Melbourne tenants are looking at moving into share houses and back in with their parents or risking becoming trapped in the rental crisis as rising costs erode their ability to save and buy a home.
Melbourne tenants are being trapped in the city’s rental crisis as a landlord exodus outpaces investors buying into the market and overseas migration drives up demand.
Experts now expect soaring numbers of people will be forced into share house arrangements or to move back in with their parents in the year ahead.
PropTrack’s December Rental Report shows the city finished 2023 with a near record-low vacancy rate and the second-fastest rising cost of leasing a home in the country, behind only Perth.
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Over the past 12 months, Melbourne tenants across houses and units were hit with an average $85 a week (18.3 per cent) increase in rental payments and a two day fall in the time they had to lock in a lease with the average listing now tenanted in 18 days.
They also faced competition from an additional four tenants per listing on average, as the number of homes available to lease fell 11.8 per cent to a 1.2 per cent vacancy rate that is 30 per cent below the 10-year average.
PropTrack economic research director Cameron Kusher said while some tenants were buying their way out of the rental crisis, with many snapping up apartments, others were having to abandon saving for a deposit to keep paying for a roof over their head.
The cost of renting has surged in Melbourne, and a growing number of tenants are no longer able to pursue the dream of buying a home as a result.
“If you are on a bit of a lower income and your rent has gone up 18 per cent, your wage is unlikely to have done that and the cost of living is going up too,” Mr Kusher said.
“Some people are moving back in with parents, where they can. And increasingly there are people moving into a share house or to turn their own rental into a share house.”
The economist said high migration in 2023 was putting additional pressure on the city’s struggling rental market, at a time when the number of landlords exiting was outpacing those buying in.
“We have seen a decline in that volume of stock for rent and overall an increase in rental accommodation demand,” Mr Kusher said.
That loss of rental homes was punctuated by a 14.9 per cent drop in the number of new listings becoming available in December, a plunge that will have compounded the number of tenants looking for a new home as the majority of the city’s one-year leases expire in January.
Melbourne’s vacancy rate has tumbled, putting tenants under growing pressure.
While the PropTrack figures show 31 average inquiries per rental listing, he noted many tenants did not contact agents before inspecting and the number attending open homes could be much higher.
Large crowds at open for inspections could be part of the driving force behind rising first-home buyer lending late last year, with Australian Bureau of Statistics figures showing 20.2 per cent increase to $1.63 billion in loans across the 12 months to November last year.
But that figure is still 26.5 per cent below the February 2021 peak.
Regional Victoria’s vacancy rate improved by 5 per cent across the past year, but it is still almost 20 per cent below the decade average.
Mr Kusher said the closest thing to a silver lining for tenants was that rents were unlikely to rise as quickly this year as last, because many could no longer afford to pay more.
4211/618 Lonsdale Street, Melbourne, is advertised at $750 a week – and with two bedrooms and two bathrooms is likely to be highly popular.
Real Estate Institute of Victoria president Jacob Caine said two-bedroom apartments and units, especially those with a second bathroom, were attracting “intense competition”, particularly in the $450-$700 a week bracket.
Mr Caine said with significant population growth in 2023 and more likely this year, it was likely the rental crisis would not be resolved without significant housing construction.
He urged federal and state governments to pursue 1950s-style social housing construction, a time when more than 15,000 homes were built a year to support the most at-risk tenants in the nation.
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