The Melbourne suburbs where rents soared most over the past year

Asking rents are higher than a year ago in the vast majority of Melbourne suburbs, leaving priced-out tenants with fewer choices.

Some of the sharpest increases have been in relatively affordable neighbourhoods as tenants flock to cheaper options, but many affluent areas have not been spared.

House rents jumped by double-digits in a handful of suburbs in Melbourne’s outer north, including Campbellfield, up 21.5 per cent to a median $550 a week, Domain’s latest Rent Report for the March quarter, released on Thursday, showed.

Nearby Dallas and Jacana rose 19 per cent each, both to a median $500 a week. Broadmeadows rose 15.1 per cent to $495.

The sharpest rise was a few suburbs further east in Bellfield, up 25 per cent to a median $650.

Even so, there were double-digit rises in a range of more expensive suburbs including Toorak, Fitzroy, Prahran, Balwyn North and Mount Eliza. They all have median weekly house rents north of $800.

Domain chief of research and economics Dr Nicola Powell said affordability was a core issue in Melbourne’s rental market.

“People are almost being forced to look at an area they otherwise might not have considered,” she said.

“People swap locations, I think families, young couples or individuals end up compromising on that location just to find somewhere that fits their budget.”

But she noted that there are several suburbs where rent growth has been more modest over the past year, and limited to 5 per cent or less in 12 months.

Rhiannon Crowley is renting a home with a balcony and would like to live somewhere with a courtyard.Credit: Joe Armao

“That pressure is easing, but it’s occurring slowly,” she said.

Rhiannon Crowley, 32, has been renting a one-bedroom apartment in Armadale, in Melbourne’s inner south-east, for about three years.

It has a balcony, but she would prefer somewhere with a courtyard, especially because she has adopted two cats, and she would rather they were nearer the ground.

“When I started looking at other rental options, prices had gone up so significantly that anything within my budget of what I was currently paying was significantly worse than where I’m renting,” she said.

Crowley has been looking to buy a home for at least six months.Credit: Joe Armao

Crowley, who works in operations administration and office management for an intellectual property firm, was looking at online listing photos of rentals that were smaller, sometimes without a balcony, and in poor condition. Armadale unit rents rose 9.1 per cent over the past year.

This experience prompted her to try to buy an apartment instead. She has been looking for more than six months through buyer’s agent Kristy Caskey of The Property Bureau. While she is looking in her own suburb and in St Kilda, she is open to moving to Carnegie or Murrumbeena.

Caskey has noticed renters seeing the opportunity to purchase while apartment prices are lagging and investors have dropped back.

“But obviously when you’re paying big rents, it’s harder to save a deposit,” Caskey said.

Some renters are considering whether to try to buy their first home instead.Credit: Simon Schluter

The few suburbs where rents have been falling include relatively high-priced areas, which is cold comfort for tenants. House rents are less than last year in Parkville, Princes Hill, Sandringham, Kew East, Caulfield and Hawthorn East, but all still cost between $730 and $890 a week.

Noel Lim, chief executive of Anika Legal, a legal service that helps renters, regularly encounters tenants who have experienced large rent rises, of $100 a week or more.

In Victoria, the law does not specify how much a landlord can increase the rent, although they must provide information about how they calculated the increase.

“Right now, landlords can raise the rent by any amount they like and renters are really paying the price,” Lim said. “That means growing financial stress, housing insecurity and the risk of eviction.

“What we see at Anika Legal is renters terrified of asking for their tenancy rights because they are afraid they will get a rent increase in retaliation.”

Lim called for some form of rent regulation that would prevent the most extreme rent increases and give tenants more stability, which is common overseas.

He backed the ACT model, for example, where rent increases are tied to the rate of inflation for Canberra rentals, plus 10 per cent.

However, the economist Saul Eslake, principal of Corinna Economic Advisory, is not in favour of rent controls because of the impact on housing supply.

Instead, he said, increasing the supply of rental accommodation would help ease pressure on rents. For example, the federal government through its Housing Australia Future Fund was already providing more funding to build social and affordable housing.

Eslake said one solution could be scrapping negative gearing tax breaks and reducing the capital gains discount for investing in established housing, which would reduce competition at auction from investors, supporting first home buyers and reducing demand for rental housing.

“If you kept negative gearing and the capital gains tax discount for investing in new properties, that might encourage more investment in new properties, which is what you want,” he said.