The tables appear to be slowly turning in favour of Melbourne's unit investors, with the city's troubled market reporting its first quarterly rise in weekly rents since pre-pandemic.
According to the latest Rental Report from Domain, the Victorian capital recorded a 1.4% quarterly increase in weekly median rent to $370, a significant development that foretells where the market is going at current conditions.
"This signals that the worst has passed for landlords," the report said.
Figures from SQM Research show that while Melbourne has the highest share of vacant properties among capital cities in September at 3.5%, the vacancy rate has been declining.
"For tenants, now is the time to secure a deal in those areas that have seen a significant drop in rent,” the Domain report said.
“Because while overall unit rents are the same as they were in 2015, vacancy rates have continued to decline, suggesting the empty pool of rentals will continue to shrink and prices will not stay this low for very long.”
Melbourne houses had a different story to tell — the city is now the only cheapest capital city to rent a house in, a place it previously shared with Adelaide.
Over the quarter, Melbourne's median weekly house rent remained at $430, while Adelaide reported a 2.3% gain to $440.
"Overall, Melbourne continues to record weak rental growth becoming a renters’ market the closer to the city, a positive for tenants looking for more affordable rentals,” the report said.
Tenant competition heats up in Adelaide
The growth in Adelaide's median house rents reflect the increasing demand from tenants and activity from property investors and buyers.
The city's five consecutive quarterly gains have resulted in its median house rent to reach a new record.
Adelaide also clocked its strongest annual increase for house rents in 14 years.
"While it has been a landlords’ market for a number of years, conditions have become fiercely competitive as the vacancy rate hits a multi-year low in September," the report said.
The South Australian capital has the second lowest rental vacancy rate in September, down to 0.6%.
"House rents have grown faster than units over the past year, although the growing price gap could stretch household budgets, pushing demand to units.”
The report noted that while investment activity has increased in the city, it was not enough to meet the demand as more people decide to relocate.
"The flow of residents away from Adelaide has previously been a drag on the demand for housing; but Adelaide has netted its first positive flow of residents since 2002.”
Sydney clocks new record for house rents
The ball returns to the landlords in Sydney, as both house and unit rents rose over the September quarter.
Weekly house rents in Sydney increased by 5.5% to a new record high of $580.
"It’s clear that tenants are willing to pay a premium for space, as house rents leap to a new high and rise at a faster pace for rentals with more bedrooms," the report said.
This was on the back of the city's shrinking rental vacancy rates, which have declined from last year's 3.5% to 2.7%.
The likely reopening of international borders is set to boost activity in the city, which could potentially leave tenants paying more for rents.
"However, investors have been enticed back to the property market by capital growth and improved rental conditions, which will boost supply and should help contain rent growth," the report said.
Canberra ends short-lived rental slowdown
The recent lockdown in Canberra momentarily slowed down demand from tenants, which pushed vacancy rates up.
However, Canberra was able to recover quickly by the end of September and maintained its status as the most expensive city to rent in for both houses and units.
Canberra’s rental vacancy rate was at 0.8% in September, stressing the need for a boost in the city's rental supply.
"The higher holding costs associated with rates and land taxes are likely to be being passed onto tenants, but it is clear the nation’s capital needs to attract investment activity to address supply," the report said.
Photo by Vitolda Klein on Unsplash.