Race for space: Melbourne’s ‘hellish’ housing Hunger Games

Key points

  • Rental vacancy rates in Melbourne are at a record low of 1 per cent and advertised rents are continuing to rise. 
  • A further interest rate rise this week to a ten year high of 3.35 per cent has made buying a home increasingly unaffordable for many.

The latest interest rate hike has not dampened buyer appetite, if the bumper turnout at one Preston home that went under the hammer on Saturday is anything to go by.

Meanwhile, the “hellish” dash to secure a rental rolls on, with panic about finding a home taking grip even among those on comfortable incomes with strong histories.

A crowd lines up for the auction at 41A Jacka Street Preston on Saturday, where the house sold for $1.2 million. Credit:Joe Armao

On the first Saturday of auctions since the rate rise, The Sunday Age charted a course across the hipsterish suburb in Melbourne’s north, attending auctions and open-for-inspection rentals. The suburb has a median house price of $1.08 million, just above the city’s median of $1.03 million.

Some buyers and tenants scored their dream homes, but for most, the hunt continues.

At 41A Jacka Street, the auction of a three-bedroom house drew a crowd. The property, which was advertised for between $1 million to $1.1 million, sold for a little over $1.2 million.

Auctioneer Jesse Dolcetta said he was not surprised by the interest in the “beautiful home in a good spot”, which saw three parties trading bids.

While the property market slowed last year as a string of rate rises took some of the sting out of values, there had been a recent influx of buyers competing for a limited number of properties, he said. But the dip in prices has seen some sellers holding off in the hope of a market rebound.

Auctioneer Jesse Dolcetta at the Auction at 41A Jacka Street Preston.Credit:Joe Armao

“Stock is pretty tight at the moment,” Dolcetta said. “For quality homes, it’s a little bit tighter again.”

There were nine properties auctioned in Preston on Saturday.

“We found a lot more buyer activity in the market,” Dolcetta said. “The interest rate rise this week hasn’t slowed that.”

Interest rates on Tuesday hit a 10-year high of 3.35 per cent, making the repayments on beefy home loans increasingly unaffordable for many.

But some buyers, Dolcetta said, had already factored that in.

“I think most people sort of already brace for it,” he said. “At the end of the day, people still need to upsize, downsize and transact.”

International student Anny Aranutayanun, meanwhile, has lost count of the number of properties she has inspected over the past two months in her search for a rental.

Anny Aranutayanun is finding it very hard to rent a place in Preston. Credit:Joe Armao

Her best estimate is that she has submitted more than 30 applications – with no success.

“Today this is the sixth [inspection] and at every house there are a lot of people,” Aranutayanun said during an inspection for a two-bedroom apartment at Blanch Street, advertised at $550 a week.

Rental vacancy rates in Melbourne are at a record low of 1 per cent and advertised rents have risen at an unprecedented pace.

Tenants Victoria director of community engagement Farah Faroque said renters were under extreme pressure, particularly those on low incomes or surviving on income support.

“Contagion has spread to working people on moderate incomes with good rental histories, who sometimes rented for decades, [and] are finding the competition pretty intense and are missing out,” she said.

Tenants Victoria has been working with a family that looked at 64 rental properties with no luck.

It is also monitoring a surge in rental increases since the start of the financial year from a smaller increase of $30 a week to a $480 a week increase for one share house.

“The rental market in Melbourne is intensely challenging,” Faroque said.

“It’s more than hot, hot, hot, it is actually, for many people, hellish.”

Brendan Coates, economic policy program director at the Grattan Institute, said there was a race for space among Australians looking for somewhere to work from home or moving out of share houses or family homes, adding substantially to housing demand.

The Reserve Bank of Australia estimates this trend has created demand for an extra 140,000 homes, offsetting the fall in population growth during the pandemic.

“Migrant numbers are rebounding incredibly quickly, but the existing Australian population has sort of spread itself out on the park bench while no one else was there,” Coates said.

“You’ve kind of got this Hunger Games scenario where there’s very few rental properties available and many people looking to rent them.”

The Grattan Institute estimates that the Chinese government’s decision to only recognise degrees earned onshore could see up to 40,000 additional students return to Australia in the coming months.

This is likely to result in the need for an extra 20,000 homes – more than a third of the total rental stock now advertised in both Melbourne and Sydney.

Coates said people looking to buy a house were also struggling as turnover was “incredibly low” at the moment.

“Clearance rates are well down, there is an abnormally low amount of stock on the market at the moment,” he said. “Very few people who are looking to sell have chosen to list their properties at this time.”

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