Melbourne, one of Australia’s most popular cities, has seen a significant increase in population in recent years. With this influx of people, the demand for rental properties has also risen. This has led to a question on the minds of many: is there a shortage of rental properties in Melbourne?
According to recent reports, the vacancy rate for rental properties in Melbourne has been decreasing steadily over the past few years. So, yes, it looks like there is indeed a shortage of rental properties in Melbourne.
In some areas, the vacancy rate is as low as 1%. This has made it increasingly difficult for renters to find suitable properties, especially in popular areas such as the city centre.
Let’s explore why this is happening and what to expect in the coming months.
The Current State of the Melbourne Rental Market
As of November 2023, the rental market in Melbourne is facing a shortage of available rentals, resulting in increased competition for properties.
Melbourne’s rental listings have dropped to a ten-year low, while median rents have reached record highs. This shortage of rental properties in Melbourne has made it difficult for renters to secure suitable places to live, indicative of a tight rental market.
The rental crisis in Melbourne is expected to worsen in 2023, with the inner city apartment market experiencing significant price increases. The city centre, in particular, is experiencing high demand for rental properties, leading to low vacancy rates and rising rents.
This trend is expected to continue in the coming months, making it challenging for renters to find affordable housing in the city.
“Close to 30% of all households in Australia rent their home in the private rental market, a share that has risen over the past few decades”
The current vacancy rate in Melbourne’s rental market is relatively low at around 1.8%, with many properties being snapped up within days of being listed. This high demand for rental properties has resulted in increased competition among renters, making it difficult for those on a tight budget to secure a suitable place to live.
Overall, the Melbourne rental market is characterised by high demand, low vacancy rates, and rising rents, which are expected to continue in the coming months. Renters are advised to act quickly when they find a suitable property and be prepared to pay a premium price to secure their desired home.
Need help securing your next home? Check out Soho’s tips on how to find a rental in a hot market.
Contributing Factors to the Shortage
The shortage of rental properties in Melbourne is a complex issue that has multiple contributing factors. The following are some of the factors that have played a crucial role in creating the current shortage.
Low Rental Vacancy Rate
The rental vacancy rate in Melbourne has dropped significantly in the past year, reaching a record low of 1.41% in July. This is the largest annual drop of any capital city in Australia. The low vacancy rate has made it difficult for renters to find suitable properties, contributing to the current shortage.
Chronic Undersupply
Melbourne’s ongoing demand pressures and chronic undersupply of rental properties have kept rental growth well above long-term averages. There has been a lack of new rental properties added to the market since the pandemic began, exacerbating the shortage.
Rising Rents
“Despite a predicted decrease in median house prices in 2023, Melbourne’s rental market is expected to reach record-high levels, with rents rising at the fastest pace ever recorded.“
The increasing population growth and a record low number of rental listings in September have contributed to the rising demand for rentals and subsequent price increases.
Maintenance and Rental Bidding
Landlords may also be hesitant to rent out their properties due to the cost of maintenance and repairs. Additionally, rental bidding has become prevalent in some areas, making it difficult for tenants to secure a property at a reasonable price.
COVID-19 and Lockdowns
The COVID-19 pandemic has also played a role in the shortage of rental properties in Melbourne. The lockdowns and restrictions have made it difficult for landlords to show their properties to potential tenants, leading to a decrease in new listings.
The pandemic has also caused financial hardship for some landlords, resulting in a decrease in available rental properties.
Interest Rates and House Prices
Interest rates and house prices can also impact the rental market. A rise in interest rates can make it more expensive for landlords to borrow money to purchase new properties, limiting the supply of rental properties.
Additionally, a rise in house prices can make it more difficult for renters to afford to buy a property, leading to increased demand for rental properties.
Overall, the shortage of rental properties in Melbourne is a complex issue that has multiple contributing factors. The above factors have played a crucial role in creating the current shortage, and addressing them will be pivotal in improving the rental market in Melbourne.
Impact on Residents and Pricing Trends
The rental property shortage in Melbourne is significantly affecting residents and the housing market. Rising rental prices, particularly for units, have increased by 4.2% over the past year, putting financial pressure on tenants, especially low-income earners and families who also need to consider school locations and rental history.
The scarcity of rentals has heightened competition, with property managers receiving numerous applications per property, leading to higher demand for rental assistance and Centrelink payments.
This situation is impacting home ownership affordability, as saving for a deposit becomes harder, and driving up demand for social housing.
In some suburbs like Beaconsfield, finding rental properties is extremely challenging, prompting more share house arrangements. Overall, this shortage is causing widespread challenges in accessing affordable housing in Melbourne.
Suggested reading: We’ve got more for you! Expand your real estate knowledge by learning if rent increasing in Melbourne.
FAQs on ‘Is There a Shortage of Rental Properties in Melbourne?’
What is the Rental Vacancy Rate in Melbourne as of October 2023?
According to recent data, the rental vacancy rate in Melbourne as of October 2023 is 1.2%. This is a significant decrease from the number of vacancies recorded in October 2022, which were 8,058.
Why is Renting So Hard in Melbourne?
Renting in Melbourne has become increasingly challenging due to various factors. One major contributor is the growing number of short-stay rentals, which have added pressure to the rental market.
Between April 2022 and April 2023, short-term rental listings surged by 39%. Consequently, the rental vacancy rate is extremely tight at just 0.9%, making it harder for long-term renters to find suitable accommodation.
What is the Rental Vacancy Rate in Regional Victoria?
In regional Victoria, the rental market dynamics are slightly different. The rental vacancy rate tightened from 3.3% to 2.2% in the 12 months leading up to July of the current year.
During the same timeframe, however, rates in regional Victoria actually softened, moving from 1.9% to 2.3%, as per the statistics from the Real Estate Institute of Victoria (REIV).
Do Tenants Pay Rates in Victoria?
In Victoria, tenants are not responsible for government rates or land taxes; these are the landlord’s obligations. If a tenant happens to pay any of these rates or taxes, the landlord is required to reimburse them, ensuring that tenants are not financially burdened by these additional expenses.
