Wood Property
Rents are going up

Rents are going up… what about values?

Need help with your apartment?

We know rents are going up but there were two apartment research reports released to the market this week that caught my eye.

  1. Tim Lawless of Core Logic – “Gap widens between houses and unit values
  2. Louis Christopher of SQM Research – “Vacancy rates sharply decrease over January

Core Logic and SQM are both highly regarded research houses. When you read these, what hits you is the similar conclusion from both reports that there will be continued pressure for unit values and rent to rise through 2024.

Both research reports were picked up by the press and got a lot of coverage.

Kate Ainsworth – ABC Business reporter, covered Tim Lawless’s research on the widening gap between house and unit prices.

The research shows that in Melbourne the percentage difference in value between houses and apartments rose from 38.5% ($225,656) in March 2020 to 55% ($334,569) in 2024. That is a 48% jump in 4 years.

Mr Lawless said “it was a likely scenario that apartment prices would increase.”

Interestingly Wood Property reported on this exact issue in Jan 22 in its “Mind the Gap” article.

Nila Sweeney – AFR reporter covered the SQM research by Louis Christipher who said, “rents would likely keep rising strongly across the country this year as vacancies fall further. Vacancies were already low to start with due to the ongoing rental shortage, so this renewed increase in demand can only push rents higher at a rapid pace, certainly over the first half of the year.”

The report shows apartment rent has grown in 3 Melbourne suburbs by 36% (Springvale), 37.9% (Box Hill) and 46.5% (Brunswick East) over the last 12 months. This is no longer a Covid catch up. That is already in the can. This is now pure market growth.

Both these reports show a seismic market shift that will certainly change behaviours in the market. Something’s got to give.

Opining on the outlook Tim Lawless said “I wouldn’t be surprised if we do start to see more demand being deflected towards the medium and high-density sector, and by that I mean town homes all the way through to high rise units, simply because that’s where people’s budgets are going to be taking them,” he said.

Each of the reports discuss the underlying drivers of short supply and growing demand driving market movements. While we can expect a tapering of net migration during the Winter months it will still be historically high. As we are not seeing any meaningful change to supply or demand imbalance the status quo of rising rents will most likely continue. This is desperate news for renters already caught in the rental market crises.

So what is the fallout of this? Today one of the largest home sharing sites, Flatmates reported a record 212,000 members were active on the platform in January nationally. This is the highest ever. Of these 50,880 were in Victoria.

Flatmates.com.au community manager Claudia Conley said “…the cost-of-living and rental crises was leading to more people turning to share accommodation that usual. … We are expecting February to be just as busy and probably into April”

The most in demand suburbs in Melbourne are shown below. Note how demand is outstripping supply though.

  1. Fitzroy – 1738 (people with)- 10 (rooms available).
  2. Malvern – 301 – 2
  3. Fitzroy North – 374 – 3
  4. Middle Park – 105 – 0
  5. Burnley – 85 – 1
  6. Collingwood – 673 – 8
  7. Caulfield – 405 – 5
  8. Cremorne – 157 – 2
  9. Prahran – 746 – 10
  10. Hampton – 74 – 0

This shows that people are looking to find shared accommodation to avoid the high rental costs. My guess is there is also some parents welcoming back their children who had previously moved out. Let’s hope they help out with the housework a bit more this time 😁

Share your thoughts or questions

Your email address will not be published. Required fields are marked *

Need help with your apartment?

Apartments Made Easy

Written by a 4th generation real estate agent Apartments Made Easy gives you the tools and tells you all you need to know about how to buy, sell, own, lease, and manage your apartment successfully.

Recent Posts

Need help with your apartment?