In 2023, Melbourne’s rental market is experiencing a surge in demand, particularly in certain suburbs, leading to increased rental yields. This prompts the key question, “What suburb in Melbourne has the highest rental demand?” This article dives into these high-demand suburbs, exploring their rental market dynamics to answer this crucial query.
We will examine factors contributing to this trend and identify the best suburbs for property investment in Melbourne, focusing on the rental yield and overall market conditions. Insights from sources like Domain’s Rent Report will guide our understanding of the current state and future prospects of Melbourne’s rental market.
Melbourne’s Rental Market Overview: High Demand and Rising Rents
Melbourne’s rental market in 2023 showcases an intense demand for rentals, accompanied by low vacancy rates and soaring rents. The rebound in rental demand since the pandemic is especially pronounced in central Melbourne.
“For example, according to recent data, the median asking rent for a unit in Melbourne’s CBD jumped by 46.7% to $550 a week within just a year.”
Sydney Morning Herald
This trend extends beyond the CBD, with suburbs such as West Melbourne, Carlton, and Southbank experiencing steep rent increases, reflecting a city-wide pattern of rising rental costs.
This environment presents challenges for tenants due to the competition for available properties and opportunities for landlords due to the rise in rental income.
Suburbs with the Highest Rental Demand and Yield
In 2023, the central suburbs of Melbourne, including the CBD, West Melbourne, Carlton, and Southbank, are the epicentres of rental demand and yield. These areas are attracting a mix of local and international residents, drawn by their proximity to the city centre and amenities. As for the suburbs that are expected to see significant growth in the coming year, you can explore insights on What Melbourne suburbs will boom in 2024?
The shift in preference towards inner-city living has increased the demand for apartments and townhouses in these areas. Consequently, these suburbs are emerging as the best areas for property investment in Melbourne, offering significant rental yields and strong investment returns in a competitive rental market.
Melbourne CBD:
The central business district (CBD) of Melbourne is a primary attraction for renters due to its vibrant urban lifestyle, proximity to employment hubs, and abundant amenities.
The median asking rent here soared by 46.7% in a year, a clear indicator of high demand. This surge is driven by the return of both local and international residents post-pandemic, seeking the convenience and excitement of city living.
Check out more properties in Melbourne VIC 3000.
West Melbourne:
West Melbourne is favored for its blend of urban and residential spaces, offering a quieter environment while still being close to the CBD.
The area’s diverse housing options, including modern apartments and heritage homes, appeal to a wide range of renters. The significant rise in rent here reflects the suburb’s growing popularity and its appeal to a diverse demographic.
Check out more properties in West Melbourne VIC 3003.
Carlton:
Known for its cultural richness and proximity to universities, Carlton is a hotspot for students and professionals. The suburb’s rental demand is fuelled by its educational institutions, vibrant dining scene, and accessible public transport.
The substantial increase in rental prices in Carlton, as noted by Domain, is a testament to its continuous appeal, especially among younger demographics. For those interested in exploring more options, there are various rental properties in Melbourne that cater to different preferences and lifestyles.
Check out more properties in Carlton VIC 3053.
Southbank:
Southbank attracts renters with its scenic riverfront, cultural attractions, and high-rise apartment living. The suburb’s proximity to the CBD and entertainment options make it a preferred choice for those seeking a dynamic urban lifestyle.
The notable rise in rental prices in Southbank indicates a strong demand for luxury living and convenience.
Check out more properties in Southbank VIC 3006.
Key Statistics
| Suburb | Median Rent Increase | Median Asking Rent | Notable Features |
|---|---|---|---|
| Melbourne CBD | 46.7% in a year | $550 per week | Central location, urban lifestyle |
| West Melbourne | 34.2% | Range: $432 – $550 a week | Quiet, close to CBD, diverse homes |
| Carlton | 30.8% | Range: $432 – $550 a week | Cultural richness, near universities |
| Southbank | 29.4% | Range: $432 – $550 a week | Riverfront, high-rise apartments |
These suburbs stand out in Melbourne’s rental market due to their unique mix of lifestyle offerings, accessibility, and urban amenities, leading to their high rental demand and yield in 2023.
