It wasn't that Crowley didn't try to live in a cheaper area. Before Surry Hills, she rented a one-bedroom apartment in Parramatta for $400 a week, but the bus ride to the train station, and then the train to her job in Sydney's CBD meant a 90-minute commute each way.

As for her apartment in Mary Street in Surry Hills, it is still on the market, with the rent not only advertised down to $820 a week but it also is being offered as an office to attract commercial tenants.

She is not alone. Interstate refugees such as Crowley who are baling on Sydney, along with a rush of new apartments for rent and falling prices that have prompted some would-be sellers to look for tenants instead, have all combined to produce a rare breed of Sydney market, one where renters can call the shots.

Some 2.8 per cent of all rental properties in Australia's largest city are vacant, and the way things are going that could go as high as 4 per cent, a level not seen since the post-Olympics property lull of 2004, SQM Research's Louis Christopher says.

In comparison, Melbourne's vacancy rate is just 1.6 per cent, roughly where Sydney was just under year ago. In Brisbane, the vacancy rate is 3 per cent, which means plenty to choose from for those looking north.

"There's a big standard of living gain to move north [or south] right now," Mr Christopher says.

The latest population and migration data shows that while NSW had the biggest increase in net overseas migration, it also suffered the biggest loss of population through interstate migration.


In contrast, Victoria and Queensland had the biggest gain in interstate migration.

Ray White property manager Rachelle Smart, who looks after the Ascot area in Brisbane, is getting inquiries from interstate migrants, particularly from Sydney. One of her clients, Judy Fraser, and her family left Paddington in Sydney for Ascot a month ago to get a "proper family home" without the expensive price tag.

"In Paddington, we lived in a small terrace and we have small children. In Ascot, we get a proper family home, we pay less rent and we have a pool and grass and a porch," Fraser says.

In Paddington they were paying $2000 a week for a four-bedroom terrace. In Ascot, they are paying $1400 for a five-bedroom house with a double garage. Both Fraser and her husband had no problems finding jobs.

While Sydney is well known for its pockets where new apartments rule supreme, it is not just these areas where the vacancies are. There also are rental properties short of tenants in established and popular suburbs such as Darling Point, Point Piper and Bondi, SQM Research data shows.

ANZ Research data shows nearly 90,000 dwellings are under construction in NSW including 66,000 apartments. Anna Kucera

Avalon and Terry Hills on the northern beaches have the highest vacancy at a staggering 8.2 to 8.3 per cent, followed by Kellyville, Marsden Park, Rouse Hill and Box Hill at 6.9 to 7.1 per cent in the north-west. These areas are undergoing bumper housing development because of the arrival of the Sydney Metro.


These are followed by the blue-chip suburbs of Lindfield at 6.9 per cent, Double Bay at 5.5 per cent, Edgecliff at 5.1 per cent, and Bondi at 4.9 per cent.

Data from renting portal Rent.com.au shows that across these suburbs, vacant homes are staying empty for longer.

In July, vacant listings in Randwick were on the market for 30 days, 114 per cent longer than last year. Manly's empty homes were vacant for 19 days or 27 per cent longer and Parramatta dwellings were empty for 26 days or 30 per cent longer.

In this type of market, landlords should be pragmatic, says SQM Research's Louis Christopher. "Landlords should consider all offers before brushing them off." Peter Braig

Why are blue-chip suburbs vacant?

Rising vacancy in blue-chip suburbs is caused by two phenomena, cheaper new apartment stock in growth areas just outside these suburbs and older stock, which did not sell in time to catch rising prices.

For their part, tenants, facing a lack of wage growth, are now forgoing the expensive Bondis and Manlys and shopping around for the cheapest rents among new apartment towers, Richardson & Wrench Mosman/Neutral Bay's Robert Simeon says.

"They are going to the so-called "railway station suburbs", which are under a lot of stress due to a high amount of stock ... and developers [and agents] are throwing in shopping vouchers at Woolworths to lure tenants," he says.


"The cost of living is going up, that's your smoking gun. People are moving to cheaper areas."

The latest HILDA (Household, Income and Labour Dynamics in Australia) report confirms housing stress after the property bubble of the past couple of years is at an all-time high,

Construction executive Georgia Burnett recently ditched a Woollahra two-bedroom "art deco" apartment for a new split-level loft in Zetland, one of Sydney's "apartment cities", saving $60 a week in rent.

The 26-year-old and her partner were paying $700 a week for the Woollahra unit, which did not have parking, airconditioning or a balcony, the complete opposite of Zetland.

"We tried to get an apartment with parking in Woollahra and it was triple our price range. The two-storey loft was a no-brainer," she says.

Competing for disillusioned tenants such as Burnett are not only new stock by new investor/landlords but desperate apartment developers who are turning their residual stock into rentals.

In the trendy inner-west, tenants are also getting choosy, reports Harris Partners' Peter O'Malley.

He has dropped the price on an apartment he is leasing in Leichhardt from $750 a week to $630 a week. There are some tenants inspecting the home, but they have turned their noses up at its exorbitant rent.


"It's quite scary like that," O'Malley says.

"The completion of new apartments around town means the rental pool is swelling."

The same is happening in Neutral Bay, Lane Cove and St Leonards, leasing agent and broker N1 Holdings says. The group has a large clientele of new migrants from Asia.

"These areas are terrible," head of property management Wendy Zhang says.

She laments the vacancy of a waterfront, older-style apartment in Neutral Bay, which has been on the market for six weeks without a single inspection. Its landlord wants $700 a week.

In St Leonards, another new apartment purchased by an foreign investor stays vacant even though its weekly rent has dropped $100 to $620 a week. The investor paid $1 million for the apartment at the peak of the boom.

"It is now one of many vacant apartments," Zhang says. "And rents will keep dropping until such a point when people are happy to pay again."

One family who illustrates both sides of the story moved from Alexandria in Sydney to Avoca Beach on the NSW Central Coast to get cheaper housing for their growing brood but couldn't rent out their Sydney apartment. Their two-level apartment was advertised at $750 a week, but no one inspected. Now it is at $700 a week.


"There is so much competition, we will have to keep dropping the price until we get a tenant, but we don't want to go past $680 a week," they told AFR Weekend.

Rent decline is the outcome

It seems the many new apartments will keep rents down for some time. ANZ Research data shows nearly 90,000 dwellings are under construction in NSW including 66,000 apartments.

Consequently, in the year to July Sydney was the only city where rents went backwards, down 0.4 per cent, the weakest rental performance on record since 2006, Corelogic says. House rents are down 0.6 per cent, while apartment rents have fallen 0.2 per cent.

Rental conditions will be worsened by the fact that tenants can now break a lease by paying a four-week penalty, BresicWhitney's Shannan Whitney says.

"In the past you couldn't leave until a tenant was found but now people will break the lease, pay the penalty and still be in a better position after finding a cheaper unit," he says.

What now?

In this type of market, landlords should be pragmatic, says SQM Research's Louis Christopher. "Landlords should consider all offers before brushing them off."

Rent.com.au chief executive Greg Bader agrees there is plenty of scope for tenants to negotiate lower rents.

"It's a big change in pace for Sydney, it's gone from being the hottest capital city market in Australia for several years to losing its top gong to Hobart, of all places."