The surprising regional Victorian towns where rents are rising fastest

Far-flung regional Victorian towns have clocked double-digit growth in asking rents as the knock-on effect of the housing affordability crisis sends ripples statewide.

Some former Melburnians who embarked on a tree-change during COVID have stayed in the regions, putting pressure on country markets unable to supply enough homes to workers in high-demand industries, and those seeking better value than the city.

Mildura rents have jumped over the past year.Credit: John White Photos

Tenants are moving outwards from even the fringe suburbs of Melbourne – sometimes by hundreds of kilometres – to reduce living costs.

The food-bowl city of Mildura has clocked the highest growth in asking rents of anywhere in regional Victoria, landing at a median of $475 after a 15.9 per cent annual spike, Domain’s latest Rent Report for the March quarter, released on Thursday, shows.

Asking rents have increased by 10 per cent or more over the past 12 months in seven regional local government areas in Victoria.

These include the high-country haven of Mansfield, with a median of $550 per week (up 14.6 per cent), Swan Hill on the Murray River (a $460 median, after 12.2 per cent growth) and the shire of Moyne, which includes the coastal hamlet of Port Fairy (up 11.1 per cent, for a median of $500).

Melbourne’s median house rent is $580 a week as of the March quarter, up $10 a week over the past year or 1.8 per cent to a record high.

Domain chief of research and economics Dr Nicola Powell says regional rental prices are at record highs, but the rate of growth is slowing.

“There are structural issues going on between the balance of supply and demand,” Dr Powell says. “The pressure is still on for tenants.”

Property investors, meanwhile, have been retreating from the Victorian market.

Investors have been selling up, deterred by costs, and those homes are not always returning to the rental market.

“When you look at the value of home loans being financed to investors, Victoria is one of the weakest states,” Dr Powell says.

“First-home buyers have basically taken the place of investors, and those who are left in the market are facing tighter rental conditions.”

Victoria’s high country has romantic allure, and new residents are keen to check it out.

Swan Hill rents have risen. Credit: Robert Blackburn

McGrath Mansfield director Sam Mcdougall says buyers may need to rent before they purchase.

“It is a lifestyle choice to come and live here and we have plenty of people looking to buy land and build a home, or buy a house, but they don’t have it all sorted yet, so they are wanting to rent,” Mcdougall says.

“We have higher demand for some of the essential services, such as hospital staff, doctors and emergency service workers, and there are more employment opportunities as the town continues to grow.

“But the bottom line is Mansfield – and some other key regional areas – are in their prime, in terms of a great demographic of people and a strong tourist trade.”

Regional areas have long offered a refuge of affordability.

However, KPMG director of planning and infrastructure economics Terry Rawnsley says expensive rental prices in Melbourne’s middle and outer suburbs are pushing tenants much further afield.

“We have seen a regular ripple effect, but now it has gotten to the point where to find the next most affordable town, you might have to go 200km down the highway,” he says.

“We are starting to reach the limit of how far the ripples will go.”

Rawnsley says essential workers, including teachers and nurses, moving to regional areas during COVID have changed local economies, including in Mildura.

This has steadied regional labour markets, reducing reliance on agriculture, but rental prices have risen as a result.

“When you look at the top fastest growing LGAs – Mildura and Swan Hill – they are benefiting from a good agricultural year,” Rawnsley says.

“Production is up and so the workers are coming into the towns.

“There also appears to be a segment of people who have moved to Mildura or Swan Hill during COVID, and there are more regular, long-time residents in the town.

“All it takes in places like Mildura, even a few people remaining there long-term, post-COVID, is enough to shift the dial on the rental market, and their spending flows to the economy.”

The feasibility of supplying more homes in regional Australia remains a challenge.

“Builders can’t quite make a profit if they want to start building more homes, so there is still a handbrake on growth,” Rawnsley says.