Melbourne’s Rental Crisis Traps Tenants

March 4, 2024
March 4, 2024 Luke

Melbourne’s Rental Crisis Traps Tenants

Melbourne is in the grips of a rental crisis. Both high migration and landlords exiting the market have created a dire situation for tenants in Australia’s second largest city. Rental costs are skyrocketing while vacancy rates plummet, squeezing renters from all angles.

Population Boom Adds Pressure

Melbourne’s population has exploded in recent years thanks to high immigration rates. The city absorbed over 125,000 new residents in 2021 alone. All these new arrivals need places to live, creating huge demand in Melbourne’s rental market.

With supply unable to keep pace, vacancy rates have dropped below 1% in many suburbs. Such low vacancy gives renters very little bargaining power or choice. Landlords can pick and choose tenants, and there’s no incentive to keep rents affordable.

Investors Sell Up, Exacerbating Shortages

At the same time, Melbourne’s investor landlords have been exiting the market in droves. Low rental yields and increased costs have prompted many to sell their rental properties. Others have shifted to short-term Airbnb rentals, which are more profitable than long-term tenants.

This investor exodus has pulled thousands of rental properties out of the market. The shortages have allowed landlords still renting to raise rents to eye-watering levels. Melbourne rents rose nearly 10% last year, with an average weekly rent now $450.

Trapped Renters Suffer

The result of migration up and supply down is a city with surging rents and minimal vacancies. Tenants feel trapped, with little ability to negotiate or find alternatives. Moving costs are exorbitant, so many resign themselves to paying more in rent.

For low income households, the rental crisis is devastating. Over half of renters are in “rental stress”, spending more than 30% of their income on housing. The crisis is harming Melbourne’s social fabric and diversity.

With high migration expected to continue, and investors still shunning long-term rentals, the crisis shows no signs of abating. Bold policies and increased construction may be the only ways to ease the trap squeezing Melbourne’s tenants.

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