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Melbourne Rental Market Shows Strong Signs Of Improvement

Melbourne rent values are bouncing back from pandemic lows, in a promising sign for investors and landlords.

Rent values in the Victorian capital have fallen 1.4 per cent over the past 12 months to the end of June, according to CoreLogic. However they lifted 0.4 per cent in June and 0.6 per cent over the last quarter in an indication the worst may be behind us.

According to the latest CoreLogic data, Melbourne’s gross yield across all dwellings has fallen from 3.2 per cent 12 months ago, to 2.83 per cent. This is still stronger than Sydney, where gross yields fell from 2.92 per cent to 2.56 per cent. But it is down compared to the combined capitals measurement, which fell from 3.44 per cent to 3.12 per cent over the past year.

Nationally, rents have grown 6.6 per cent over the past year, 2.1 per cent over the last quarter and 0.7 per cent over the month of June - an indication Melbourne’s rent value growth might now be almost matching the rest of the country.

Gross yield on a national average has fallen from 3.73 per cent 12 months ago, to 3.41 per cent.

Rent values: Houses against units

However, a great discrepancy has emerged between the growth, or otherwise, in house rents in Melbourne and that of units - where supply has largely outstripped demand in many markets.

Melbourne house rent values have grown 2.3 per cent over the past year, during the pandemic, but unit rent values have fallen 6.4 per cent, largely contributing to the overall fall in values.

Nationally house rent values have grown 8.9 per cent over the last year, 7.7 per cent in the combined capitals. Unit values have grown 1.3 per cent nationally, but fallen 0.8 per cent in the combined capitals over the same period.

“As with house prices, rent prices are seeing a deceleration in growth at the national level and across each of the capital cities,” CoreLogic’s Head of Research Australia, Eliza Owen pointed out.

“This may reflect affordability constraints, but there could also be higher levels of rental supply as investor activity in the market increases. Over May, ABS data showed a 13.3 per cent increase in new finance lent for the purchase of investment property,”

“In Sydney and Melbourne, unit rents continue to show year on year decline, at -1.1% and -6.4% respectively.

“These cities, which have historically had the highest intake of international migrants, have seen rental demand most impacted by international border closures amid the pandemic. Although demand across these unit markets remains fairly subdued, there are signs that rents may be stabilising at lower levels.

“Melbourne unit rents have also started to show signs of stabilising, with values remaining flat over the quarter.”

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