to both a business hub and the beach, in an area where we could afford to buy property.”
Meanwhile, Renae Smith left Sydney for France after paying exorbitant rent in the city’s Inner West.
“We were paying $5,000 a month rent for a three-bedroom house in Newtown. Add on the cost of living, and we were struggling,” she said.
“An opportunity came up for us to move to France for a year. We’ve saved thousands of dollars on rent and food as we shop at the local markets.”
She added flying back to Sydney every three months was cheaper than renting in the capital city.
Amidst the mass departure of talent, Mr. Achterstraat stressed the need for more housing density to improve both affordability and economic viability.
He said “building up” in inner Sydney would improve productivity and wages, reduce carbon emissions, and protect land and green spaces.
The paper shows that big, dense cities make workers and businesses more productive by offering learning opportunities and other social benefits like access to good schools, open spaces, goods, services, and more time with family and friends.
“New apartments and townhouses in inner suburbs will let young families live near their parents and their children’s grandparents. The social benefits of abundant well-located homes are major,” Mr. Achterstraat said.
He mentioned the benefits could have been achieved earlier if 45,000 dense homes were built in the city between 2017 and 2022.
“This could have seen prices and rents five-and-a-half per cent lower—$35 a week for the median apartment or a saving of $1,800 a year for renters,” he said.
At the same time, he suggested it was time to reconsider heritage restrictions on housing near the CBD and their impact on keeping housing prices high.
He pointed to the increase in Heritage Conservation Areas (HCAs) limiting new housing, noting that over half of residential land in key suburbs like North Sydney, Newtown, Edgecliff, and Redfern falls under HCAs.
“This reduces the amount of land available for new housing near the city, near train stations, and close to jobs,” he said.
“We can preserve the gems of Sydney’s heritage without inadvertently freezing young people out.”
High-Interest Rates Discourage Young Potential Homeowners
At the same time, high interest rates have been found to discourage potential young homeowners in Sydney.The cash rate currently sits at 4.35 percent after being paused by the Reserve Bank of Australia in December.
Interest rates have exacerbated the affordability crisis in Pittwater, Sydney, where the median mortgage costs 103 percent of the median income, requiring a median-income family to save for 28.5 years for a deposit.
A cost-of-living analysis (pdf) confirmed rising interest rates and rents were hitting hard, with nearly one-fifth of people failing to pay rent or mortgage.
Joanna Quilty, CEO of the NSW Council of Social Services, mentioned that COVID-19, high inflation, and multiple disasters have significantly affected those already struggling.
“Interest rate rises aimed at curbing inflation and surging rental prices over the last 12 months are a big part of the story, substantially reducing housing affordability and the ability to pay for other essentials,” she said.
Sydney’s Housing Affordability Crisis Predates COVID-19
However, Nick Garvan, Housing Unit Research Manager at e61, said the issue of young families being priced out of Sydney existed before COVID-19, with the city losing about 0.5 percent of its population annually for the past 20 years.“We did see a lot of people leaving Syndey for other regional areas around NSW, particularly on the coast, during COVID-19, but these trends have actually been going on for quite a bit longer, most of the last decade,” he told ABC Drive Illawarra.
He said over the years, people in their 30s were mainly moving away from Sydney to places like Wollongong and other areas like Newcastle and the Gold Coast.
“The areas in Sydney from which people are leaving fastest are the areas where housing prices have grown the most in recent times,” he added.
“Which really does point to housing affordability being a driver of these patterns.”
He said it was common for 30- to 40-year-olds to contemplate relocating, as this was the age when people usually started families, requiring bigger homes for their children.
“These are the people most likely to move out of the city if housing affordability prevents them from upsizing.”
