The median apartment rent hit $450 per week,up 20 per cent from 12 months earlier in the fastest annual growth on record,the Domain Rent Report for the December quarter released on Thursday showed.
For houses,the median rent reached a record high $480 and grew 7.9 per cent in the 12 months to December.
The increase comes amid growth in demand as tenants make pandemic living habits permanent and eschew share houses for their own space,at the same time as international borders reopen.
Domain chief of research and economics Dr Nicola Powell said the figures were unusual.
“For Melbourne,this is quite a milestone in rents,” she said. “Normally when you speak about rents there’s not a lot of change.
“But what we’ve got now is the longest stretch of rent growth since 2007 and 2008. They’ve been rising for five quarters in a row.”
The Melbourne rental vacancy rate is at 1.4 per cent,close to record lows and well below its peak of 5.6 per cent in December 2020. It creates a challenging environment for renters trying to find a home.
“It’s firmly a landlord’s market,” Powell said.
Rent increases were particularly steep in inner Melbourne,where unit rents jumped 28.9 per cent in a year to a median $490 a week. Rents also rose by double digits in the inner east,up 14.1 per cent,and inner south,up 12.8 per cent.
Some experts have called for a rent freeze to curb Australia's growing rental crisis
Melbourne renter Emily Shoobridge spent six months couch-surfing because she struggled to find a home in the competitive environment.
She spent three months applying for rentals and only recently landed a lease in Melbourne’s CBD because she submitted her application immediately after an inspection that about 15 others attended.
She settled for a studio apartment,a compromise on her desired type of home,but the 25-year-old hospitality worker was left with little choice.
“I obviously didn’t want to live in a studio,” Shoobridge said. “Once upon a time I lived in a studio,it was when I was 18 and in student housing.
Emily Shoobridge has just rented a studio apartment after six months of couch-surfing.Joe Armao
“My mental health plummeted when I moved in there and I vowed never again to move into another.”
Shoobridge had spent half a year sleeping on friends’ floors and futons,and decided she would be better off living on her own rather than joining another share house.
“I knew going into it that it was going to be bloody tough,” she said.
“A lot of people have to settle for living situations they don’t necessarily want and that takes a toll.”
A studio apartment wasn’t Shoobridge’s first choice of property.Joe Armao
Grattan Institute economic policy program director Brendan Coates said Shoobridge was emblematic of a nationwide shift in housing demand. The pandemic caused Australians to value having their own,larger space,he said.
This new trend meant more homes were occupied,and when international borders reopened the market became much tighter than before the pandemic.
“It’s likely to get worse from here,” he said.
“A tight rental market means renters will be spending more of their incomes to keep a roof over their heads,which means they can’t spend as much money on essentials.
“We see rising rates of homelessness with rising rents. That’s the consequence.”
Coates said the crisis would deepen until a significant number of homes were built or made available for rent.
“Life’s tough if you’re a renter right now. You’ve got a big increase in demand with migration going up against a static supply,so in the short term rents will keep going up,” he said.
He said housing stress was also associated with poor health outcomes and developmental issues with children.
“There is evidence that if you’re living in housing stress it has a long-term impact on your wellbeing,” he said. “If you’re in financial stress it has an effect on your health.
“It has an impact on the long-term development of kids. There’s stress in the household,they miss out on nutrition if they don’t have enough to eat and they can miss out on educational opportunities.”
Centre for Independent Studies chief economist Dr Peter Tulip agreed rising rents would make homelessness worse.
“It’s a very tight rental market and landlords are able to charge substantially higher rents and still fill their properties,so why wouldn’t they?” he said.
Tenants looking for a home face tough competition.Supplied
“The single biggest cause of homelessness is high rents … We are seeing growing homelessness. It’s obviously not by choice,people are being squeezed and left without an affordable alternative and the result is homelessness.”
He said immigration has gone from close to zero to quite high levels,reversing the trend earlier in the pandemic.
“[Rents] will keep rising steadily until we start building more housing. The cost of housing will keep getting more and more expensive until policy changes.”
Tulip echoed the Grattan Institute’s concerns about the effect of high rents.
“One of the big effects on society is that higher housing costs are making Australia more unequal,” he said.
“High housing costs hurts lower income earners because they tend to be renters while benefiting the wealthy because they own the housing. This is a major factor of driving inequality in Australia.“
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