Melbourne's rental squeeze: rents surge as demand hits record highs
If you're renting in Melbourne, you've likely felt the pinch recently. And if you're a landlord or property investor, the dynamics are becoming increasingly complex. A recent report highlighted by realestate.com.au, based on Proptrack data, paints a clear picture: Melbourne's rental market is tightening significantly as we move through early 2025.
After a period of relatively flat rents in late 2024, the first quarter of this year saw landlords regaining ground, with rents across the city taking a noticeable leap.
The Key Findings:
Sharp Rent Rises: Melbourne renters saw their weekly rent jump by an average of $15 in the first three months of 2025. The median advertised rent now sits at $575 per week.
Apartment Costs Surge: The rise was particularly steep for units, with apartment rents climbing 3.6% to a median of $570 per week.
Houses Hold Steady (But High): While house rents didn't see the same quarterly jump, they remain high at a median of $580 per week.
Affordability Gap Shrinks: Worryingly, the difference between renting a house and a unit has narrowed to just $10 a week. This indicates intense pressure on the more traditionally affordable end of the market.
What's Driving This Trend?
The classic economic principle of supply and demand is in full effect:
Strong Demand: Melbourne continues to experience robust population growth, adding significantly to the number of people seeking rental accommodation.
Shrinking Supply: Compounding the issue, the pool of available rental properties is actually shrinking. The data shows a net loss of 22,000 rental properties over the past 12 months, largely due to investors selling their properties.
The Impact on Renters
This combination of high demand and low supply creates a challenging environment for tenants:
Affordability Crisis: Many renters are facing severe affordability stress, with reports suggesting some are paying more than half their income just to keep a roof over their heads.
Compromises Necessary: Tenants are increasingly forced to make difficult choices – moving further away from the city center and amenities, settling for smaller or older properties, or entering share house arrangements to manage costs.
A Complex Picture for Landlords
While rising rents might seem purely beneficial for landlords, the article notes that many are still choosing to exit the market. Factors contributing to this include ongoing uncertainty around government legislation, increasing land taxes, and compliance costs. This suggests that simply increasing rent isn't enough to offset the perceived risks and costs for some property owners, further impacting rental supply.
What Does This Mean?
Melbourne's rental market in early 2025 is characterised by high costs and fierce competition for available properties. For renters, it means budgeting carefully and potentially adjusting expectations. For landlords and investors, it highlights a market with strong rental returns but also significant regulatory and cost pressures. It underscores the broader challenges facing housing affordability and supply across the city.
