Melbourne landlords slash rents, while regional cities can’t keep up with rental demand
The number of days Melbourne homes are sitting advertised for rent jumped a staggering 40 per cent in November compared with this time last year, new analysis shows.
At the same time, the proportion of Melbourne rental properties that have been discounted has also skyrocketed, according to the analysis of rental listings conducted by Domain.
Last month, more than a quarter (26.1 per cent) of all Melbourne houses and apartments listed for rent had had their asking price reduced, up from 14.9 per cent in November last year.
In contrast, every region outside Melbourne, including Geelong, Ballarat, Bendigo, Shepparton and Latrobe Valley, has seen a significant drop in the proportion of advertised rental properties being discounted.
The analysis shows landlords in inner Melbourne, including the CBD and Southbank, and the inner east, in suburbs such as Prahran, Windsor and South Yarra, have been discounting more often than anywhere else, as they attempt to fill empty apartments by offering cheaper rent.
The inner-city rental market was hardest hit by the pandemic due to a dramatic drop in the number of international students and heavy job losses across hospitality, retail and tourism, as businesses were forced to shut down to contain the virus.
Significant numbers of inner-city workers also left the city, seeking cheaper rent elsewhere as offices shut and professionals worked remotely, many on reduced hours and pay.
The analysis by Domain revealed 30.5 per cent of advertised rental properties in inner Melbourne had their asking price slashed last month, up from 14.4 per cent in November last year. More than 30 per cent of rental properties in the inner east had their prices reduced, up from 15.3 per cent at the same time last year.
Dionne Wilson, of Harcourts Melbourne City, says she is not surprised by the high number of rental properties being discounted.
“I thought those numbers could have been even higher,” she says. “Everything we are currently bringing to market is being rented for a lot less than they were a year ago.”
“Some of our rents are up to about 40 per cent lower and we’re seeing some properties sit on the market for months. One property we had had been vacant for 11 months and we’ve had others that have been vacant for five to six months. Previously, our properties would be vacant for a couple of days,” she says.
While a drop in international student numbers has affected the inner-city rental market, Ms Wilson believes many professionals and those working in retail and hospitality left the CBD during the pandemic due to job losses and remote working.
“Just in the last two to three weeks we have started to see some of these people coming back. There has been a dramatic upswing in activity and we expect that’s due to retail returning, hospitality returning, and even some office workers returning,” she says.
In the inner east, leasing consultant Damian Betham, of McGrath St Kilda, says rent reductions have been commonplace since Victoria’s strict lockdown began and believes it will continue for some time to come, as tenants become accustomed to cheaper rents and landlords look to secure long-term tenants.
“What we typically find is that a property will get listed and gradually the price will come down by $25, then $50 and so on,” says Mr Betham, who largely works in the inner suburbs of St Kilda, Windsor, Prahran, South Yarra and Elsternwick.
“I had an older-style apartment recently that was advertised for $320 to $330 a week, and it went down to $250 a week, and all of a sudden we had people applying for it without even seeing it,” he said. “We are finding that price is really what is driving interest in properties at the moment.”
Mr Betham says he is also seeing an increasing number of tenants moving just to get a better rental deal.
“Obviously, we’ve seen a lot of people who might have lost their jobs because of covid move back home or move in with friends and that’s driven the high number of vacancies,” he says.
“But, what we’re also seeing now is people moving, who don’t have to move. So, we’re getting applications from people who have seen something similar to what they’re already renting in the same block for much cheaper, so they’ll move to take advantage of the lower price,” he says.
While Mr Betham says he has seen a small increase in the number of people viewing properties in recent weeks, from “20, on average, to 30 to 40 people”, some tenants who have moved back to their home towns or to regional areas, may never return.
In regional cities such as Ballarat and Bendigo, the proportion of rental properties that have had their advertised price reduced has dropped significantly over the past 12 months, reflecting a steep increase in demand.
In November last year, 4.9 per cent of advertised rentals in Bendigo were being discounted. Last month that dropped to just 1.9 per cent.
The increased demand for rental properties has also seen an increase in rental prices in the city, according to Terrence Morse, of Biggin & Scott Ballarat, who believes the demand is being driven largely by Melburnians.
“The rental market is very strong at the moment. I had one property about four weeks ago where we had over 100 applications for this particular two-bedroom unit,” he says.
“I think the lockdown has really made people evaluate where they are currently living and so as we were coming out of lockdown I had quite a lot of Melbourne people who were looking to buy up here in Ballarat, but they wanted to get a bit of a sense of what it was like, first.
“They were asking for say six, nine or 12-month leases, but they were willing to pay three or four months in advance, because they’d sold up in the city and they were just looking for, I guess, that country feel,” he says.
Mr Morse says many new tenants from Melbourne, who plan to combine remote working with “commuting to Melbourne a couple of days a week”, have been leasing properties within walking distance to the train station.
“The train station here is very close to the city centre, so we are finding a lot of Melbourne people looking to rent in your Ballarat Central sort of suburbs, where they can just walk to the station and jump on a train when they need to,” he says.
It’s a similar story in Bendigo, where Nicoletta Tzouroutis, a senior property manager at Bendigo Real Estate, says the agency’s “vacancy rate for the last two weeks has been zero per cent.”
“The demand for rentals is incredibly high at the moment,” Ms Tzouroutis says. “I think because of covid, a lot of people have decided to get out of Melbourne and Bendigo is appealing to a lot of people.”
Ms Tzouroutis says demand for rental properties is so high that many homes aren’t even being advertised.
“I think you’ll find that a lot of agents around Bendigo are also doing a lot of leasing off market as well, because we’ve got so many applications coming in and we don’t have enough properties.”
“So, the properties that are coming on board, we’re able to get those good applications that we’ve already referenced for other properties and get a really quick turnaround without having to advertise,” she says.
Ms Tzouroutis says the increased demand has also lead to rental price increases in the central Victorian city.
“The rents have definitely increased from what they were last year. I couldn’t tell you by how much. But, normally over the Christmas and New Year period, you do tend to get more properties sitting on market a little bit longer, but this year it’s been the complete opposite.”.
Ref: RACHEL WELLS (on 23 Dec 2020). Melbourne landlords slash rents, while regional cities can’t keep up with rental demand. Retrieved from https://www.domain.com.au/news/melbourne-landlords-slash-rents-while-regional-cities-cant-keep-up-with-rental-demand-1015542/.
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