Posted
People in regional Victoria are at risk of being
priced out of the rental market amid declining vacancy rates and growing
competition from former Melbourne-based tenants.
Regional
Victoria's vacancy rate — the percentage of properties available to rent
— dropped to an average of 1.2 per cent in February according to the
Real Estate Institute of Victoria (REIV).Key points:
- Vacancy rates have declined across regional Victoria over the past 12 months
- Rental prices have increased by as much as 10 per cent
- There has been increased competition for a limited supply of housing as Melbourne's population moves to regional centres
That was down from 1.9 per cent 12 months ago, with 3 per cent considered to be a balanced market.
As Melbourne's population grows by about 125,000 a year, both the Federal and State Governments have pitched infrastructure projects aimed at encouraging more people to live in regional areas.
But there are concerns that private housing investment, specifically in the rental market, is not keeping up.
A tough ride for people 'outside the norm'
In her four-month-long effort to find a home for herself and her two-year-old daughter in Ballarat, Caitlin Costello said she would, at times, apply for a dozen different properties a week."It was a case of, 'I'm going to try anyway but I don't expect to get the property' because I am a single mum, I'm a full-time mum, I'm on Centrelink," she said.
"A lot of them [houses] are falling apart and they're still asking top dollar. The real estate don't care about showing you through a dirty house because the housing market is just that bad you've got to take it."You can't be too picky or you're going to miss out."
Ms Costello said she found it difficult to compete with couples and full-time professionals at property inspections.
"There were usually … about 30 people there. I'd been to one house and she [the agent] had been showing people through all day so she'd had about 200 people through.
"Your minimum rent these days for a two-bedroom house is $250."
Good for investors, trouble for tenants
Former president of the REIV and real estate agent Trevor Booth said Ballarat recorded a vacancy rate of 0.7 per cent in January, which was "one of the lowest, if not the lowest, vacancy rate on record"."It's been trending down for the last couple of years and we certainly anticipate that the low vacancy rate is not going to dramatically turn upwards anytime soon," he said.
"There is frustration and that frustration is unfortunately going to continue."
But the dwindling supply of rental properties was good news for landlords, with "higher and better yields than most investors anticipated".
"A unit or a house that was leased at say $300 a week 12 months ago, a tenant moves and the property goes back on the market at $330 a week and it's being leased very quickly," Mr Booth said.While he said the flow of people to areas outside of Melbourne was "a great thing", it had meant higher rents in regional centres.
"They're actually renting in these areas initially and then getting a feel for how that change of lifestyle and the convenience of using a fast train service," he said.
"What they're then doing is moving out of the rental market and moving into the buyer market."The latest State Government rental report has shown that while median weekly rent remained steady in Melbourne, it increased by 5.3 per cent in regional Victoria between December 2017–18.
The flipside of a growing economy
Mr Booth said another cause of Ballarat's slim vacancy rates was the growing job opportunities being created in the regional city.Feb 2019 vacancy rates, regional Victoria
- Geelong and Baron region: 1.7 per cent
- Bendigo and Loddon: 1.1 per cent
- Ballarat and Central Highlands: 0.8 per cent
- Wimmera: 1.3 per cent
- Shepparton and Goulburn: 1.6 per cent
- East Gippsland and Wellington: 1.0 per cent
- Mildura and Mallee: 0.7 per cent
- Wodonga and Ovens-Murray: 1.4 per cent
- Latrobe Valley and Gippsland: 1.4 per cent
- Warrnambool and Western: 1.2 per cent
"Ballarat is going through what I would consider one of its strongest growth phases in probably 25 years," he said.The State Government has committed $461.6 million to redevelop Ballarat Base Hospital, $100 million to upgrade train lines and $47.8 million to build a GovHub office for 600 public service positions being relocated from Melbourne.
Moreover, the development of an industrial estate to Ballarat's west has attracted potential commercial investment, including a proposed $300-million waste-to-energy facility.
"It's bringing workers and families into Ballarat, either in the construction phase or for general employment, and that is putting a lot more pressure on the need for rental accommodation," Mr Booth said.
But he said there was uncertainty among investors in the property market, including about tighter lending standards in the wake of the royal commission.
"There are areas that we feel damage the confidence of investors and ultimately investors are the ones who provide rental accommodation in the marketplace," Mr Booth said."Unfortunately the supply of rental accommodation is not going to keep up with demand, so there needs to be more incentive from governments to encourage investors to get back into the marketplace."
The difficulty of keeping up with fast market forces
Professor of Housing Studies at Swinburne University of Technology Kath Hulse said "the affordability problems that have been evident in Melbourne for a long time are now spilling over into the rental market in regional areas".
"It's quite hard for government policy to keep up because some of the change can be quite quick, the market change can be quite rapid," she said.
"The main tool that governments have, particularly state governments, is regulation, legislation, and we know that takes a lot of time to agree on changes and get through parliament."
Professor Hulse said governments more broadly had moved away from funding the construction of large public housing projects.
"There's been this move to supporting demand rather than providing supply. What we know is there needs to be some balance between them," she said."There are some people for whom the market simply doesn't provide housing at any price they could afford.
"Their choice is they can either rent something that's more expensive and that puts them in stress, or they can drop out of the rental market or go into marginal housing like a caravan park."
Renters aren't just students anymore
Professor Hulse said there had been a demographic shift within the rental market over the past 30 years."We used to think of it as a place for predominantly young people for a relatively short period of time, students and young people just starting work, but what we now know is that the rental sector houses a diverse group of people," she said.
"About 4 in 10 have children and that's unusual historically, there's also a lot more professional singles and couples renting who are on moderate or higher incomes."After hearing about an upcoming vacant property through a friend, Ms Costello reached out directly to the landlord to explain her situation and get ahead of other prospective tenants.
While she secured a 12-month lease before renovations are due, she said she worried about her and her daughter's long-term future.
"It's easy to put on a smile and pretend you've got it all together, but because you're trying to juggle the child, you're trying to juggle keeping financials in tow, keeping the house, finding a new house … and if you're doing that by yourself, it makes it 10 times harder."
As for buying her own house, Ms Costello said it was a far-off dream.
"Realistically, in my current financial position and the way the property market is at the moment, it's not a realistic wish."
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