Melbourne’s rental market has undergone a significant recalibration, and as the dust settles, a clearer picture is emerging.
By the end of 2024, national rents had risen 4.8 per cent—down from the 8.1 per cent surge recorded the year prior—marking the smallest annual increase since March 2021, according to CoreLogic’s December Rental Review. While this remains elevated relative to the pre-COVID-19 decade average of 2 per cent, it suggests the rental market has reached a more stable footing—offering confidence to both rental providers and renters.
In Melbourne, rents grew by 4.1 per cent over the year, while gross rental yields rose by 29 basis points to 3.71 per cent. The city’s vacancy rate sat at 1.8 per cent, below the perceived ‘healthy’ level of 3 per cent. Kay & Burton’s vacancy rate sat below the city’s average, fluctuating between 1-1.5 per cent throughout 2024. This has resulted in fewer days on market and better rental returns for our clients.
Senior New Business Manager
“We’re seeing rental prices begin to stabilise as market churn slows and tenancy durations extend. Many renters are opting for longer-term leases, providing rental providers with increased security,” said Megan Taylor, Senior New Business Manager at Kay & Burton.
A report from Homes Victoria highlights this trend, revealing the average tenancy duration rose to 24 months in 2024, up from 21 months the previous year—indicating reduced mobility across the market. Meanwhile, the number of active rental bonds declined from 677,492 in September 2023 to 652,766 a year later, reflecting the shift toward longer-term tenancies and a smaller rental pool.
“Many renters we meet are moving out of necessity—often due to the sale of their home or a change in personal circumstances. Stability is now a key priority, with 24-month leases becoming increasingly common,” Ms Taylor said.
Investor activity remains a key factor shaping the market. The combination of sustained investment property sales, land-tax pressures, and evolving minimum standards legislation is discouraging some traditional investors from entering Melbourne’s rental market. If this trend continues, a reduced supply of rental properties could place upward pressure on rental values, particularly in sought-after areas.
“I expect to see fewer new investment properties coming to market this year leading to sustained demand,” Ms Taylor said. “Typically, rental stock is replenished through existing investor properties and sales campaigns that haven’t met vendor expectations. With a positive outlook for the sales market, this transference of stock will likely slow. And when supply tightens while demand persists, rental values inevitably rise.”
Despite these structural shifts, demand remains strong at the premium end of the market.
“The investment market in Melbourne is primed for capital growth,” Ms Taylor said. “We’re seeing particularly high demand for properties in the $2000 to $2500 per week range, particularly for four- to five-bedroom homes with multiple living zones, pools, and garages. Supply remains tight, meaning properties that previously achieved sub-$2000 per week rents, may now enter this higher bracket.”
Looking ahead, investor confidence is expected to slowly return to the Melbourne market over the next 12 months. The city’s capital growth has been subdued compared to other states, and as property values stabilise, the city presents a compelling opportunity for investors seeking long-term value. With rental price growth expected to continue, Melbourne is becoming increasingly attractive for investors looking to capitalise on rising yields and a strengthening market.
*Data sourced from realestate.com.au sold listings and Kay & Burton CRM
