Shrinking residential vacancy rates are set to fuel continued rent increases in Melbourne, according to Real Estate Institute of Victoria (REIV) president Neil Laws.
The latest figures from the REIV show that vacancy rates are as low as 0.6% in some areas - well below the 3% mark that Laws believes keeps the rental market balanced.
"A balanced rental market is one when people can generally find a home to rent and landlords get a reasonable rate of return on their investment. An unbalanced market is what we have now - queues for rental homes and significant rent increases," says Laws.
According to REIV figures for May, residential vacancy rates are as low as 0.6% within 4km of the city centre - a marginal increase on April's historic low of 0.3%. The 4-10km ring, however, has seen its rental market tighten somewhat, with vacancy rates dropping from 1.6% in April to 1% in May - meaning that the overall vacancy rate for the city's inner 10km zone has dropped by 0.1% over the course of the month from 0.9% to 0.8%.
"In Melbourne, the inner city remains the area with the most significant shortage, with a vacancy rate of 0.6%, which is quite a contrast to four years ago when the inner-city vacancy rate was 6.2%," explains Laws.
The middle and outer zones have shown minor monthly movements, according to REIV data, with the middle zone's vacancy rate dropping from 1% to 0.9%, and the outer zone's rate increasing from 1.1% to 1.2%. Melbourne's overall vacancy rate remains unchanged at 1% - well below the magic 3% balance marker last seen in the city some years ago.
"The general rule of thumb is that the market is in balance when the vacancy rate is around 3%, and the last time the market was in balance was three years ago in January 2005 when Melbourne had a 3.3% vacancy rate," explains Laws.
"There's only one way that the market will come back into balance - more rental homes where people want to live, and there's no sign of that happening any time soon."
