Melbourne Rental Market

I have been an investor for 15 years and have 4 rental properties in Melbourne - all in "blue chip" suburbs.

I must say this is the slowest rental market I have experienced in all those years.

I have a 3 bedroom, well presented modern unit in Caulfield that is proving difficult to rent (quickly that is). 2 years ago prospective tenants were so keen for the place I was fighting off applications. It rented at $595 and following a rent increase earlier this year I was achieving $610.

Fast forward to now and I have had multiple opens over 4 weeks with only a handful of prospective tenants coming through. Some opens I have had no one come through. I have handed out about 7 applications but none have come back - save for one - which I rejected as it was only for 6 months.

I have just dropped the price to $580pw to generate interest.

What is your experience in Melbourne? Where have all the renters gone? :confused: I gather new investors to the market have led to a flood of rental properties available.

New investors paying top dollar for property in Melbourne right now with massive loans - I hope you have taken in to consideration that finding a tenant is not as easy as you might think!
 
I cant comment on the specifics rprodrive, but on the economics - a sluggish rental market is to be expected following an investor driven house price boom.

Traditionally Australia has a very static '70/30 PPOR/Renter' ratio. This barely moves (even in the 02-04 boom). Meanwhile over the last 24 months, half of all loans have gone to Investors - a 50/50 split. That means there's been a very large increase in supply of rental properties over the short term, without a corresponding increase to demand.

It'd be interesting to hear whether the Sydney market is experiencing similar softness.
 
I cant comment on the specifics rprodrive, but on the economics - a sluggish rental market is to be expected following an investor driven house price boom.

Traditionally Australia has a very static '70/30 PPOR/Renter' ratio. This barely moves (even in the 02-04 boom). Meanwhile over the last 24 months, half of all loans have gone to Investors - a 50/50 split. That means there's been a very large increase in supply of rental properties over the short term, without a corresponding increase to demand.

It'd be interesting to hear whether the Sydney market is experiencing similar softness.

wonderful post,
I was going to reply then you said it all.
 
I have noticed the market slowing down a little sooner than usual (it always slows down getting closer to Christmas) this year, and depending on the type of property tenants do have a lot of choice. In saying this I'm finding most properties are leasing in 2 weeks at most.

Of those that didn't return the applications, did you call to see why? Or have you advised them you've dropped the rent?

Feedback is invaluable, and if you follow up with advising the rent has dropped / you may find one of them will be inclined to put in an application.

There's a number of reaons a property isn't snapped up quickly for lease, the first is price, poor advertising, then inspection times (doing them at 3pm on a Thursday afternoon won't see as many people through as 5.30pm the same night). Also don't forget that this time of year sees tenants demanding A/C so I your place doesn't have it, this would be something to consider.
 
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Agree with redom

When investors flood thr market, the rentals soften, it's commons sense

What I am surprised is that why isntthere a massive glut of rentals

With most states booming I'm a little surprised there hasn't been that much rental softening, unless there is and just hasn't been reported as the media love these sort of stories
 
Of those that didn't return the applications, did you call to see why? Or have you advised them you've dropped the rent?

Feedback is invaluable, and if you follow up with advising the rent has dropped / you may find one of them will be inclined to put in an application.

There's a number of reasons a property isn't snapped up quickly for lease, the first is price, poor advertising, then inspection times (doing them at 3pm on a Thursday afternoon won't see as many people through as 5.30pm the same night). Also don't forget that this time of year sees tenants demanding A/C so I your place doesn't have it, this would be something to consider.

Thanks for the tips - I don't usually follow up people as I don't always take a phone number - but will do that from now on. A good suggestion.

The place does have A/C, advert is ok on RE.com.au, and I have been opening up at various times. It is also listed on domain but I don't get any leads from there.
 
What I am surprised is that why isnt there a massive glut of rentals

With most states booming I'm a little surprised there hasn't been that much rental softening, unless there is and just hasn't been reported as the media love these sort of stories

If you follow the media the rental market is holding up well. I just don't believe it from what I have seen. Rents are dropping - at least in Melbourne.
 
