By Anthony Webb
With vacancy rates in Melbourne the highest we have seen in a long time, landlords and property managers are asking; what’s driving this trend? Will the rental market get back to where it was, and if so, how long will this take?
Amid falling rents and rising vacancy rates, it’s easy to lose perspective – the reality is, the rental market has been so good for so long. If we look at it as a landlord and tenant market, it has simply shifted towards a tenant market.
At the moment, the rental market is mirroring what the sales market did during Melbourne’s COVID lockdowns in 2020, and dropping by about 10%.
Reassuringly, what PhilipWebb are seeing right now is a high volume of enquires for rental properties. Multiple tenants are applying for properties, with lots of healthy competition in the market.
However, the market is still very price sensitive, especially in Melbourne’s CBD. For example, a property leased at $500 might have to be dropped down to $460 before landlords see serious interest. But once you hit that sweet spot, you will get good numbers.
Some of the key drivers of these market conditions have been the ongoing impacts of COVID-19. During this period, tenants have been able to break their lease without consequence, they have been eligible for rent reductions and many people have moved home amid uncertain economic conditions.
Additionally, with COVID-19 conditions looking up, we’re starting to see people regain confidence and rent out their properties again, which is supplying the market with more stock, especially 2-3-bedroom houses and units.
With January the busiest month for leasing, we’ll be watching the rental market closely this month, which should set the tone for the remainder of 2021.