Unit rents in the Melbourne CBD have spiked by 33.3 per cent in a year as landlords claw back pandemic discounts and price out some tenants.
The median rent for an apartment in the CBD reached $480 per week, the Domain Rent Report for the December quarter showed. West Melbourne units were just behind, at $470 per week, up 25.3 per cent in the past 12 months.
Melbourne suburbs where rents rose most – Units
Nearby Southbank and Docklands landlords were asking for $500 per week in rent, up 23.5 per cent and 22 per cent, respectively.
Although Melbourne CBD unit rents are still 4 per cent below their levels five years ago, the pace of the rebound as Melbourne reopened has been a shock.
“It shows those areas which had the deepest declines are now having the strongest rebounds,” Domain chief of research and economics Dr Nicola Powell said. “It’s why they’re seeing the strongest rates of growth.”
Renters who took advantage of plummeting inner-city rents during the pandemic would now face significant rent increases or the loss of their home, Powell said.
“What does that mean for those people who realised they could get a lease on their own [over 2020 to 2021]?” she said. “Do they push further afield or go into a house share?
“What we’ll find is they may have to compromise again.”
**That was the case for CBD tenant Robinson Watt. He and partner Natasha Theocharous received notice their rent would increase nearly $600 per month at the end of their first 12-month lease, a rise of about 33 per cent.
They doubt they will be able to afford the new rent.
Natasha Theocharous and Robinson Watt are facing a $600 per month rent increase. Photo: Justin McManus
“It feels like now we’ve only just set everything up,” he said. “It’s a new place to us and we’re already considering moving on before we’ve settled into it being our home.
“What we’re giving up is the feeling of having roots and being somewhere permanently.
“It’s a reminder that when you’re renting, everywhere you live is insecure.”
Watt said the COVID-depressed rental market made him feel more financially independent.
“Everything prior to this has been share houses. It really felt like when we moved here we were taking a very big step; ‘finally, this is how adults were supposed to live’.
“Now we have a space where we can set it up how we want … but we’ve just had a reminder that ‘no, this isn’t yours, it’s not your home and it can be taken away on a whim’.”
Harcourts Melbourne City director Dionne Wilson said rents would likely increase further.
“We’re still tracking slightly behind the pre-COVID numbers, which were at an all-time high. I think it’ll be in March when we catch up.
“As an office, our average rent was about $555 per week before COVID and now we’re just under $500 a week.”
Wilson said landlords were entitled to ask for pre-COVID rents given the increase in demand because of a nationwide change in living habits and the return of international migration.
“Whilst it looks like rents are flying up at a rapid rate, they’re recovering,” she said. “They haven’t gone above where their peak was previously.
“They will go past their peak, but they’re recovering. It does make it feel less sinister.”
Melbourne suburbs where rents rose most – Houses
Rents for houses were up too, but did not show a uniform trend. The biggest rise was in Blairgowrie on the Mornington Peninsula, up 20.8 per cent to an asking rent of $640 per week.
The next largest increases were spread across the inner ring; Southbank house rents grew 20 per cent to $480, Canterbury was up 18.4 per cent to $900 each week and Balaclava rose 17.8 per cent to $678 per week.
Westpac senior economist Matthew Hassan agreed the return of migrants and international students to Australia was a key driver of increased rental demand, particularly in inner suburbs.
Another emerging trend was Australians placing more importance on having a spare room or their own home — like Watt and his partner — which changed how the rental market looked, Hassan said.
“We’ve just come out of two years of no migration and pretty strong building across the wider metro markets in Sydney and Melbourne … and normally you would expect that to see some re-balancing between supply and demand, but it feels like we haven’t and we have gone back into a super tight market,” he said.
Rising interest rates were also putting upward pressure on rents, he said, as some landlords increased asking prices to help with increased mortgage costs.
However, Hassan was still surprised by the rate at which inner-city unit markets had rebounded.
“It does surprise me … it felt like we just went from empty units in CBDs to all of a sudden [the market being as] tight as a drum.“