26 Seddon St, Ivanhoe VIC 307926 Seddon St, Ivanhoe VIC 3079
Rental prices have boomed across Melbourne over the last 2+ years. The graph below shows overall asking rents are up 40%% for units, while Melbourne’s Inner City has seen an increase of 60%. When combined with remarkably low vacancy rates, the current supply-demand balance in Melbourne is scary.
If we cast our minds back even just a few years, it wasn’t long ago that many predicted high vacancy rates for years to come. So many cafes, bars, and restaurants were also brought to their knees during lockdowns. Even the vibrancy of our great city was put in question!! Imagine that!
So what has driven the big jump in rental prices?
Landlords were always going to pass on higher holding costs and tax imposts when they could. But there are definitely more variables in play.
Overseas migration has been massive. The graph below also shows that over 2,000 migrants settled in our city each week last year. Actual numbers were 67% higher than Government projections one year prior. Seriously.
With our population growing faster than ever, you would hope that new building supply is ramping up. The sad news? It’s not.
The third graph shows how dire the situation is. Multi-Dwelling Planning activity has fallen off a cliff. Last year, just 16,025 new dwellings were approved across all Melbourne Council Areas.
Vacancy rates are a metric used to measure the amount of vacant properties in a particular suburb, city, state, or country. Essentially, the figure or ‘rate’ showcases how many properties listed for rent are still vacant.
When these figures are high, it means that landlords are struggling to find tenants, and vice versa for a lower number. In February 2024, Melbourne’s official rate was a staggering 1% (Source: SQM Research). To put this into perspective, this figure is lower than any other time in the past 20 years, with 1.4 being the previous low in April 2018.
In basic terms, 99 out of every 100 listings are being filled. Although this is generally beneficial for landlords, many renters are getting left in the dark. If you’ve turned on the news recently, you might have seen footage of huge queues lying up for rental inspections, or you may have heard first-hand anecdotes from people you know.
Let’s move right along from the previous point. Due to low vacancy rates, high interest rates, and many other factors, the rental market has become more competitive than ever. As a result, rental prices have climbed at a remarkable level.
As you can see in the graph at the top of this article, average rent prices jumped from $380 to $610 (per week) in the Melbourne Council area between Jan 22 to May 2024. Although prices did dip a little during the peak of the pandemic, these substantial increases are definitely nothing to poke a stick at.
Today, even compact apartments in the CBD with barely any living space are being listed for rental prices that are higher ever. Adding on to this, population growth is outpacing planning and development, even with the government publicly noting the need for more affordable housing as a priority.
Imagine there’s a highly sought-after restaurant with only ten tables. One evening, a large group of 40 people makes a reservation for dinner. Here, the restaurant experiences a supply-demand imbalance: there are more diners wanting to be seated (demand) than there are available tables (supply).
To mitigate the issue, the restaurant might try to offer staggered seating or recommend alternative dining options, but these options might not fully satisfy the demand. This situation is a little bit like the Melbourne housing market.
As more and more people move to Melbourne from regional towns, other cities, or other countries, the demand for housing only grows, and grows, and grows. This is one of the reasons why we’re seeing huge lines of people showing up to the same rental inspections. The same can be said for the current Australian job market, where some reports have highlighted that even entry level roles are receiving hundreds of applicants.
In November 2023, Domain released an article detailing that the number of foreign buyers in the new housing market had reached a five-year high across Australia. As they noted, “every state registered more foreign buyers for established homes, with the majority in Victoria (5 per cent).” (Source: Domain)
The growth is partly attributed to the relative stability of the Australian property market, as well as attractive conditions for international investors, such as the strength of the Australian dollar and ongoing demand for high-quality residential properties.
According to another article from Realestate.com.au, the majority of investments came from Chinese nationals, followed by Hong Kong, India, Vietnam, and Taiwan.
Need professional advice and assistance with real estate investing in Melbourne? Reach out to Property Analytics today!
The systemic Supply-Demand pressures that have led to our current rental crisis will invariably impact the sales market across the city.
More than 70% of the Permanent Migration Program is skilled based. We’re talking Medicos, Engineers, Professionals, etc. After renting, these new Melbournians will have the desire and ability to purchase in coming years.
Expect a lot more news and debate about population growth and housing supply–and for good reason.
While Melbourne’s property market undergoes a series of ebbs and flows, one thing remains the same–you can find real value from a partnership with an experienced buyer’s advocate.
Buyer’s advocates, also known as buyer’s agents, act on your behalf to find and secure properties that match your needs and represent tangible growth moving forward. In a market with high demand and rising prices, it’s fair to say that professional assistance is more valuable than ever.
They have access to a network of properties, insider market knowledge, and negotiation skills that can make a substantial difference in securing a property. Feel free to go through our dozens of Client Case Studies to understand how we’ve helped buyers over the last 15 years.
Given the high influx of overseas buyers and a growing population, competition for properties is fierce. In this sense, buyer’s advocates can give you a real competitive edge. This can include everything from offering expert data-driven advice on existing properties to evaluating upcoming developments and more.
The process of buying a home in Melbourne is increasingly complex. Buyer’s advocates streamline this process, handling the legwork and allowing buyers to focus on their everyday lives.
In a market where properties are being snapped up quickly, negotiation can be key. Buyer’s advocates bring expertise to the table to help you secure properties at fair prices, even in an ultra competitive market.
Some of the best hidden gems never make it to the popular apps and websites. Instead, they are sold off-market without the need for a public listing at all. At Property Analytics, we use our strong network and connections to give you direct access to these opportunities.
Whether you’re an experienced investor or new to the world of real estate, you want a licensed Buyer’s Advocate who provides credible information and advice.
At Property Analytics, we are data-driven in everything we do – all clients receive proprietary market research so that they understand exactly why we recommend each property and advocate for each area as viable investment opportunities.
Simply put, our dedicated staff can help you get ahead through well thought out, well planned, and smart property investments. If you need a real estate development expert in Melbourne or a feasibility study report on a Melbourne development, feel free to get in touch as well!
03 9497 5429
