Victoria Market: Moderate increases in rental costs over last year

Moderate increases in rental costs over last yearMelbourne renters have seen only moderate rises in rents over the past year, especially when compared to Sydney. At the same time investors have seen static yields but potentially benefited from improved capital growth.

Over the past year the median weekly rent for a house in Melbourne has risen by $10 and by $8 for units.. Currently the median rent for a house is $437 per week and $389 for a unit.

This compares to a rise of $23 per week in Sydney to $582 for a house and an $18 rise for units to $509.

It is certainly less expensive to rent in Melbourne than in Sydney and renters have been faced with more moderate increases.

In part, the lower weekly rent explains why rental yields are lower in Melbourne than in Sydney. The yield for a house in Melbourne was 3.4 per cent in December last year and 4.2 per cent for units. In Sydney, the comparable figure was 3.9 and 4.7 per cent respectively.

Over the past two years, yields have not changed substantially for houses in Melbourne with a change from 3.5 per cent 3.4 per cent recorded. Property owners over that time have benefited from capital growth.

Units, which have a higher yield, have recorded a similar change, from 4.3 to 4.2 per cent.

It is interesting to note that over the longer term, yields for both houses and units in Melbourne have stabilised at a lower level. From 2003 to 2005 investors benefited from yields of around 4.4 per cent for houses and 4.9 per cent for units.

Robert Larocca
RP Data Victoria Housing Market Specialist

About Robert Larocca

Robert Larocca has built a profile over the past eight years as an expert on the Victorian residential property market. He worked for the REIV both directly and as a consultant over 8 years acting as a spokesperson, managing its research department and public policy. He has been a media and government relations consultant and spent a decade working across the three levels of government including as a Councillor and Mayor in the City of Moreland. He has well developed leadership skills in the not for profit sector and has been the Chairperson of CERES Community Environment Park for 9 years.

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