After a rocky couple of years for Melbourne real estate, the local rental market has begun 2023 with a burst of activity. Owners who held investment properties throughout 2020 and 2021 experienced the rollercoaster firsthand as asking rents in the Victorian capital dropped considerably and renters became harder to find.
This year, however, is shaping up to be a very different scene for rental providers as vacancies across the city tighten, demand once again outweighs supply, and asking rents are back – if not beyond – pre-pandemic levels.
“Everything’s moving very quickly. If things are priced well and priced at market value we’re getting multiple people turning up to open for inspections and several applications made,” said Kay & Burton Director of Property Management, Cath Stubbings.
According to property market data, 2023’s start-of-year vacancy numbers look starkly different to a year ago. SQM Research recorded a 3.3% vacancy rate in January 2022, but a year later that more than halved, dropping to just 1.2% – a clear sign to investment owners that the toughest times of the Covid years are now behind us.
Ms Stubbings said this new-look market has brought with it a fresh dynamic to the rental landscape.
“It’s quite unique, but we’re seeing a lot of off-market deals. There’s enough demand out there that we’re not always getting properties listed online. We’ve got so many renters who are already looking, who are saying they’ve missed out multiple times. So, when our new business teams bring something in that’s suitable, or a property comes up from our rent roll, we’re able to slot those renters straight in to the right home,” she said, adding that between 20 per cent and 30 per cent of rentals are currently being filled off market at Kay & Burton.
The hottest property on the Melbourne rental market today are homes priced between $500 to $1300 a week. Demand is also building for the higher-end rentals in the $2000-plus category.
Perhaps the hardest hit corner of the Melbourne rental market during Covid were the inner city and city-fringe suburbs, especially the apartment market which fell temporarily out of favour throughout the capital’s prolonged lockdown periods.
But what a difference a year has made. PropTrack, the data arm of realestate.com.au‘s REA Group, unveiled figures in February showing that the suburb of Melbourne had experienced the largest jump in unit rents over 12 months. According to the numbers, Melbourne’s current median rental value skyrocketed over the year by 42 per cent to $540 a week.
“We’re seeing a huge increase in people returning to those inner city suburbs. Neighbourhoods like Southbank, Docklands, South Yarra; they all took a massive hit during Covid, suffering through very high vacancies, and as a result, rents went down considerably. There’s now incredible demand returning to those areas,” Ms Stubbings said.
“Most of these suburbs are back to pre-Covid levels, and in many cases with a premium on top. What this means is we’re able to find good-quality renters, and choice is key to a successful tenancy.”
Melbourne’s rental scene has clearly shifted into being an owner’s market with plenty of renters seeking properties. However, Ms Stubbings said a superior property management team does so much more than simply filling vacancies, but rather builds long-lasting relationships.
“We’ve got a brilliant leasing team who work really hard to help both our owners and renters because we consider our renters to be our clients too. Our philosophy is if we look after our renters, and provide them with a great level of service also, they will in turn look after our owners’ properties because of that relationship. It’s a win-win for everyone,” she said.