Rents soar as housing runs low

RESIDENTIAL rents are on the rise for the first time in five years, driven by a sharp fall in the number of Melbourne houses available.

Agents report rent increases of $10 to $20 a week in inner suburbs, and the head of property research at Macquarie Bank, Rod Cornish, has tipped solid rises next year.

Official vacancy figures to be released by the Real Estate Institute of Victoria today are expected to show a further decline in Melbourne's residential vacancy figures.

Inner-city vacancy rates peaked at 4.2 per cent in September 2004 but had fallen to 2.7 per cent by August this year.

A 3 per cent vacancy rate is considered a balanced market and the sharp decline is expected to put further upward pressure on rents.

Mr Cornish said the last apartments in Melbourne's high-rise construction phase would settle in the first half of next year and he predicted strong rental demand would pick up in the second half of the year after the supply was absorbed.

While reluctant to put a figure on the overall rise in rents in the cycle, Mr Cornish said the high number of immigrants choosing to settle in Melbourne and the trend for people to delay purchasing a home until well into their 30s was underpinning demand.

Mr Cornish said the rent cycle's upswing would be felt more in Sydney, where there had been little construction over the past 2½ years.

Adrian Jones, of Noel Jones Real Estate, said some rental managers had started reviewing rents and tenants had accepted increases of between 5 and 7 per cent without "blinking an eye".
Mr Jones predicted rents would rise by up to 10 per cent over the next 12 months.
He said the eastern suburbs company had 3600 properties under management and in the past year its vacancy rate had declined from 2.5 per cent to under 1 per cent.

There was strong demand for top-end properties that had suffered falls in rent of between 10 and 25 per cent two years ago.
He tipped rents would bounce back as demand was very strong for executive family residences.

"Traditionally the busiest time of the year for property managers is December and January, but this year offices have been overrun with quality applicants months earlier than usual," he said.

Andrews Corporation business and development manager Mariam McDonald said rents had risen by $10 to $20 a week in inner suburbs and in the city centre there was good demand for quality apartments.

This was despite a record number of 3090 apartments settling in the CBD, Southbank and Docklands this year.

Tim Nicoll, of Melbourne City Real Estate, said top-end dwellings in the city centre were commanding strong prices, with three-bedroom, two-bathroom residences renting for $800 to $1000 a week.

But when multiple high-rise towers had been released to the market at the same time it had resulted in a short-term decline in rents, he said.