In June, just before Melbourne re-entered lockdown, Harshada Shirodkar and her husband moved apartments.
But they didn’t move far. With vacancy rates in the inner city rising steadily, they noticed an increasing number of apartments becoming available in their South Melbourne apartment building.
“We had been in our apartment for two years, so we just started looking at the listings and noticed there were a lot of apartments available and also that they were cheaper than what we were paying,” the IT professional said.
Ms Shirodkar and her husband are among many inner-city residents who have taken advantage of falling rents since March.
Melbourne CBD rental prices plummeted 27.3 per cent in the year to December, with the median unit rent dropping to $400 per week – the largest fall of any Melbourne suburb – the Domain Rent Report released this week shows.
Other inner-city suburbs, including Docklands, Southbank, Middle Park, West Melbourne, South Melbourne, East Melbourne, Carlton and Albert Park, also featured in the 10 suburbs with the biggest drops in apartment rents, with falls ranging from 22.4 per cent in Docklands to 11.6 per cent in Albert Park.
By moving just a couple of floors, Ms Shirodkar and her husband secured a new lease for $50 a week less than what they were paying.
“The new apartment is exactly the same size but instead of paying approximately $450 a week, we’re now paying $400 a week,” she says
“So, that’s a saving of approximately $200 a month and If you calculate that over the year, that’s a huge amount,” she says.
Domain senior research analyst Nicola Powell said areas which had “heightened levels of apartment supply” and a “greater proportion of rental demand sourced from overseas migrants or foreign students” were hardest hit by rent falls over the course of the past year.
MacLeod, which is close to LaTrobe University’s Bundoora campus was the only outer suburb to feature in the top 10 list of declining apartment rents, with unit rents falling 18 per cent to a median of $250 a week.
“The international border closures have had a big impact on demand for rentals in these inner city areas and places like MacLeod, especially in places, such as the Docklands, that have had heightened levels of supply,” Dr Powell said.
She said remote working has also affected inner-city rent prices, as some residents relocate to middle ring and outer suburbs in search of more space, a trend that has driven up rent prices in some outer suburbs and regional areas.
“That ability to work from home has certainly driven a lifestyle exodus, if you like, to outer suburban and regional areas as some tenants become less tied to the location of their workplace.”
As a result, landlords have been slashing rents to in order to fill city apartments, some of which have sat empty for months.
Dionne Wilson, of Harcourts Melbourne City, said she recently leased an apartment in the CBD for $400 a week less than its previous asking price.
“We had one apartment in Market Street which was rented out for $1000 per week. It then sat vacant from about February last year and we leased it just prior to Christmas for $600 per week,” she says.
“I would say that tenant got a pretty good deal. We’re seeing asking prices for apartments being reduced by as much as 20 to 35 per cent, depending on the building and the property itself,” she said.
While inner-city apartment rents are falling, some of Victoria’s favourite coastal towns have seen rents skyrocket over the past 12 months.
In Sorrento on the Mornington Peninsula, house rents increased by 25 per cent to December, to a median of $650 a week. In nearby Mount Eliza and McCrae, house rents also increased significantly by 10.7 per cent and 9.5 per cent respectively. The median house rent in Mount Eliza is now $748 a week.
Dr Powell says increases in rents in coastal areas have been driven by people considering a lifestyle change and trying before they buy.
“I think a lot of people are using this pandemic period to try different lifestyles to see if it suits them and obviously the rental market is the way to go rather than actually purchasing straight up,” she says.
Liz Jensen, of Kay & Burton Portsea, is not surprised Sorrento has seen the biggest jump in house rents in the past year.
“I’m not the slightest bit surprised. In March when we had our first lockdown the phone started ringing then for permanent rentals and it just hasn’t stopped.”
She says while rental supply has all but dried up she can’t see demand slowing anytime soon, even when more people start returning to the office in the coming weeks and months.
“People are telling us that they can’t bear the idea of being jammed in the city and they just love it down here because it’s still very cosmopolitan but they’ve got the beach and they can walk everywhere,” she said.
“There will always be people who need to go to the office for something, whether it’s two or three days a week or once a month, but the thing is, this past year that we had has made people value their lifestyle and value what’s important to them and people are a lot more relaxed than they used to be about working from home.”