The tight rental market means tenants are paying more- Canva
  • Investors in Melbourne are benefiting from a rental market favouring landlords
  • Herron Todd White Director Perron King says the well-known interest rate hikes are hurting investors’ borrowing capacity
  • The current rental yield in Inner City Melbourne stands at 4.9%

While the tight rental market means there is no shortage of tenants in Melbourne; Herron Todd White‘s latest Month in Review report reveals investment grade purchases are becoming harder.

Herron Todd White Director Perron King explains that property has maintained its status as a popular investment platform, with a notable increase in both house prices and rents over the past few years.

Investors in Melbourne are currently benefiting from a rental market favouring the landlord. Melbourne’s low vacancy rate means investors will have no issues obtaining and retaining a tenant while also seeing an increase in rent.

Melbourne rental vacancy rate

Despite this, he says “… investors in the Melbourne market may be in for some tougher times in the short term from a capital growth aspect.”

“With the well-known interest rate hikes hurting investors’ borrowing capacity, the search for investment-grade purchases becomes harder, especially combined with a shortage of quality stock on the market due to a decrease in overall market activity.”

Melbourne Inner City

The Herron Todd White report highlights that in Melbourne’s Central Business District investors can ride the wave of workers coming back to the office and international activity starting to pick up.

The demand for units in the city is high, considering that they constitute 99% of inner city Melbourne’s dwelling types.

Melbourne Inner City rental yield

The current rental yield in Inner City Melbourne stands at 4.9%, and the median rental price is $490 per week. In Richmond, the median rental price is $450 per week, and the rental yield is 3.7%.

A two-bedroom, one-bathroom apartment with shared amenities is listed at $420 per week in Carlton, reflecting a 30.7% decrease from the previous quarter. Units in Carlton, on average, take 51 days to sell.

Geelong sees steady activity

Over the past year, the investment market in the Geelong region has maintained a stable level of activity.

The demand for rentals seems to be strong, with only a 0.77% vacancy rate and a significant 23% of the population in the region choosing to rent.

“This demonstrates that with the high demand for rentals, investors are able to gain a steady flow of income, with little fluctuation and turnover of tenants,” Mr King says.

He highlights that a significant local factor that affects the investor market in Geelong is the presence of both Waterfront and Waurn Ponds Deakin University campuses.

“With an influx of young adults competing for four-plus-bedroom dwellings to be occupied as share houses, investors are seeing rental earnings in excess of $550 with constant demand,” Mr King says.

“Furthermore, these large dwellings have the ability to be leased per room, allowing for further opportunities in rental return.”

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