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Key points
- Rents in Melbourne have soared to a record $550 a week for a typical house.
- The median unit rent is also at a record level, of $520 a week.
- Experts say it is unlikely there will be relief for tenants any time soon, given the tight vacancy rate.
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Melbourne’s rents have soared to record levels and there’s little relief in sight after the median unit jumped by $95 a week in the past year.
The asking rent for a typical unit hit $520 a week in the September quarter, up 22.4 per cent in a year, the latest Domain Rent Report released on Thursday showed.
House rents made their steepest annual jump, up 17 per cent to $550 a week.
“House and unit rents have risen for eight quarters in a row – that’s the longest stretch we’ve seen of persistent rental growth,” Domain chief of research and economics Dr Nicola Powell said.
It went beyond a reversal from the depths of the coronavirus pandemic, when interstate and international arrivals were locked out of the city and rents plummeted.
Returning migration was now leaning into the market, adding pressure to the number of available houses and units, pushing rents higher, she said.
The shortage of rental properties meant the vacancy rate was just 0.9 per cent in September, close to the record low of 0.8 per cent recorded in March.
“It’s hard to imagine that rents are not going to continue to rise when the vacancy rates are so low,” Powell said.
About 70,000 extra rentals were needed immediately to balance out the market across Australia, Domain data showed.
Despite the Victorian government’s plan to build 800,000 homes over a decade, it would take years for the new supply to arrive and alleviate rising rents.
Jeremy Anderson and Erin McKellar went above the asking rent to secure their apartment in Elwood.Credit: Joe Armao
For tenants such as Jeremy Anderson, 28, and his partner Erin McKellar, 26, a tighter market has meant a bigger struggle to find an available, affordable rental close to the city.
The couple ended up offering an extra $30 a week to secure a two-bedroom apartment in Elwood about six months ago. They pay $480 a week for their top-floor property.
“I was looking for somewhere in Prahran and South Yarra for between $450 and $550 a week,” Anderson said.
“At one of the inspections, there were 35 people there … and the apartment was tiny and dark – and I went to a couple of similar ones.
“I called [Erin] and said, ‘This is going to be a lot harder than I thought’ … I really started to get concerned. So we started looking further out of the city, in the leafy suburbs, and we moved out further to Elwood.”
When the couple were looking for rentals, it was illegal for agents and landlords to ask people to bid extra to get a rental, but would-be tenants could offer extra money.
Since then, the state government has banned agents and landlords from accepting an offer of extra rent.
Elwood is in Melbourne’s inner region, where unit rents rose 23.9 per cent over the year, or $110 a week, to a median $570, data showed.
There were steep rises for units in the inner east (22.6 per cent), north-west (18.9 per cent) and north-east (18.4 per cent).
AMP chief economist Dr Shane Oliver said as rents grew, tenants would probably look for more housemates to share costs, seek cheaper rentals further out of the city or move in with family to save money. Former Reserve Bank governor Philip Lowe previously said higher rents would lead people to economise on housing.
“It’s like they say, the solution to high prices is high prices,” Oliver said. “Once rents go up, people will look at ways they can spend less on it.”
This would take some pressure off the market as more rentals became available, he said.
“If you’re a young person and your rent goes up by 20 per cent, that’s an extra $100 or more you’ve got to find per week, so you’re going to look for ways to cover that cost,” he said.
Jellis Craig’s Adam Cusinato, who is managing properties across Stonnington and Boroondara, said there was an average of 20 applications per property for more affordable rentals.
Tenants are still offering more than the listing price to be considered.
“For one- to two-bedroom apartments, the interest has been overwhelming,” Cusinato said. “People are applying without even inspecting them.”
Tenants Victoria director of community engagement Farah Farouque said rent inflation and cost-of-living pressures were a huge challenge for Victorian tenants.
“We know some people who are employed and rent their homes are forced to resort to food banks to get by,” she said. “If you have to rely on Centrelink income support, the financial pressure to find and maintain housing is that much harder.
“It’s good to see that [Victorian] Premier Jacinta Allan is prioritising housing. This is a challenge that is not going away overnight.”
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