Victoria’s rental vacancy rate hits new low as population booms and banks crack down

By Jack Kerr and state political reporter Stephanie Anderson

Updated 24 Aug 2018, 8:49am


The rental vacancy rate in Victoria has hit a record low, the state’s peak real estate body says, and the swelling population has been blamed.

The latest figures from the Real Estate Institute of Victoria (REIV) show the vacancy rate dropped to just 1.8 percent in July.

That’s the lowest it has been in the 16 years since the REIV began collecting such data.

It’s also well below the 3 percent rate the REIV says is needed for a healthy rental market, where there is enough supply to meet demand.

Renters in regional Victoria are having the hardest time finding a home: the vacancy rate outside of Melbourne dropped to 1.5 percent, from 2.3 percent a year ago.

Vacancy rates in Melbourne’s outer suburbs were also below the state rate, sitting at 1.6 percent.

“The vacancy rate has been on a slow, steady decline since before 2014, basically driven by strong population growth,” Tenants Victoria CEO Mark O’Brien said.

“There’s not really been a supply response to reflect that strong population growth.”

Victoria’s population grew by 2.3 percent — or 143,000 residents — last year, according to the Australian Bureau of Statistics.


Photo: Victoria’s rental vacancy rate has fallen to 1.5 percent in regional Victoria. (Source: REIV)


‘Investors retreating from the market’

REIV president Richard Simpson said tighter lending restrictions for property investors were also having an impact.

“Investors have really retreated from the market on account of the crackdown on finance from the banks,” Mr. Simpson said.

However, that was making it easier for some renters to become first home buyers.

“We’ve definitely seen that occur in the lower end of the market,” he said.

“In the outer suburbs of Melbourne, demand for those kinds of houses has really soared.”

Mr Simpson said the Government needed to address the supply of housing, by allowing for higher density living in the inner city.

“People are going to always want to come to Melbourne,” he said.

“It’s about now making sure that there’s enough supply to meet that demand.”

Mr. O’Brien said the rental investment sector was in need of reform.

“Trying to fill the private rental market with mum and dad investors is a very poor option for such a significant market,” he said.

“What governments should be looking at is how do we introduce institutional investment into the private market so that we don’t get these strange peaks and troughs in the supply response.

The low vacancy rate could further exacerbate the state’s homelessness problem, he said.

While vacancy rate figures are released on a monthly basis, the REIV said the data was calculated as a six-month average, in order to eliminate volatility in the figures.