Rental crisis deepens as number of bonds drop for first time on record

The number of homes being leased in Victoria has fallen year-on-year for the first time since records began, while the number of new rental properties hitting the market has also plunged.

New data from Homes Victoria for the December quarter shows there were 669,640 rental bonds being held across the state – a 0.8 per cent decrease on the same period in 2022. It’s the first annual decline in active bonds since the records began in 1999.

The annual number of active rental bonds in Victoria fell for the first time since 1999.Credit: Peter Rae

When people lease a home in Victoria, their bond – usually equivalent to a month’s rent – is lodged with the Residential Tenancies Bond Authority, offering a measure of how many people are currently paying rent.

Over the past decade, the number of active bonds held has increased at an average rate of 3.2 per cent.

The recent fall has coincided with a shortage of new homes being built, an increase in land taxes paid by landlords, and owners of rental properties owners increasingly looking to offload their investments as higher interest rates bite, experts in industry figures say.

It highlights the extent of the squeeze that tenants are now feeling as record low vacancy rates – just 0.8 per cent in Melbourne, according to Domain’s latest figures – help drive rents higher against the backdrop of a broader cost-of-living crunch.

The total number of new lettings across the state also declined to 48,162 in December quarter – a drop of 13.9 per cent on the same period last year. In Melbourne, the decline was 15.8 per cent.

Over the same period, the index that measures median rents across Melbourne rose by 15.2 per cent. The city’s median rent is now $530 a week, ranging from $480 in Melbourne’s west to $600 per week in the city’s south.

Tenants Victoria chief executive Jennifer Beveridge said the state was in the middle of a rental crisis and people on low or middle incomes were feeling the pain.

“All tiers of government need to put the foot on the pedal to deal with systemic challenges that have been long in the making,” she said.

“The state’s recent housing statement set some ambitious goals regarding overall housing supply, and close attention also needs to be paid to growing the pool of social housing for those on the lowest incomes.”

Ahead of the state budget in May, the Real Estate Institute of Victoria (REIV) has called on the state government to introduce new tax incentives to get investors to supply rentals to the market long-term.

One option floated was to lower land tax for owners who kept their property listed on the rental market for an agreed period.

About 860,000 Victorians will be hit with higher land tax bills this year under temporary changes introduced to pay down the state’s net debt – forecast to hit $177.8 billion by mid-2027. Half are expected to be paying land tax for the first time.

The REIV has also called for a review of stamp duty, including potentially removing it and replacing it with a new charge that encourages more market activity.

REIV president Jacob Caine said renters were facing unprecedented competition for properties.

“It’s time the Victorian government reconsidered several comfortable, yet outdated, taxes like
stamp duty and instead adopted fit-for-purpose tax measures that will drive investment and
give more Victorians a roof over their heads,” he said.

“To increase the supply of housing in Victoria, we need a tax regime that positions this state
as a more competitive place to invest.

“While we welcome recent commercial and industrial property policy efforts, more must be done in residential property to bolster housing supply.”

A survey of REIV members found 90 per cent of agents were being contacted about recovering costs from additional land tax. The institute also said 70 per cent had reported increased contact from landlords looking to sell.

Shadow treasurer Brad Rowswell said the bond data was evidence that taxes were hurting housing affordability.

He called on the state government to rule out any new or increased taxes in the upcoming budget

“In the almost 12 months following Labor’s latest property tax hikes in last year’s budget, rents have continued to climb, vacancy rates have plummeted, and critical investment continue to be driven interstate,” he said.

An Allan government spokesman said the state’s housing statement – published in September – had introduced increased protections for renters to manage the housing crisis.

”Whether you’re renting, buying your first place, upsizing or downsizing – the work we’re doing means there’ll be a place you can afford, and that you can call home,” he said.

Victoria’s housing statement set a target of 800,000 new homes over the next decade.

Over the year to January, a total of 51,068 houses, flats and townhouses were approved across the state, according to the Australian Bureau of Statistics.

But just 2370 detached houses were approved in January – the lowest monthly total since October 2013.