Apartment Values Are Set to Soar Amidst the Ongoing Rent Price Crisis


The rental crisis in Melbourne that is seeing exorbitant rent hikes for even the most humble of apartments, continues on in earnest as apartment listings slumped for the month of April.

PropTrack data shows new rental listings fell by 20 per cent in April, and director of economic research Cameron Kusher said traditional areas where people rent in Melbourne were seeing big spikes in demand and big falls in supply.

Mr Kusher told realestate.com there were a range of factors driving the crisis, least of all being surging migration.

“We saw a big breaking up of sharehouses (during COVID) and that meant more people were demanding rental properties,” he said.

“Initially, a lot of those people moved out of Melbourne but now … they are moving back.

“We’ve seen a lot of people that own investment properties selling their properties off, that’s reduced supply.

“The more recent impact on this is that overseas migration into Australia has ramped up really quickly.”

With less supply comes higher prices and apartment investors will of course be looking at these higher rental returns with keen interest and it should be a matter of time before they get involved and apartment values rise.

It’s not just higher rental return that motivates apartment investors however, they also look for property that they expect to go up in price for capital return, attract tax benefits and so their children have housing security.

So the net annual return of rent minus running costs might not the only thing to get investors and buyers piling back in to the market.

Another round of interest rate rises this week announced by Reserve Bank governor Philip Lowe certainly wouldn’t have helped those possible net returns.

But really, it’s surging migration that is putting the most upward pressure on rental market growth, with net overseas migration to Australia predicted to be around 400,000 people for the 2022-23 financial year with another 1.5 million over the next five years.

With that sort of influx, and with most migrants landing in Melbourne and Sydney, there will need to be tens of thousands of new apartments created over the next decade to alleviate the shortage.

Apartment values should surge once new migrants to Australia have rented for a couple of years and then get ready to buy, adding to buyer demand in an environment where apartments are in short supply.

With interest rates looking like coming off in 2024, and without any other major unemployment dramas or unforeseen circumstances, the forces of supply and demand on Melbourne apartments should see values spike over the following two years.


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