Thousands of Victorian landlords flee prime suburbs over rent reforms – realestate.com.au

Thousands of Melbourne landlords are walking away from some of the city’s most desirable locations in response to government policy.

Residential rental bond data shows there are 10,274 fewer rental bonds active in the state over the past year.

But at a municipal level, the data shows ‘shocking’ long-term declines of as many as 2,000 fewer active bonds, indicating a similar decline in the number of available rental properties since 2017 in some of the state’s most sought-after municipalities, from Port Phillip to Boroondara and Stonnington.

RELATED: Melbourne renters face $10,000 rent hike, landlords push for more

450,000 Victorian landlords face fines and default on rent reform

Victoria will ban no-fault rental bids and evictions from November 25

That was the year the Victorian government began a litany of rental reforms that have now grown to 150 changes for landlords to address.

Once affordable Frankston has also fallen by almost 1,000 rental properties in the timeline, with a drop of 989 homes, closely followed by the Mornington Peninsula, which now has 880 fewer bonds active amid a brutal homelessness crisis that has made the borough one of the states most likely to see people sleeping rough.

Further data from Homes Victoria shows renters are paying the price, with Melbourne’s vacancy rate at just 2.4 per cent in June this year, after averaging 5 per cent between 2020 and 2022.

This two-bedroom unit in South Melbourne is advertised at $700 per week. It is located in the municipality of Port Phillip.

---

In nearby Stonington, this two-bedroom apartment in South Yarra is listed at $680 per week.

---

In regional Victoria, the number is even worse at 1.8 per cent, the toughest level for renters since March 2022.

Census data shows demand for renters is growing, with 2021 statistics indicating 537,865 rental households accounted for 30.2 per cent of housing in Greater Melbourne, up from 472,462 (30 per cent) in 2016.

In total, Victoria has 72,000 more rental bonds active today than in 2017.

But experts have raised concerns that the areas behind most of the increase are on the city’s fringes, including Melton and Wyndham, and apartments in Melbourne city – accounting for almost 40,000 of the increase.

In Bendigo, this three-bedroom house costs renters $900 a week.

---

PropTrack economist Anne Flaherty says the declining availability of rental properties in Melbourne’s suburbs is “quite shocking”.

---

PropTrack economist Anne Flaherty said the decline in rental prices in attractive areas was “quite shocking” as the property market overall should have grown over time given population growth.

“A lot of it has to do with the exodus of investors that we’ve seen in recent years,” Ms. Flaherty said.

“There are high taxes and high compliance regulations, and a period during the pandemic when there was a moratorium on evictions, which put pressure on landlords and rents fell and property values ​​rose, and that caused investors to sell their homes.

“It’s improving, but it’s still nowhere near the level needed to recover.”

Victoria’s hardest hit rental markets

Source: Huizen Victoria

She also noted that investors in some areas, such as the Mornington Peninsula, may want to avoid rental regulations by designing their homes as short-stay holiday homes.

Morington Peninsula Council’s short-term rental register counted 2,294 properties in 2019, rising to a peak of 3,080 in 2023, before falling slightly to 2,860 in the most recent 2024 data.

Since 2017, rental reforms announced for Victoria have included minimum standards for rental properties that require everything from the installation of blind choir stalls to preventing landlords from discriminating on the basis of pet ownership.

Separate data from Ray White shows that since land tax increases started in 2024, landlords had auctioned off 140 homes in Craigieburn, 100 in Reservoir and more than 50 in half a dozen other suburbs – mainly in the north of the city. This does not apply to rentals sold by other companies or private agreements.

Frankston was once an affordable area, but now houses like this rent for $650 a week.

---

Nerida Conisbee, chief economist at the Ray White Group, says land tax costs are likely to tip landlords over the edge and force sales.

---

The firm’s chief economist, Nerida Conisbee, said that because of the many affordable areas, it was likely that landowners had been pushed over the edge by land tax and meeting minimum standard costs, meaning their investment was no longer viable.

