Melbourne rental prices hit record as market shrugs off property downturn, Domain data shows

Tenants hoping the property downturn would spur rents to drop across Melbourne have so far been left disappointed, with new data showing weekly asking prices for houses have continued to climb to record levels while unit rents have flattened.

As the rental market enters its busiest fortnight of the year, the latest Domain Rental Report has found the citywide median weekly house rent increased 2.3 per cent over the December quarter to reach a record high of $440. Units remained stable over the quarter at $410 per week.

The inner south region recorded the biggest annual jump, with asking prices for houses surging from $600 to $650 per week. Meanwhile, the region’s median rent for units increased $20 per week to $420, translating to an extra $1040 a year.

Median weekly asking rents for houses in Melbourne

 RegionDecember 2018       December 2017       QoQ      YoY       
Inner East$590$5601.7%5.4%
Inner South$650$6003.2%8.3%
North East$400$4000%0%
North West$400$3900%2.6%
Outer East$430$4300%0%
South East$400$4000%0%
Mornington Peninsula$410$4002.5%2.5%

Median weekly asking rents for units in Melbourne

 RegionDecember 2018       December 2017       QoQ      YoY       
Inner$450$4500% 0%
Inner East$410$4000% 2.5%
Inner South$420$400 0%5%
North East$370$350 2.8%5.7%
North West$365$3501.4%4.3%
Outer East$370$3600%2.8%
South East$345$3400%1.5%
Mornington Peninsula$330$3250%1.5%
Source: Domain Rental Report, December Quarter 2018

The city’s overall pace of growth in the rental market had slowed compared to the previous year, Domain senior research analyst Nicola Powell observed. Improving gross rental yields suggested rental prices were holding firmer than property values, she said.

“This improvement may not be enough to entice investor activity, given that the prospects of short-term capital gains are minimal,” she said.

The latest figures come amid historically low vacancy rates, and as economic forecasters predict further property price falls across Melbourne in 2019. Earlier this week, Moody’s Analytics tipped prices in the Victorian capital would slip by 6 per cent this year.

The city’s rental market has proven much more competitive than prospective tenant Andy Campbell expected. Mr Campbell, a British national with Australian citizenship, arrived in the city last week and has already inspected 15 places.

“It’s a feeding frenzy,” he said as he left the inspection of a one-bedroom apartment on Toorak Road in South Yarra on Wednesday.

Renter Andy Campbell leaves an inspection in South Yarra. Photo: Stephen McKenzie

The 47-year-old environmental consultant is yet to find a permanent job, and has offered one landlord three months’ rent in advance in a bid to secure an inner-city apartment.

“My budget is ideally under $450 a week,” Mr Campbell said. “And it’s tougher than I expected.”

The second half of January is usually the busiest time of year at open for inspections, according to Rob Gillies of Hocking Stuart’s South Yarra office. “Everyone who has to move before school or university is looking,” Mr Gillies said.

And the principles of supply and demand can push up the price of new rentals on the market, he said. “It’s a fortunate market to be in for investors and property managers because it’s always an area that people are looking to move into.”

Demand for the large pipeline of new apartments that hit the rental market in recent years has largely been soaked up by Melbourne’s unprecedented population growth.

“However, with interstate and overseas migration slowing from their historical highs, we could see demand soften over the longer term,” Dr Powell said.

Agents showing an open home.
January and February are the busiest time of year in the rental market. Photo: Stephen McKenzie

The report showed no regions had recorded an overall drop in weekly asking prices, but prices were stagnant for houses in the north east, outer east and south east over the past year.

Mary Sayers, the Victorian Council of Social Service’s acting chief executive, warned that rentals were becoming harder to find for people on low incomes.

“Unfortunately the private rental market shows no signs of becoming more fair and affordable any time soon,” Ms Sayers said. “And while rents continue to increase, wages remain stagnant, adding more pressure, particularly for people on low incomes.”

Median weekly house rents across Australia

Capital cityMedian rentsQoQ YoY 

Median weekly unit rents across Australia 

Capital cityMedian rentsQoQ YoY 
Source: Domain Rental Report, December Quarter 2018

Source: https://www.domain.com.au/news/its-a-feeding-frenzy-melbourne-rental-market-shrugs-off-property-downturn-793683/