“Demand is far outstripping supply”: Rental vacancies plummet
Renting is about to get a whole lot harder, and potentially more expensive, for prospective tenants in Southbank.
Apartments are being snapped up quickly as a range of factors, including an increased demand, reopening of borders and lack of new properties coming on the market has seen one local agent forecast “rent going up”.
For the first time since the onset of COVID-19, residential vacancy rates in Southbank have dipped below five per cent according to the latest data from SQM research.
At three per cent, vacancies in the local area are at their lowest for three years (since March 2019).
The figures represent a huge bounce-back after almost one in five Southbank apartments (17.2 per cent) were empty less than 18 months ago, in October 2020. Since then, demand has steadily grown as the number of vacant residential apartments have dropped despite the impact of the Omicron variant.
Ray White Southbank principal Andrew Salvo said that after “a tough few years”, things had sprung back sharply despite a “worst ever quarter” in July to September 2021.
“The rebound has been so strong that we’re now back at pre-COVID levels within just six months,” he told Southbank News.
He said agents were seeing “huge numbers through properties” and forecast that vacancies would remain low.
“It’s not only that they’re renting quicker, we’re getting large numbers through open-for-inspections. We’ve had some properties where 40 people have turned up whereas during COVID and in lockdowns, we were lucky to get one. There’s a lot more demand. Demand is far outstripping supply at the moment.”
Mr Salvo said that the huge impact of the pandemic — whereby demand dropped and landlords were forced to reduce rent to ensure their properties could be leased — forced a “reset” of the local market.
“There has been a big reset in pricing to get into a state where we could attract people from other suburbs to come and live in our area,” he said.
Vacancies were a big issue at the start of COVID, but as rents reset the vacancy rate came down which meant there was no stock on the market. Now with the borders reopening and the free movement of people, there’s not much [available].
The return of international students has been a factor in the resurgence of the local rental market.
Prior to COVID-19, more than one in seven Southbank residents were international students.
And while that percentage is not as high as the CBD and nearby Carlton (where more than a third of residents in the area are international students), a sizeable number of those who opt to study within Melbourne choose Southbank as their home.
However, Australia’s strict border policy throughout the pandemic saw that figure decline.
But this had rebounded, too, and Mr Salvo said they had dealt with “a lot” of students in the past month.
Along with students, there was also demand for rentals from those interstate and in regional areas.
“We’ve had a lot of young professionals moving to Melbourne. A lot of people left Melbourne, and left jobs behind here, so there’s a lot of jobs. I’ve done a few open-for-inspections myself and talking to a few people from Sydney, they can get a higher-paying job [here] and their living costs are far cheaper. So, we’ve been able to attract people from interstate and regional areas who want [that].”
The predicted squeeze on the rental market was down to plateauing supply, too, according to Mr Salvo, with an uncertain pipeline of new properties.
“Demand has increased but it’s very much a supply issue as well … there was no new construction happening during lockdowns, no new commencements from what we could see. So, there’s going to be a bit of a black spot two years down the track,” he said.
“We might be having completions now, but in the next two years the number of completions will be far diminished. So, I see vacancy really tightening and rents going up even further, well above what it was pre-COVID.”
The pandemic has permanently changed many industries, and real estate is no different.
Once seen as almost trivial, virtual property tours are now an essential service.
“Pre-COVID we were sort of doing it (virtual tours) for the owners who wanted to invest in their campaigns, but generally most of them didn’t see any point,” Mr Salvo said.
“But I think buyer and renter behaviour has changed a lot. Through COVID we did virtual tours and now it’s put us in good stead for the future as well and we’re continuing to do it. People who rent in Southbank and the CBD; not many of them are from the area — we’re a very immature suburb. People are generally coming from somewhere. So, it’s imperative that we do it now as part of the service.” •