Southbank rent soars after unprecedented 40 per cent rise
The average Southbank unit costs 40 per cent more to rent than what it did 12 months ago, after an unprecedented rise in local rental prices.
In January 2022 the average weekly rent for a Southbank unit was $450, however one year on that has risen sharply to $628 according to SQM Research.
Available data, from 2009 on, indicates that a 12-month hike of such magnitude has not been seen before in postcode 3006.
Online message boards contain stories of Southbankers struggling to deal with substantial rent rises imposed on them by landlords.
One local said they were informed that the rent on their two-bed, one bathroom apartment would go up by $650 per month, which amounted to a 25 per cent increase.
“[I’m] not really wanting to pay $7.8k more a year to rent. But here we are I suppose,” they said.
“[The] REA [real estate agent] gave a range of factors, including inflation, rate rises and ‘market prices’. Is this happening to other people? Is it normal?”
Another poster responded: “In Southbank right now, yes, it is unfortunately normal. I was asked to pay a 30 per cent increase and people in my building also had enormous increases passed on. It looks like a combination of making up for lost or decreased rent through COVID, and soaring demand.”
Weekly rent in Southbank has now risen above pre-COVID levels, where it hovered at just over $600 per week at the start of 2020.
Ray White Southbank principal Andrew Salvo told Southbank News that the data was reflective of what he was seeing.
In less than six months, from the third quarter of 2022 to January 2023 (albeit an incomplete quarter), average rent in their portfolio had risen 24 per cent, from $463 to $574 per week.
Mr Salvo said there were a number of factors behind this, and while demand had indeed grown with people moving back to Melbourne post-COVID and the return of international students, the bigger issue was on the supply side.
“Generally, we’ve always got a few projects per quarter settling in the City of Melbourne, with hundreds of units of supply hitting the market. That’s not happening at the moment,” he said.
A key reason for this was a 20 per cent jump in construction costs but, from a local perspective, Mr Salvo said a considerable number of Southbank units had also been taken off the market through sales.
A huge amount of tenants have bought — that just goes with the maturity of the suburb. We’re finding a lot of our tenants that’ve been with us for 10 years have converted to purchasing a property. A lot of investment properties have been taken off the market and turned into long-term owner-occupier properties, so that’s depleting. That generally gets topped up; generally, as a building gets older that will happen … and new off-the-plan buildings get sold to investors, which then replenishes the supply loss.
This however, according to Mr Salvo, was currently not happening.
He said the sharp leap in rent was also a market correction after the pandemic.
“People need to remember that rent also dropped 30 per cent through COVID, so we are recovering. It’s a recovery,” he said.
“On average across our portfolio we have only just made up our losses from COVID.”
In Victoria, there is no law that determines how much a rental provider can put the rent up by.
In most cases, however, rent cannot be increased more than once every 12 months (until recent rental reforms, this was just six months).
According to Consumer Affairs Victoria, letting agents or landlords must tell renters about increases at least 60 days before the rent actually goes up.
The rental provider must also detail how they calculated the increase (for example, the consumer price index) and what the renter can do if they think the increase is too high.
The pinch is not just being felt by Southbankers locked into leases, but also by those hoping to shift apartments or move into the area for the first time.
From a high of 19.2 per cent in October 2020 (where almost one in five Southbank dwellings were empty), residential vacancies in the local area have plummeted to around 2 per cent.
This has made apartment-hunting a far tougher and mentally taxing prospect for those looking to move.
To put this in context, during the height of COVID there were more than 1600 apartments vacant in Southbank.
Now, that figure is below 200, and competition at inspections is high.
Mr Salvo said that a recent viewing for a one-bedroom Southbank apartment attracted 30 registrations and, for the first time ever, the agency required extra staff members to help organise interested individuals.
He said there were ways for prospective tenants to stand out and “get ahead of the curve”.
“Your application needs to be squeaky-clean, ready to go … build the relationship [with the letting agent], and give as much testimonial from your previous property manager as you can to build a case for yourself.” •
Image credit: Pat Whelan.