As an increasing number of tenants return to renting homes after the COVID-19 pandemic, property management experts say Melbourne’s letting scene is being driven by new realities.
The latest trends in the market include:
+ Tenants are increasingly requesting private, one-on-one inspections of properties available for lease.
+ The demand for rental homes in inner-city areas is directly being driven by the rate of employment recovery and growth in key industries such as hospitality.
+ Some landlords are lowering their asking rents, mostly in areas with sluggish demand and a strong inventory of available properties.
+ The decline in the city's overseas student market is continuing to affect rental demand.
+ In most areas, houses are far more in demand than apartments.
+ Professional property management is becoming increasingly critical for landlords. Property managers are coming to the fore in setting the right lease terms that will help a property investor maximise return on investment, and in providing detailed information about the rental and demand trends in key suburbs.
Nelson Alexander’s Head of Property Management Martin Sizer says the level of demand for rental properties and new leases is firmly centred on specific areas.
He says while some middle ring suburbs, such as Ivanhoe and Kew, are performing strongly and experiencing a shortage of rental properties, areas close to the city have an oversupply of rental properties. As a result, prospective tenants are spoilt for choice, with some putting pressure on landlords to lower their price expectations.
“Real estate sales across our network are bouncing back nicely, but the situation with rentals is that it is not going to bounce back as quickly,” Mr Sizer says.
“We will have to wear lower rental returns on some properties for a while – most likely for six to 12 months.
“The rental market is literally quite different from suburb to suburb. As you get closer to the city there is less demand and more properties, which is driving rents down.”
Nelson Alexander is tracking solid levels of demand for houses from tenant enquiries made to the company’s 16 offices. Higher rental prices are also being paid on house leases compared to flats and units.
The trend to house rental prices holding firm is borne out in recent data compiled by the Real Estate Institute of Victoria.
With data on historical vacancy rates going back to 2002, the REIV collects vacancy rates and rental data from its members on a monthly basis.
In September, the REIV found that the proportion of vacant properties had increased again for metropolitan Melbourne to 4.3 per cent, by contrast to 3.7 per cent in August. It fell to 1.4 per cent for regional Victoria.
The weekly median rent for houses in metro Melbourne fell to $470, just slightly below the $480 recorded in August. Meanwhile, the weekly median rent for houses increased to $370 in regional Victoria.
Melbourne CBD rental prices have fallen sharply in the year to September, according to other data.
The Domain Rent Report for the three months to September 30 shows the median unit rent in the Melbourne CBD dropping 17.4 per cent to $450 per week – the largest fall of any Melbourne suburb.
Docklands and Southbank unit rents also saw significant falls of more than 14 per cent to $490 and $480 per week respectively.
These falls highlight the drop-off in overseas students as a result of the pandemic-related lockdown. Available rental stock in the city and nearby suburbs has also been boosted by some property owners switching apartments they own from an Airbnb-style, short-term rental to a traditional, long-term rental.
Mr Sizer says Nelson Alexander letting managers are dealing with “more demanding tenants” and are increasingly working closely with them to get new leases signed and properties filled.
“With inspections, our property managers are now more conducive to arranging an inspection time that suits the tenant,” he says.
“Traditionally, we would set open for inspection times and wait for tenants to come. Now the whole process is centred on real estate agents being a lot more flexible about tenants nominating a time that suits them to inspect a property.
“This is how we are working now – and it is how we are getting the properties leased quicker.”
Mr Sizer added there were strong signs that demand for inner-city rentals was improving as Melburnians regained jobs or increased their working hours, particularly in the hospitality and arts and entertainment industries.
The Domain Rent Report revealed Melbourne’s inner area, including the CBD and suburbs such as Carlton, Fitzroy and Parkville, accounted for 64 per cent of all unit rental listings in the September quarter.
The high proportion of available rentals close to the city meant that overall rental prices for units experienced a quarterly fall of 3.6 per cent to $400 per week.
According to the report, the lack of international migration, overseas students and the reduced demand for holiday rentals all contributed to lower asking rents in the CBD.
The report found that house rents held up better than apartment rents, increasing overall by 2.3 per cent for the quarter to $440 per week.
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