Leasing activity and Renter enquiries bounce back

5 min read

Property managers are tracking a surge in demand for Melbourne rental properties as leasing activity and Renter enquiries come back strongly.

Martin Sizer, Nelson Alexander’s Head of Property Management, says leasing activity was very strong in late January and February and is expected to build through 2022.

“Our property managers are seeing people who may have moved back to live with Mum and Dad but are now deciding that they are ready to get back into a share house,” he says.

“People are back looking at property – and I am actually quite bullish about the outlook for rental demand and for improved returns for property investors.”

In addition to young people and tertiary students looking for accommodation, other Renter categories – such as families and executives and workers transferring from interstate – are also displaying stepped-up interest in signing new leases.

While the start of the year is traditionally the peak season for leasing activity in Melbourne, there appears to have been a surge in Renter confidence in 2022 after two years of uncertainty driven by the pandemic lockdowns.

Mr Sizer says prior to Covid the all-time record for Nelson Alexander’s Fitzroy office staff renting out individual properties (in Fitzroy, Fitzroy North, Clifton Hill and Abbotsford) was 84 properties rented in a month.

By contrast, he says that in one week at the start of this year, the Fitzroy office rented out 33 rental units and houses – a concrete sign the market was bouncing back to robust health.

The pick-up in demand from Renters is borne out by statistical analysis of Melbourne’s market by several property analyst groups.

According to the Domain Group’s national rental market report for the three months to December last year, Melbourne house rents jumped by $15 (3.5 per cent) over the quarter to a new record high of $445 a week.

This is the first quarterly increase since September 2020.

Despite the rise, Melbourne remains Australia's most affordable capital city to rent a house, posting the weakest annual growth of all the capital cities, at 1.1 per cent – which analysts view as another factor encouraging prospective Renters to enter into new lease agreements.

Domain’s Senior Research Analyst Dr Nicola Powell says unit rents in Melbourne increased $5 over the quarter to $375 a week, but they remain $55 below the March 2020 high.

“This is the first time in almost five years unit rents have recorded two consecutive quarters of growth,” she notes.

“House rents have recouped all the Covid price dip to hit a new record high, and this has resulted in a record price gap between houses and units.

“Melbourne’s rental market has edged into recovery with asking rents once again on the rise.”

The report reveals that unlike other capital cities Melbourne has battled extensive lockdowns, driving many Melburnians to become Covid escapees. In addition, international border closures have hampered overseas migration and foreign student numbers, which hit rental demand in 2020 and 2021.

“Influencing the recovery in rents has been a combination of weaker investment activity and some investors selling, the resumption of short-term travel, a shift in Renters to more affordable inner-city rentals, and greater household formation,” Dr Powell says.

“Once international borders fully reopen, rental demand will spiral, particularly in Melbourne which has historically welcomed more overseas migrants. Australia is amid a skills shortage, a targeted migration approach from the government will be one lever to plug this gap. The return of overseas migrants, international students, and particularly skilled highly paid migrants will add to rental demand.”

The Federal Government reopened Australia’s borders on February 21, but it will take some months for the arrivals of international students to improve.

“There is reason to be optimistic, “Mr Sizer says. “ We are seeing more properties coming on board, and the reopening of our international borders will stimulate demand from overseas students.

“Among professional property managers, there is an air of anticipation that we are getting back to normal. The people who would normally lease properties at this time of year are thinking that it is perfectly safe to start leasing.”

At the height of the pandemic, renters were often able to negotiate cheaper rents, particularly in inner Melbourne, as apartments stayed empty and on the market for months.

But analyst CoreLogic says rents in the inner city have jumped by 12.4 per cent in the past year, with growth particularly strong between November 2021 and February this year.

Core Logic Head of Research Tim Lawless says rents in Docklands and the Melbourne CBD were up 6.6 per cent and by 6.2 per cent in Southbank in the last quarter of 2021.

However, rents in these areas are still well down on pre-Covid rents.

Mr Lawless says rental affordability after the Covid whack is now a driving factor in the appeal of precincts like the CBD and Docklands, with higher density living now back on the agenda amid strong vaccination rates.

“You’d have to say these trends would continue if not gather some pace,” he adds.

According to Mr Sizer, the pandemic and lockdowns have forced big changes in the way people rent properties.

He says private inspections, particularly during business working hours, have become far more important to thousands of prospective Renters.

“The ability to show properties privately, at times that suit the Renters, has become critical,” he says. “With flexible working and so many people working from home, private inspections are a trend that’s here to stay – and it heightens the importance of having an on-call property manager looking after your investment property.”

If you would like to discuss your property management needs in detail, please contact any Nelson Alexander office.

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