Dynamic & Different: Dissecting Melbourne’s Rental Markets

Melbourne’s Rental Markets – Unit Median Rent 

Source: Department of Families, Fairness & Housing, Urbis Rental Intelligence Platform

As evident in the above data, it is not appropriate to talk about performance across the whole city, without perspective on the markets within that city. While Greater Melbourne saw a decrease in rents by only $46 per week, Melbourne CBD has seen a $157 per week decrease. To June 2021, this put the CBD at $14 less rent per week than the whole of Greater Melbourne, compared with a $97 per week higher rent pre-Covid. In the latest data, we can see rents are growing again. 

Rents in New Apartment Product

So let’s consider a component of the market within one of the micro-markets of Greater Melbourne. This will give us an up to date understanding of rents in apartment product delivered under the Cities Better Apartment Design standards. In other words – what is the performance of product that we want people to be living in as a top tier example of good, healthy design? 

Before Covid, the median rent for an apartment in a newer building within Central Melbourne (CBD, Docklands & Southbank), was just above $600 per week. As of August, you could pick up one of these apartments for the median of $550 per week. Therefore, we are still yet to reach ‘pre-Covid’ rental levels in our central city.

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Rents have grown by 37.5% in total since November last year!

Due to the fluidity of the market, rents were as low as a median of $400 per week from mid-2020 at the height of lockdowns, through to the end of last year when we began to see the last of lockdowns. In percentage terms, this growth is greater than the percentage that rents decreased by, which was 33%. Yet, we still have a way to go to reach that $600 per week mark, which would result in growth in rents of 50% since the Covid lows! 

Rental Growth Forecast

We need not over-react to recent growth trends and understand they reflect a market operating as it should. Calm approaches that monitor the situation across markets from various datasets should be taken. I argue that rational conclusions relating to measures focussed on the supply of stock need to be considered more than demand side policy or price manipulation strategies. Our residential market is maturing with new types of stock such as BTR in its many forms. These projects are in essence developments of the community, and it is a sense of community and togetherness alongside relative equity that got us through the pandemic. So, let’s not add more barriers to pioneers of the BTR space, and the residential market more broadly. Rather, let them build with quality planning outcomes and allow the market to balance itself. 

Watch out for my next article where I will discuss the importance of rental housing that is affordable and the market depth segments requiring affordable housing, at market, and premium product.