Melbourne residential rents now at 6% above pre-COVID levels

The rental rebound in the city has gained momentum.

Melbourne’s rental market was hardest hit by closed borders, but JLL says rapid tightening in the market over the past year has seen the rental growth gain momentum. Currently, rents are around 6% above pre-pandemic levels.

Apartment prices have also returned to moderate growth in the months of March and April 2023, but are still almost 6% lower over the past year.

Here’s more from JLL:

While apartment demand in Melbourne has fallen the past year and has been affected by interest rate headwinds, it has already stabilised now in 2023 at a relatively robust level.

New apartment demand remains largely focused on smaller boutique developments more aimed at owner-occupiers. Investor demand remains muted, although the strong rental market and lift in rental yields is starting to attract a little more interest from investors.

Melbourne supply remains moderate

Despite Melbourne having much more built-to-rent (BTR) supply than other markets in the pipeline, the overall level of supply across all product types fell sharply in 2022 and will likely remain moderate for at least several more years. Project cost pressures continue to inhibit large-scale build to sell projects, from progressing to construction stages.

A strong rebound in migration and foreign student numbers has gained momentum in 2023 and had an enormous impact on rental vacancy, which has fallen to 1.1% in March 2023, its lowest level in decades.

Outlook: Apartments edge towards recovery

It has been a tough period for Melbourne apartments, but residual stock from the last cycle has been largely depleted and demand prospects have improved markedly with the rebound in migration and foreign student numbers. With new supply completions also remaining moderate over at least the next few years, supply is likely to fall well short of underlying demand.

The supply/demand balance and the relative affordability of apartments are likely to support apartment price growth over the medium term, while there will also be little relief for the tight rental market for some time yet.

Note: Melbourne Residential refers to Inner Melbourne apartments. Inner Melbourne data: Supply from JLL, rents from Department of Human Services Victoria, and vacancy from REIV. Greater Melbourne data: Price, sales volume and yields from CoreLogic.