By Elizabeth Redman and Kate Burke
Rents are higher than a year ago in almost every part of regional Victoria, and the growth has rippled out from lifestyle hotspots to smaller towns.
But the breakneck pace of growth is slowing as the tree-change trend loses steam.
Rents have jumped by double digits in regional areas such as the Campaspe shire.Credit: Century 21
Ten council areas in the state posted double-digit rent rises, in the latest Domain Rent Report for the December quarter.
The largest rise was in the Strathbogie shire outside Shepparton, up 19.1 per cent in the past year to a median rent of $420 a week.
It was followed by the Alpine, Campaspe and Indigo shires, where rents rose more than 13 per cent each over the year.
It follows a boom in regional rents in recent years as Melburnians who could work remotely fled lockdowns in search of more space.
“They’re still growing, because there’s obviously still a mismatch between supply and demand,” Domain chief of research and economics Dr Nicola Powell said.
“But they’re moving away from that strong rate of growth.”
She noted that in some popular areas, the annual increase is now in the single digits after an earlier boom. On the Surf Coast, rents rose 3.3 per cent in a year to a median $620 a week, while the Macedon Ranges are 4 per cent higher at $520 a week.
Rents are now hitting an affordability ceiling for many tenants, forcing some to house share or look to a different property type, she said.
“Most of the areas have had an over-30 per cent increase in the last five years,” she said. “That’s where you see the affordability ceiling and the strain being placed on local residents that are unable to keep pace.
“We haven’t built enough social housing for people on lower incomes – those most vulnerable Australians that are in the private rental market.”
She added that natural disasters such as last spring’s floods in regional Victoria can also displace people from their homes and push them into the rental market.
In Euroa, in the Strathbogie shire, there are few homes available for rent and costs have increased.
Ray White Euroa’s Shane Thomson said tenants could find a three-bedroom house for about $350 a week 12 months ago, but now might expect to pay $450 or even more.
When the sales market was buoyant during the property boom, investors were taking the opportunity to cash in and sell to owner-occupiers coming to the area, which has reduced the supply of rental properties available, he said.
Interest rate rises had also prompted landlords to review rents, he said, especially when a property became vacant, while tenants sharing a house were filling their spare rooms to cut costs.
“As rent increases, it often makes it harder for people on single incomes to get into the private rental market,” he said, calling for more social housing in the area.
In hotspots such as the Surf Coast, rental growth has slowed.Credit: Jason South
In Echuca, in the Campaspe shire, investors also sold while property prices were moving, LJ Hooker Echuca principal Allison Minter said.
Interest rate rises added pressure to landlords, while others sold due to state government rental reforms that required properties to meet minimum standards.
There are scant rental properties available and any family homes listed for rent can attract 50 to 60 applications, she said.
“It is pretty scary, it is pretty sad,” she said.
Tenants could expect to pay between $380 to $480 a week for a basic home, or as much as $650 for a larger residence.
Melburnian tree-changers are still arriving, either for work, or moving for retirement. Some had rented a home temporarily while building a place to live in retirement, she said, adding to demand.
KPMG chief economist Dr Brendan Rynne said regional rental increases – which started in popular sea and tree change destinations earlier in the pandemic – had rippled across the state to more affordable markets.
“Lower income tenants in those rural and regional areas that saw an influx [of demand from tree changers] have now been pushed out of those markets because they’re unable to pay the higher rents,” Rynne said.
“They’re the ones now moving into locations that are further out… that are now seeing rental increases.”
Rynne said regional demand was running out of puff, and felt prices were likely to plateau — and later fall in some regions — as there was a swing back to regional and metropolitan cities.
Some tree-changers may return to the city in a post-lockdown world, but this would be counterbalanced by limited new housing supply in many regional areas. Some landlords would pass on increased mortgage costs to tenants, he said.
Rynne added that the floods had further reduced the supply of housing, which increased competition and prices for remaining properties.