“For investors who don’t have a lot of cash flow, those higher land taxes could take the land from viable to no longer viable.”

She added that more expensive neighborhoods that are losing large numbers of rental properties could also be affected by fewer and fewer landlords being able to afford homes in those areas – leading to more sales than purchases.

Toby Balazs, director of the Real Estate Institute of Victoria, said the problem was likely to get worse.

“Unless there is greater incentive for new construction and investors to enter the market, the challenging rental market will unfortunately continue,” Mr Balazs said.

Ben Kingsley, chairman of the Property Investor Council of Australia, said the data could also indicate long-term landlords were selling homes rather than upgrading them to meet an ever-expanding list of rental standards.

This four-bedroom house in Echuca, located in the Campaspe council area, will set tenants back $740 per week.

---

Ben Kingsley, chairman of the Property Investment Council of Australia, says long-term landlords are the most likely to have sold their homes.

---

“They are the ones who have been maintaining the properties for tenants for decades and have just had enough of the government, and are taking their money to a more accommodating real estate market to invest in,” Kingsley said.

“And that is a bad outcome for the economy and for the movement of investment capital, which is essential for a thriving economy. And that is what happens as a result of such strict rent reforms.”

Tenants Victoria chief executive Jennifer Beveridge said while it was good to see rental supply increasing overall, the concentration in the suburbs could “create serious challenges for workers”.

“A teacher or nurse may be able to find rental accommodation in Melton, but if they work in Port Phillip or Stonnington, where rental supply has declined, they face crushing commuting costs or are completely priced out,” Beveridge said.

“This geographic disconnect between where people work and where they can afford to live is fragmenting communities and pushing essential workers away from the areas they serve.”

The tenants’ advocate said they often heard of tenants being forced to choose between affordable housing and close to work, and that the decline in supply in Boroondara, Stonnington and Port Phillip, where there is a high concentration of jobs, meant that even well-paid professionals struggled to find a home near their employer.

Tenants Victoria chief executive Jennifer Beveridge says the rising numbers of rental properties are good, but their distribution is problematic.

---

In Melbourne’s far east, this three-bedroom townhouse in Croydon costs renters $675 a week. It is one of the areas with the largest decline in active rental bonds.

---

“And hospitality workers, aged care staff and other essential workers who keep the Mornington Peninsula economy going have nowhere to go – they can’t move further away because they are surrounded by water,” Ms Beveridge said.

Greystar Australia, one of Australia’s most active Build-to-Rent players, has added around 1300 homes to South Yarra and South Melbourne in recent years, offsetting even worse outcomes for renters in the two areas.

But managing director Matt Woodland said that with up to 50 new tenants a month, the two complexes would be fully let by the middle of next year.

“The general feedback (from renters) is that they enjoyed the simplicity of being able to rent here as you can book a tour and sign up online,” he said.

While build-to-rent could play a role in solving the housing crisis, he said it was not intended to replace the traditional landlord with investors.

Greysta’s first build-to-rent project in Victoria, the Gladstone, in South Melbourne.

---

Matt Woodland, managing director of Greystar Australia, says while they have helped increase supply in one of the areas of the city that have seen the most rental housing loss, they are not a replacement for traditional investor-owned rental properties.

---

Mr Woodland said getting more build-to-rent complexes up and running would either require improvements in construction costs or government policies to reduce regulatory costs and other costs associated with making housing available.

A government spokesperson said they were leading the country on tenants’ rights, but had more to do.

“The best way to make housing fairer for young Victorians is to build more homes faster – that’s why we’re introducing the biggest overhaul of Victoria’s planning laws in decades, bringing Victoria’s outdated NIMBY planning laws into the modern era,” they said.

Sign up for the Herald Sun weekly property update. Click here to receive the latest news from the Victorian property market straight to your inbox.

MORE: Victorian landlords face fines over new blind cord safety rule

Tenants win bond relief as 10,000 homes leave the Victorian rental market

Long-term vacant homes in Melbourne rise as vacancy rates grow | Prosperous Australia