Dire rental affordability in Melbourne
Image: Canva.
  • Rental affordability across great Melbourne has plummeted 10 per cent in 12 months.
  • Melbourne's overall rental affordability rating is 126, which is moderately unaffordable.
  • Options for rentals that cost 15% of income are rapidly vanishing.

The dire state of rental affordability in Melbourne has just been thrown into sharp relief.

According to the latest Rental Affordability Index, released by peak housing body National Shelter and SGS Economics, an average Melbourne rental property costs 24% of the average household’s income of $108,955.

To put this into perspective, a renter spending over 30% of their income would put them under what’s considered ‘rental stress’.

The index gives Melbourne an overall affordability rating of 126, which is approaching what analysis considers to be moderately unaffordable.

Rental affordability index, Greater Melbourne

rental affordability index greater Melbourne
Source: SGS Economics and Planning

Moreover, for people on low incomes such as single people on Jobseeker, single or coupled pensioners, and single part time worker parents on benefits, rents were classified as either ‘extremely unaffordable’ or ‘severely unaffordable’.

National Shelter CEO, Emma Greenhalgh, said “In Melbourne, students and people on lower incomes are priced out of entire swathes of the city. The rental market is fundamentally broken.”

What has changed in the last year

According to SGS Economics & Planning principal, Ellen Witte, there was an entire corridor that was considered to be affordable to the average rental household last year, stretching from Footscray in the inner west north to Meadow Heights.

However, as of the June 2023 quarter, she said those options that cost less than 15% of a household’s gross income had all but vanished.

Furthermore, according to the Rental Affordability Index, in 2022, many inner suburbs, especially in the inner north, provided affordable rents. Renters could live as close as 5km to 10km away from the CBD in suburbs such as Footscray, North Melbourne, Parkville or Carlton, as well as Hawthorn.

This year however, the average rental household would have to look as far as Sunshine, about 15km from the CBD, to find affordable rents at the median rate.

Rents have risen 16% over the past year, driven mainly by rapid price rebounds in one and two bedroom apartments that now exceed pre-pandemic levels.

Top 5 least affordable postcodes in Greater Melbourne

Rank Postcode Suburbs RAI score Rent as share of avg income
1 3187 Brighton East 80 38%
2 3193 Beaumaris 80 38%
3 3206 Albert Park, Middle Park 85 35%
4 3104 Balwyn North 88 34%
5 3106 Templestowe 91 33%

Source: SGS Economics and Planning

Back to pre-pandemic levels

According to the report, rental affordability has dropped 10% since the June quarter of 2022 and returned to 2018 levels, offsetting any gains made during the pandemic.

“Unaffordability has spread from the cities to well into the regions,” said Witte.

“Households will have to live further away from where the jobs are to access affordable rents, and businesses are struggling to find workers.”

Witte added that this is a problem that needs to be tackled on multiple fronts.

“This downward spiral has now reached the point where very few affordable long-term rentals are on offer,” she said.

“We need to attack this problem from multiple angles; this means expanding social and affordable housing, rethinking how we use tax subsidies and strengthening renters’ rights.”

You May Also Like

Do Australia’s latest auction figures show a return to a balanced market?

Clearance rates across the combined capitals dipped to 59.8%, the fifth consecutive month of decline.

Australia’s housing market hints at turnaround as November sees slowest monthly gain in home values

Australia’s housing market signals potential turnaround as November sees its slowest monthly growth since February, recording 0.6% rise.

Perth property market predictions 2024 – House price & rental forecast

Experts deliver their take on what 2024 holds for Perth’s property market – predictions for capital growth range from 10 to 15 per cent.

Australian house prices soared to new record highs in November despite the cash rate rise

Home values lifted 0.22% MoM, with the national median now $761,000.

Experts Corner by The Property Tribune

Ko & NPA partner to launch several co-owned luxury properties at Mermaid Beach, Gold Coast

Ko's partnership with NPA Projects provides more opportunities to co-own off-the-plan holiday residences, including exclusive Gold Coast properties

Continue reading

Top Articles

Expert tips on how to be a successful property investor

Property expert and buyer's agent, Lloyd Edge, shares his insights.

Australian commercial property update: Industrial and tourism assets lead the pack in trying times

Commercial assets have faced volatility recently, driven by financing changes and demand fluctuations from institutions and funds.

WA has emerged as a property investment hub, and why that's a good thing

Eastern investors chase Perth's affordability, doubling the distance between home and investment in 2023, reveals MCG research.