PropTrack: Melbourne vacancy rate lifts for third straight month, rent crisis could ease in 2025

Melbourne’s vacancy rate has improved for the third straight month and experts believe it could be an early sign of the end of the rental crisis. Find out how much longer you have to hold on.

Tenants inspect a rental apartment in Ascot Vale in the depths of Melbourne’s rental crisis. Picture: NCA NewsWire / Luis Ascui.

Hundreds of thousands of Melbourne tenant’s could see a reprieve from rental price surges as soon as next year after a third straight monthly improvement in the city’s vacancy rate.

PropTrack’s latest rental market insights released today show that for the month of May the Victorian capital’s vacancy rate rose 0.1 percentage points to 1.34 per cent, putting it slightly above the national average for the first time in 2024.

It’s also the first time the city’s vacancy rate has improved for three consecutive months since November 2020.

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Latest Census data shows there were 537,865 rented households across Melbourne in 2021, accounting for 30.2 per cent of all households in the city.

A 1.34 per cent vacancy rate applied to that figure indicates there would have been 7200 homes available to rent citywide in May.

It marks an about 500 home increase from April.

PropTrack economist Paul Ryan said the vacancy rate was not yet high enough to slow rapid rises in rental costs which surged 14 per cent across Melbourne over the past year.

“Three months of easing conditions is something we haven’t seen for four years, so things are getting better,” Mr Ryan said.

“But I would say that we will have a very tight rest of this year.”

A Carlton home for lease in January of this year. Picture: NCA NewsWire/Andrew Henshaw.

If the improvements in the city’s vacancy rates continued on trend, he said Melbourne could be back to a 2 per cent vacancy rate or better during 2025.

This would likely result in rents rising roughly in line with wage growth, around 3 per cent a year, instead of recent double-digit surges.

“But we would need to see (another) six to nine months of rental vacancy rate increases,” Mr Ryan said.

“That will need investors to come back into the market. And with taxation there are question marks over whether that will happen.”

The economist added that population demands also appeared to be easing and Melbourne was benefiting from reasonable numbers of new homes being completed, which he said was the key to relieving rental pain long term.

Solid new housing completion figures have helped Melbourne’s rental vacancy rate.

However approvals data shows the pipeline of new construction will soon dwindle.

Real Estate Institute of Victoria president Jacob Caine said their data was also showing signs of improvement for tenants and while there were complexities ahead it was a “good sign”.

“This is news that should give renters, particularly those in the middle of a lease, optimism that the next time they go to lease a property that process should be less frustrating and deflating than it was the last time they looked to rent a property,” Mr Caine said.

However, he said for a truly balanced market a vacancy rate closer to 3 per cent would be necessary and tenants would continue to endure more moderate rent rises for a while longer.

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Originally published as PropTrack: Melbourne vacancy rate lifts for third straight month, rent crisis could ease in 2025