Agree with redom

When investors flood thr market, the rentals soften, it's commons sense

What I am surprised is that why isntthere a massive glut of rentals

With most states booming I'm a little surprised there hasn't been that much rental softening, unless there is and just hasn't been reported as the media love these sort of stories

In Sydney, it really depends on the suburb as to whether rents are going up, down or sideways. I have some friends looking in Sutherland and it definitely seems like rents have weakened. Don't take too much notice of asking prices as some decent discounts were being offered. (Sutherland does seem to be the only suburb that has added any supply in the local area, so it does make sense)
 
In Sydney, it really depends on the suburb as to whether rents are going up, down or sideways. I have some friends looking in Sutherland and it definitely seems like rents have weakened. Don't take too much notice of asking prices as some decent discounts were being offered. (Sutherland does seem to be the only suburb that has added any supply in the local area, so it does make sense)

Thanks bumskins, very interesting.

Personally i think its only a matter of time before rents (in absolute terms) drop in Sydney. Thats been the focus of the investor market - with all this supply coming online, the incentives to purchase new (tax and duty rebates) - its likely to soften the rental market (not sure by how much). This is wild speculation, but my impression of Sydney is that theres supply being spread around Sydney - so rents may weaken across the board.

For those that care, Canberra is being pummelled. The supply 'tap' is only dripping at this stage too, it'll be pouring within 12-36 months. Its hard to see how it wont be in for an extended rough time (even though there'll be a lot of bias from those in the industry telling you its going great guns).

As an aside, I went to a very interesting presentation from an economics consulting firm not too long ago about the 'supply' side of the housing market. Its the other half that gets very little attention. Takeout from it was that Sydney has been perenially undersupplied for over a decade (same number of buildings built year on year). 2015 will be the first where supply outstrips demand, but there's years of catchup to be made.

Interestingly, the regulators know this. Thats why those in policy positons are less worried about the run up in prices and dont call it a bubble - while the media tend to overhype the market and call it a bubble.

Rprodrive, sorry to hijack your Melbourne specific thread!

Cheers,
Redom
 
I've managed to rent out a house and an apartment in Prahran in the last 2 weeks without too much trouble. However, the agent did warn that it may be slow so the places were rented as the same price as previously.

Are you going through an agent or trying to rent it out yourself?
 
Looks like yours is the most expensive out of the 3 listings on re.com.au, by $85 a week. One for 495 and another for 480. Looks more townhouse, than unit. Maybe get the agent to list it under that category also, if you can?
 
Thanks for your suggestions everyone- the place rented for $580 after an open that resulted in 3 applications. Number of people coming through was steady after the price drop. It works out to a 5% drop in where the market was 12 months ago so not too bad and the days on market was 4 weeks.
 
What is your experience in Melbourne? Where have all the renters gone? :confused: I gather new investors to the market have led to a flood of rental properties available.

!

Some of the old renters are still there.
Some have now become first home owners.
There is a new pool of new renters.

The problem with all of the above is that all renters have more choice now.
More supply, less competition.

Whats the problem??????

Surely you didn't think that you had a monopoly on Melbourne supply of units.

Again, wherever excess profits are made, the market will adjust.

Supply of property rental sites is a 'low barrier to entry' game.

Of course the market will react to times in recent past when ques where lining up to rent.

I don't understand the whooha
 
Thanks for your suggestions everyone- the place rented for $580 after an open that resulted in 3 applications. Number of people coming through was steady after the price drop. It works out to a 5% drop in where the market was 12 months ago so not too bad and the days on market was 4 weeks.

And here we have the text book 101 lesson for property investors.

Property rental prices are very elastic.

So one has to understand the season of property very well if one wants to prosper quite easily.

We are now in the winter of the rental market because supply is increasing so fast.

So once one understands the season, one adjusts to it quickly.

Winter means hunker down, wait for the next season.

So properties coming up for lease might need a bit of a rent reduction.
We know its winter, we know that the rental market is very price elastic, so we drop the rents a bit.

It will be far less pain for everyone concerned, it will be financially positive because the loss in vacancy time often offsets any small reduction in rent (+ can choose better tenant).

When the season changes, the action plan will change.
 
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