Source : the age
Melbourne tenants looking for a house are being asked to pay an extra $5 a week, and a record amount for a unit, as the Victorian capital’s tight rental market pushes costs higher.
House and unit asking rents are now a record $600 a week, Domain’s latest Rent Report, released on Thursday, shows, after house rents rose 0.8 per cent in the June quarter. Unit rents peaked in March and remained steady.
The data takes in advertised rents but does not include lease renewals where rents may also increase.
Other cities surged ahead even more, meaning Melbourne is now the cheapest capital city to rent a typical house.
The rises follow the federal budget’s negative gearing and capital gains tax concessions reforms, aimed at improving younger people’s chances of buying homes. Treasury modelling predicted an uptick in rents of $2 a week.
The budget failed to provide short-term relief for renters, with no new increase to Commonwealth Rent Assistance and support for 80,000 new rental homes over the next decade. Despite the budget grandfathering existing landlords’ negative gearing arrangements, investors are preparing to pay more tax on capital gains when they sell.
A spokesperson for federal Housing Minister Clare O’Neil said: “We know renters are doing it really tough at the moment in a very tight rental market. That’s why we’re making renting easier, fairer and more affordable with longer leases, stronger tenant protections and more help to pay the rent: increasing Commonwealth Rent Assistance by more than 50 per cent by delivering the first back-to-back increases in 30 years.
“Our policies are increasing supply overall and will put downward pressure on rents over time but importantly, we want more renters to become homeowners – and our tax changes will help 75,000 renters to do that.”
Experts attributed Melbourne’s June quarter rise in house rents to a tight market and lack of available properties, rather than the federal budget’s tax changes, however, they said these could have an impact in coming months.
Domain chief residential economist Dr Nicola Powell said Melbourne’s vacancy rate was just 1.2 per cent in June. A vacancy rate of about 3 per cent reflects a balance between tenants and landlords.
“Melbourne hasn’t shown what is very evident in other capital cities and that is this rapid growth in rents – Sydney saw an extreme acceleration, and that’s a direct behavioural response to those budget conditions,” Powell said.
She said Melbourne’s rental market had already been affected by the Victorian government’s introduction of new rental laws in 2021 – some governing how often rents could rise – and increased land tax on second homes in 2024.
“Melbourne has already had lots of rental reform so it’s on a different journey – the hoops that investors have had to jump through has had a marked impact on investor activity,” she said.
“The concept of ‘investors have left the building’ has already happened.”
Investors opting out of the property market was a positive, independent economist Saul Eslake said, because it was giving first home buyers more of a chance to buy with less competition. It also meant they would no longer be in the rental market.
“The federal government can’t bring themselves to say it, but they will reduce investors in the market – but that’s a good thing,” Eslake said. “It reduces demand on rental properties.”
Eslake said it was too early to tell what the full impact of the budget announcements would be in the Melbourne market, given they had happened in mid-May and most would not come into effect until next year.
Rents have been rising for years as a fall in household sizes in Melbourne collided with the return of overseas migration after the COVID-19 lockdowns ended, but have stabilised recently as tenants hit the limit of what they could pay.
While Victoria has historically delivered more new housing, it is still racing to catch up and build enough to meet demand.
Melbourne’s tighter rental market is proving difficult for tenants because as rents go up, properties at the cheaper end of the market are becoming scarce.
Tenants Victoria CEO Jennifer Beveridge said even though rents weren’t rocketing in Melbourne, with landlords becoming more accustomed to the new rental laws, $600 a week was still expensive.
“Affordability is still a big concern for lots of renters,” Beveridge said. “We are working with people who are experiencing challenges … for repairs to properties or notices to vacate among other things.
“We do know it’s very challenging to find something else for an affordable rent,” she said.
House rents have risen most over the past year in the inner east, up 9.4 per cent to $875 a week. Unit rents rose most in the outer east, up 6.3 per cent to $553 a week since a year ago.
Growing cost-of-living pressures were putting renting families under pressure, Ray White Frankston’s head of property management Jessica Davidson said.
Rental arrears had “spiked” across more expensive and more affordable homes.
Ray White Frankston’s figures showed arrears on their rent roll had jumped from 3.6 per cent in May 2025 to 4.8 per cent in May this year.
Tenants are now looking for places they can better afford, with some downsizing properties to be able to make rental payments.
“Unfortunately, some people have been put in a position where they have to choose whether to put food on the table or pay their rent,” Davidson said.
Financial pressure was also on landlords, mostly “mum and dad” investors in Frankston, and that was pushing rents higher as they looked to cover extra costs from state and federal government changes.
Jamee Leighton found out how difficult it was to find a decent place to call home, when she was looking for an affordable rental in Frankston.
The 38-year-old who shares care of her two sons, Hendricks, 6, and Banks, 2, with her ex-husband, had a budget of about $450 to $550 a week and was lucky enough to find a unit, moving in a few weeks ago.
“You can’t get houses for that amount of money,” Leighton said. “The amount of places with holes in the roof, mould in the bathrooms … for my budget it was disgusting.”
Leighton said though she earned a good wage working in learning and development with a not-for-profit organisation, she was part-time.
“Being a single-income woman, I’m limited in what I can earn having kids, so I didn’t want to end up paying more than half my wage on rent,” she said.
Through her work, Leighton said she had experience with families who were struggling to make ends meet.
“Having to choose whether to live somewhere safe or put food on the table in Australia in 2026 is disgusting.”
