Tough rental market, investment outlook improves 

The rental market continued to be marked by tight supply, low vacancy rates and high rent prices at the start of spring. For renters desperate to secure accommodation, the outlook was tough. Rental data showed vacancy rates fell to a new record low in August, with the national rental vacancy rate at 1.1 per cent in September.

Buxton offices reported a strong rental market through winter entering into September. At the end of September, Buxton Bentleigh had only four rental listings available from a rent roll of 800 properties, a steep fall from the average of 10 or more listings, rental department manager and director Phoebe Righetti said. 

Rental prices continued to trend upwards. A Buxton office where rents rose $10 a week in previous years reported rents had increased by as much as $20-$30 weekly. Homes up for rent didn’t last long on the market, with well-priced properties in good locations snapped up within days. 

Many landlords selling up due to rising costs, land taxes and changes to regulations and standards led to a severe undersupply of rental properties. Many renters had to vacate their homes and compete for a reduced number of listings. As sale listings trended upwards, the number of auctions spiked from late winter. For five consecutive weeks until Grand Final week, Victoria had 1000 or more homes up for auction each week.

Clearance rates remained stable, with some areas reporting strong clearance figures and results above sellers’ expectations. 

For would-be property investors, market conditions have become more positive. In some cases, renters offered to pay more to secure properties. The tight supply, increase in migration and international student numbers, and slow new construction figures should keep rental returns attractive for investors. 

There will be more choice of investment properties as some landlords leave the market. The increase in supply has also seen home prices stabilise in many areas.

Phoebe Righetti described the property management market as “very strong”, with homes attracting as many as 30-40 groups of renters per inspection. 

The market was bullish for more affordable rental homes such as units and apartments, while more expensive houses and new townhouses had slightly less demand. Investors have to balance between getting higher rental yields or long-term capital growth or a mix of both.

Generally, more affordable units and apartments in inner and middle-ring suburbs could attain higher rental yields but slower capital growth. Houses with more space and potential for development in suburbs further out could offer stronger capital growth but lower rental yields.