Melbourne rental listings saturating

This is a non-scientific assessment of the rental market in Melbourne, but since i moved here in 2014 it has always been highly competitive. Lines out the door of up to 50 people per rental, and not many available in each price level for each suburb.

Typically Feb/March is a prime time in the year for falling rental listings. it is the quarter of highest migration to the state, so competition is high. By April there should be virtually scraps available.

However this year is starting to feel different, and i speak mainly for the northern corridor that i am most familiar with. Firstly I notice that prices across the north, from North Melbourne through Fitzroy, Northcote, up to Reservoir are not much different to what they were in 2014. Maybe $10-20 here or there, but i would still be able to rent what i did when i moved here for more or less the same price.

But more impacting is that this year, there is a massive saturation of low end properties that were not there last year. I'm taking the $350-400/week market in Reservoir. And not just old houses, but virtually brand new townhouses. These are selling for $500k+ and renting for a gross yield of 3.5%, and there are pages of them available in what should be the tightest time of the market (and was last year).

This property cycle saw an early saturation of highrise apartments that are only just starting to hit their stride of completions now. During pre-sales, people became scared of a saturated market and focused on land-linked developments. not being able to afford houses, townhouses have become a popular go-to for many investors. But it seems that they are saturating, saturating fast, and based on today's dwelling approvals data, we have record numbers more on the way.

I am a population skeptic and believe Melbourne will see falls in population growth of up to 25-30% from current levels (ie. from 150k to 100-120k) in the next 5 years. This will throw a massive overbuild to segments of the market such as affordable (read-accessible to FHB's) townhouses, and with America's rate hikes we know that it is inevitable Australia will too. In summary, I can see the avenue towards lower migration, saturation forcing investor sales, and exactly where the over-supply will hit that is going to drive down prices.

Is anyone else getting this same gut feeling?

 

Not myself, but there should be a small blip coming. I think Melbourne will maintain solid population growth, but agree a decrease is warranted.

FWIW, my wife's sister recently rented in Northcote and said the competition was difficult and she missed out on a number of properties before success.

 

I'd say rents have increased circa 10% in Northcote and Reservoir since 2014, rental demand is still very strong in Northcote, granted there are/have been some large developments completed but there is still plenty of demand.
I'm doing dual occs in both Reservoir and Northcote at the moment, know your market, build a good product and you will have no problem getting good rent and occupants.
If there is a population decrease like you say, I wouldn't think your Fitzroys and Northcotes would be too affected, Reservoir north of the train station may be but ultimately inner city rentals would be pretty in demand in Carlton/Fitzroy/Northcote/Thornbury, well serviced suburbs and lifestyle suburbs. My opinion only.

Also like to quickly add the main developments in Northcote have been completed now, there are not too many large number developments in this suburb coming out of the ground or nearing completion, most of this happened from 2014 as you say till now, far smaller developments at the moment in my opinion

 

Majority of the new developments are left vacant by foreign buyers. I've seen fire alarms go off in small complexes at 1am and only a dozen couples exit the building whilst the fire brigade goes in.

It's a dangerous situation for investing because it doesn't show accurate supply and demand conditions.

 

yeah i see the same thing, Northcote seems to have been developed at a very sustainable rate. Quite a different story to Brunswick just across the creek. The risk for Northcote is the surrounding suburbs creating too much of a price differential across the boarder. Though i agree there will be more stability in the blue-chip, well developed suburbs, they will only be able to shoot so far as the gap to their neighbours is considered reasonable by buyers

Yeah its interesting times. I don't believe there is any comparison in Australia's history

 

I think it's a big call that Melbourne will have a population decrease of 25-30%!

 

I think they mean the population growth numbers will reduce by 25-30%, not the total population.

 

exactly... i was hoping the note 150k dropping to 100-120k would clarify

 

Don't think this is the case - I have one in the north and was rented recently in January.

Have like so many enquiries and 10 applications, people from Adelaide, Queensland, Perth etc. and some were like pretty high end income guys like Senior Manager for Telstra and some even offered to pay me more and 3 months in advance.

I settled for 2 Medical Doctors "relocating down" from Townsville and also achieved the highest rental in the whole street. (by the way it is ex-housing comm house).

Also friend who is trying to rent in preston (apartment) close to the market missed out and she's earning at least 170-180K.

 

Contrary to the belief that rents always rise, not so...... supply vs demand

If there is an oversupply rents will fall back, this is what happened in Perth

Watch this space

 

That's the mini "ghost city" the Chinese have exported overseas you are seeing. Not from Melbs but from what I hear there's a lot of that down at Docklands Should be plenty of rentals available there?

 

Yeah it's pretty bad. Depressingly quiet on a Sunday. One of the best locations in melbourne ruined.

I didn't realize how important planning was until I saw that.

 

there are rentals def available in docklands but the prices ain't exactly going down either. This is more exp than south Melbourne, southbank, albert park rentals

 

Wow $850/wk fora 2 bed unit, thats $44.2k/year in rent. Anyone renting must be earning big $$ to afford this place.

but look at the handbag next to the stove, looks like the owner could easily afford the $850/wk rent :O

 

If really the owners were under pressure they would put it to $500-600 which is reasonable
As u can get these elsewhere in next door suburbs which is tbh better service by other amenities

 

$850pw looks a lot (and is) but you get your money's worth. Large apartment for starters, probably 100m2+, 2 car parks (second worth $60pw), north facing view over the harbour with no overlooking, pool, gym, large communal garden and a residents lounge which can be booked for functions of up to about 50 people. Then brilliant location, library and free trams outside, supermarket, PO, GP, pharmacy etc etc within minutes. Yes, I'm biased

 

I took a quick look at this place on Tuesday, and there were quite a few people viewing it.

16 Chapel Street Richmond Vic 3121 - House for Rent #423241090 - realestate.com.au

The property was quite nice, but needed a few dollars spent on tidying things up: A heater had come off the wall, wallpaper was lifting (between the door and heater in photo 3), etc.

I find that rental prices can vary dramatically for apparently similar places. This townhouse is $820 per week, $150 more than the place I viewed, but doesn't appear to offer a lot more.

1/75 Firebell Lane Richmond Vic 3121 - House for Rent #423334174 - realestate.com.au

However, the property history shows that the owners are ramping the rent aggressively. It was $775 last year.

 

Melbourne is a very mixed market.

 

I know.

But I think that sometimes properties are listed at a premium, the investor is chancing it for a bigger return. They tend to sit around for a few months (and a few rent cuts).

 

Be careful I have seen people list rentals at high price and later a selling agent putting that number in to increase the perceived yield even though it was never rented at that amount. When you ask the selling agent whether they got that amount as rent/copies of rental agreement they say it wasn't their agency handling the leasing