Although current Covid-19 restrictions may act to reduce demand for rentals in the shorter term, the easing of restrictions and re-opening of borders will return markets to their current generally undersupplied state.
Rental prices have jumped as much as 50% year-on-year in some areas of the Victorian capital, while renters in some areas of the city are paying significantly less than they did just 12 months ago, according to the latest realestate.com.au research, led by renter demand for lifestyle properties.
McCrae on the Mornington Peninsula sits at the top of the list as the Melbourne suburb with the strongest hike in rental house prices over the past 12 months with a whopping 41.82% increase to $585 per week, from $495 a year ago.
Next on the list are Safety Beach, Diamond Creek, and Croydon North which had 27.45%, 22.09%, and 20.88% increases respectively in rental prices for houses.
10 Melbourne suburbs with the biggest annual increase in rent for houses
And the hike in rental prices isn’t confined just to the housing market - Melbourne units have also seen an extravagant hike in prices in some areas over the past year.
Ashburton comes in the first place as the suburbs with the biggest increase in weekly rental prices for units, up a whopping 51.52% to $750 per week, from $495 per week this time last year.
Rosebud West, Aberfeldie, and Croydon North came up next on the list with impressive unit rental increases of 29.23%, 26.92%, and 25.49% respectively.
10 Melbourne suburbs with the biggest annual increase in rent for units
What has driven the hike in rental prices?
Unsurprisingly, the answer is ‘Covid-19’.
Property sale prices across the country have soared over the past year, led by strong demand and undersupply, and the trend has certainly spilled out into Australia’s rental market.
Covid-19 has created a two-speed rental sector by boosting demand for “lifestyle properties” while slashing renter demand for inner-city properties as the work-from-home movement intensifies amid worsening and lengthening lockdowns.
REA Group director of economic research Cameron Kusher explained that while, generally speaking, the Melbourne rental market has been weak, that weakness is isolated to pockets.
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“The inner-city apartment market is struggling (due to) the impact of closed borders both domestically and internationally,” he said.
“But outer suburbs have been really strong, (particularly) on the Mornington Peninsula, which talks to the fact people are looking for a lifestyle.”
I’ve also seen record low activity from investors over recent years due primarily to credit restrictions together with the subdued new home building, which has also acted to undersupply rental markets.
Meanwhile, at the same time, increased demand from prospective first home buyers pushed out of housing markets by booming home prices will only continue to exacerbate the mismatch between rental supply and demand in most capitals and continue to place upward pressure on already high rents.
But rental prices in some areas have plummeted.
But as Kusher alluded to above, surging rental prices have been seen in some areas of Melbourne, but there are some pockets where prices for both houses and units have plummeted.
The REA research shows the housing rental market has taken the biggest hit.
Canterbury and East Melbourne houses have seen the steepest falls, with typical weekly rents in both suburbs shedding about 35 per cent, or more than $400 per week, annually.
Houses in Ormond, Toorak, Princes Hill, and Brighton also lost more than 20%.
For units, Box Hill South saw the biggest decrease in weekly rents - at 31.11% - while Caulfield East, Carlton, and Melbourne (3000) all also experienced declines of more than 25%.