Victoria’s rental market is seeing a sharp drop in rental stock due to an increase in property investor sell-offs.
The state lost 24,726 rentals during the year, as evidenced by the drop in active rental bonds from 677,492 in September 2023 to 652,766 in 2024.
The sell-off is accelerating, as seen by the 4,315 drop in rental bonds during the first quarter of 2024. In the second and third quarters, bonds were down 7,820 and 9,498 respectively, and the trend persisted in the following quarters. The rental bond drop has been the worst since records began to be kept in 1999, ABC.net.au reported.
The significant decline in rental stock carries serious implications. With fewer rental options available, tenants could face increased competition, driving rents higher. At the same time, real estate investors will need to reassess their strategies to adapt to shifting market conditions.
Metro areas had a 4.2% fall (23,108 lost rentals), while regional areas saw a 1.3% loss (1,588 lost rentals), making the downturn more severe there. In spite of this, CoreLogic data indicates that over the previous six months, vacancy rates have increased, while rentals in Melbourne have declined.
“This trend underscores a gradual easing of rental conditions, as the city experiences an improved vacancy rate alongside a slowdown in the pace of rental growth,” per Domain’s September 2024 Rental Report.
The decrease in Victoria’s rental pool hasn’t resulted in higher rental prices, despite what some investor groups had previously predicted. In fact, rents have been declining, according to Tim Lawless, head of research at CoreLogic.
However, the Property Investors Council of Australia said that if the number of overseas students rises, tenants in Victoria should brace themselves for possible sharp increases in rent.
