The rental market has well and truly roared back to life after a challenging two years, with some Jellis Craig offices reporting record letting months throughout Q1 2022.
Over the last two years, the effects of the pandemic on international visitors and people movement resulted in vacancy rates sitting at very high levels. In positive news since mid-last year, Melbourne is sharply recovering from the pandemic-induced spike reaching the lowest vacancy rate since March 2020, at 2.1%. (Source: Domain)
Melbourne residential vacancy rates
Not only this, but the average rental rates have also started to increase compared to the height of the pandemic – this is particularly true for units which saw a decrease in rents of -6% as at January 2021 now growing by 2% in January 2022. This is another positive sign for rental providers that things are returning to normal.
There is a resurgence of interest, from both investors and renters. Interestingly, this spike started prior to the return of overseas students and travellers. The turnaround has been driven largely by an inner-Melbourne population, with a number of previously local residents finally returning to the city after a period of living elsewhere. According to CoreLogic, despite the absence of foreign students, inner city rental listings across Melbourne have normalised back to the decade average. We can only anticipate this will continue to improve as international students return and our borders remain open.
According to CoreLogic, recently the trend rate of growth has accelerated across the inner-city precincts and unit markets of Melbourne. The reason for this is likely two-fold. Businesses are starting to draw their employees back to the office, with hybrid work now the norm in most corporate office settings. Secondly, there is no doubt that the city is returning to its former glory, with sport, theatre, live music and events all back on the agenda. These two factors are both impacting the inner-Melbourne rental market in a positive way.
Outside of inner-Melbourne, the demand is still strong in the outer-Melbourne suburbs, particularly those areas in quality school zones. Further out into lifestyle regions where there was strong growth during the pandemic, the exodus has been slowing since the second half of 2021. It will be interesting to see whether the desire for a sea or tree change will continue as people navigate a post-pandemic world.
Investors are returning to the market. The banks are reporting new lending applications in the owner-occupier space have slowed and the balance is being made up with an increase in loans in the investor space, meaning investors are feeling more confident with the market as vacancy rates fall and and are borrowing to buy rental properties as an additional income stream.
It is pleasing to see that things are improving for the rental market after a tumultuous and challenging 2-years.
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