Surging demand and dwindling rental supply have fuelled a jump of more than 22 per cent in median rents in some inner-city Melbourne suburbs in the past 12 months, and more increases are expected as vacancy rates tighten, data from CoreLogic shows.
Apartments in inner Melbourne notched up the biggest rise in median weekly rents during the year, with Docklands soaring by 22.2 per cent. Rents in Southbank rose 21.6 per cent, West Melbourne 20.5 per cent and Melbourne city 17.7 per cent.
In Sydney, median rents for Pyrmont apartments jumped by 16.9 per cent, Ultimo 14.6 per cent and Hay-market 14.3 per cent during the same period.
Tim Lawless said many inner-city rental apartment markets had recovered from their pandemic lows.
‘‘These inner-city precincts are bouncing back strongly now off the back of rising demand against rapidly tightening vacancy rates,’’ he said.
‘‘Demand for inner-city rental accommodation is now being driven by a spillover from the lower density sectors of the rental market, where high rents and rental affordability are pushing more renters to consider an inner-city higher-density option.
‘‘This renewed level of demand is being amplified by recently opened borders with overseas students and visitors and permanent migrants adding to rental demand. Additionally, as inner-city precincts become more vibrant as workers return to offices and COVID-19 related restrictions are eased, inner-city areas are likely to become more popular.’’
The inner-city precincts of Melbourne and Sydney were among the hardest hit during the pandemic because of the border closures and migration away from the cities.
In the most extreme examples, rents in some inner Melbourne suburbs dropped by more than 20 per cent from peak to trough, Mr Lawless said.
Strong demand for houses in the more affluent suburbs and coastal locations also sparked a 20.1 per cent jump in rents in Tootgarook on the Mornington Peninsula over the year.
House rents climbed by more than 19 per cent in Bardon and Ascot in inner Brisbane and by 13.9 per cent in Coogee in Sydney’s eastern suburbs.
Although some of Sydney’s more expensive suburbs have posted a drop in value in the three months ended March, rents in suburbs such as Randwick climbed by 7.9 per cent – the biggest quarterly gain for houses across the capital cities.
Clovelly was up 6.6 per cent, Somerton in Adelaide’s south rose 7.4 per cent and houses in Yeerongpilly in Brisbane’s south had a similar rise.
‘‘Available rental supply remains well below average in most areas of Australia and rental demand isn’t likely to ease, with higher overseas migration and more prospective buyers being kept in the rental market due to affordability constraints,’’ Mr Lawless said.
‘‘Available rental stock is around record lows across every capital city and major regional housing market. Rents have risen substantially more than incomes in most areas and renters are having to dedicate more of their incomes to rental payments, which has implications for savings and consumption.
‘‘With the government relying on the private sector to deliver rental housing, it seems that the long period of declining investment activity between 2015 and 2021 is, at least in part, the reason why rental stock has tightened so substantially.’’
Vacancy rates have fallen to a record low of 1 per cent nationwide in March, data from Domain shows.
‘‘We’re likely to see rents move higher in the short term as more first home buyers are kicked into the rental market longer because of their inability to afford to purchase,’’ said Nicola Powell, Domain’s chief of research and economics.
‘‘Vacancy rates are tightening even before the return of international migrants. When they do, we’re likely to see rents rise further.’’