Economic Factors Influencing Rental Demand
Melbourne’s rental market dynamics are significantly influenced by economic trends. Factors like job growth and wage increases are pivotal in driving rent prices. In 2023, Melbourne’s robust job market and population growth, including a notable increase in net overseas migration, have spiked the demand for rental properties.
This surge, coupled with limited housing availability, has led to a rental crisis, marked by historically low vacancy rates and substantial rent increases. These economic conditions underscore the high demand in the rental market, making it challenging for tenants to find affordable accommodation and creating lucrative opportunities for property investors.
Future Outlook: Trends and Predictions
Looking towards 2024, CoreLogic highlights an expected slowdown in rent growth, a trend backed by recent statistics showing that rent values have risen for 35 consecutive months, but the pace of this growth has eased over the past four months.
This change is particularly notable in regional Australia, where rent value growth has been slowing since April of the previous year. The reasons for this slowdown include expected reductions in the cash rate, which could stimulate investment and first-home buyer activity, thereby increasing rental supply and dampening rent growth.
Additionally, the softening of income growth is likely to impact housing preferences, potentially leading to a resurgence in share houses as renting households adjust to slower income increases.
However, despite this anticipated slowdown in rent growth, rental affordability remains a significant concern.
CoreLogic’s data indicates that the share of income required to service new rents is at its highest since June 2014, with rent values increasing by 29.3% since August 2020. This equates to a rise in median weekly rents of $134.
Renters, who typically have lower incomes, may find themselves reaching the limit of affordable rent increases, leading to potential shifts in housing preferences and migration to more affordable areas. To get insights into the quality of life in different suburbs, including rental affordability, you can learn more about What is the happiest suburb in Melbourne?
To address these challenges, housing reforms are being proposed. These include increasing the supply of well-located homes and improving the quality of rental properties.
The construction of more social and affordable housing is also seen as a key strategy to protect lower-income households from the extreme fluctuations in rental values experienced in recent years.
In summary, while Melbourne’s rental market is expected to see a slowdown in rent growth, challenges related to affordability and the need for housing reforms will persist. These trends underscore the importance for renters and investors to stay informed and adapt to the evolving rental landscape.
Suggested reading: Further Reading: To complement what you’ve learned here, take a look at our detailed article on the best suburbs to live in Melbourne for additional information and suburb profiles.
FAQs on “What Suburb in Melbourne Has the Highest Rental Demand?”
What is the most sought-after suburb in Melbourne?
According to Domain, Berwick, located in Melbourne’s south-east, emerged as the most sought-after suburb for houses. This suburb attracted a remarkable 41,860 highly engaged buyers over the 12 months leading up to the end of May 2023.
Where is the highest rent in Melbourne?
Outside of Sydney, Melbourne’s bayside suburb of Brighton holds the record for the highest median weekly rent. As reported by Domain, Brighton’s median weekly rent stands at an impressive $1,343, making it the priciest capital city suburb in Melbourne.
What suburbs will experience significant growth in 2023?
In New South Wales (NSW), the suburbs of Kings Langley and Manly are expected to see substantial growth. According to CoreLogic, Kings Langley and Manly have witnessed price increases of 13.1% and 12.1% respectively.
Additionally, Alexandria is also among the top five suburbs for strong growth in house prices, with a 12.1% rise in the first half of 2023.
Which Melbourne suburbs are shrinking despite a decade-long boom in population?
Despite Greater Melbourne experiencing a population increase of almost 10% between 2016 and 2021, around one in five suburbs saw a population decline. This data, sourced from the Australian Bureau of Statistics, indicates a trend where certain suburbs are bucking the overall growth trend in the region.
