Melbourne, like many global cities, has seen its share of price hikes. But recent data suggests things are stabilizing.
As 2024 closed, the median rental cost in Melbourne was $580 for a house and $550 for a unit. And while there was an increase of 3.8% in rental costs throughout the year, this is a massive drop compared to 2023’s surge of 19.6%.
| Keep in mind: Properties closer to the city center are more expensive compared to ones in the suburbs |
Beyond the Rent: The Hidden Costs
Let's dig into what else you, as a tenant or potential landlord, need to consider:
Utilities: This is a big one. Expect to pay electricity (around $97/month), gas ($62/month), water ($64/month)– they all add up. And Victoria is pushing for mandating energy and water efficiencies for properties. While this is fantastic for the environment (and your long-term bills), older, less efficient rentals might cost you more upfront.
- New heating and cooling systems could save renters $215 a year, while upgrades to the hot water system could save about $113 a year. The government estimates the total savings at $5677.
Bond/Security Deposit: This is typically a month's rent, held as security against damages. You'll get it back (hopefully!) when you move out, but it's a significant upfront cost.
Moving Costs: Don't forget the expense of actually getting your stuff into the property! Hiring movers, renting a truck – it all adds up.
Insurance: As a renter, you need contents insurance to protect your belongings. To protect and cover the cost of furniture, electronics, clothes, jewelry and other valuables. Prices for renters insurance can run anywhere between $300 to $500 annually, for $50,000 or more in coverage. Landlords, of course, have their own insurance obligations.
Transportation: How will you get around? Melbourne has a decent public transport system, but you might still need a car, which means registration, insurance, petrol, and parking.
Internet/Phone (Around $72/month): Essential for work, staying connected, and binging Netflix.
Council Rates (for Landlords): As a property owner, you're responsible for council rates, which contribute to local services and infrastructure.
Rental Application Fees: While not common, some landlords might charge a small fee ($50-$100) to process your application. If approved, this rental application fee is deducted from your first rent payment, but if not you will have the money returned to you within seven days.
The 30% Rule and Rental Stress
Here's a crucial point: many Melburnians are experiencing "rental stress," spending over 30% of their income on rent. This is particularly challenging for single-income households. According to research, some individuals earning less than $90,000 a year and renting a typical Melbourne apartment are likely experiencing rental stress.
The '30:40 indicator' is also used to measure housing affordability stress. It identifies households as being in housing affordability stress when the household has an income level in the bottom 40% of Australia's income distribution and is paying more than 30% of its income in housing costs.
| Keep in mind: When setting your budget, whether you're a tenant or a landlord calculating potential rental income. Over-leveraging yourself is never a good idea. |
Victoria's Rental Reforms: What You Need to Know
Victoria is introducing significant changes to rental property standards, aiming to improve the quality, safety, and sustainability of rental homes. These reforms, build upon existing minimum standards, focusing on enhanced energy efficiency and renter safety.
Key changes to prepare for:
Minimum Standards: Stricter requirements around heating, cooling, ventilation, and overall property condition.
Energy Efficiency: A push for more energy-efficient appliances and insulation. Landlords may need to invest in upgrades to meet these standards.
Ending "No Grounds" Evictions: Landlords will need a valid reason to evict a tenant.
Rental Dispute Resolution Victoria (RDRV): A free public dispute resolution service to help mediate simple issues between landlords and tenants such as repairs, maintenance, damage, bond claims and rent increases.
What This Means for You:
Renters: Expect better living conditions, more security, and a fairer system for resolving disputes.
Landlords: Anticipate potential upfront costs to meet the new standards, but also the opportunity to attract higher-quality tenants and potentially increase rent (within reason).
Compliance Deadline: The compliance deadline for the new rental standards is set for October 30, 2025. From this date, these standards will be applied to new rental agreements or conversions from fixed-term to periodic rental agreements.
Where should you focus your investment?
It depends on your goals. Inner-city apartments (apartment in Melbourne) offer high rental yields and appeal to young professionals, while houses in the suburbs attract families seeking space and stability.
Inner City vs. Suburbs: A one-bedroom apartment in the CBD can range from AUD 2,000 to AUD 3,000 per month, while prices in the inner suburbs drop to around AUD 1,200 to AUD 2,000 per month.
Rental Market Variations: Unit rents in West Melbourne, Carlton and Southbank have escalated dramatically, recording rises of 34.2%, 30.8%, and 29% respectively.
Hot Properties and Key Locations
Southbank: This vibrant precinct is known for its stunning Australia 108 and Uno Melbourne apartments, offering incredible city views and world-class amenities. (Consider properties around 60 Southbank Blvd).
St Kilda: A beachside suburb with a bohemian vibe, St Kilda offers a mix of apartments and houses, perfect for those seeking a relaxed lifestyle (Fareham St Kilda is an area to explore).
Docklands: A modern waterfront precinct with stunning apartments and easy access to the city (Regatta at Collins Wharf offers premium waterfront living).
Inheritance Tax and Other Considerations
I know what you might be thinking: What about inheritance tax in Australia? It's a valid concern, but the good news is that Australia doesn't have inheritance tax. However, it's always wise to seek professional advice on estate planning to ensure your assets are protected.
Why Melbourne? Why Now?
Because right now, there's a smart chance to get into the Melbourne property market. Prices are starting to go up again, and interest rates might climb even higher. Melbourne homes are currently undervalued, which means there's hidden value waiting to be discovered.
But here's the key: not all properties are equal. You need to know where to buy, what to buy, and which area is the best for invest in Australia.
Here's a warning: If you wait for interest rates to drop, you'll be fighting with everyone else for the best homes.
Imagine next year, you see australia property price going up and you're still paying high rent.
Don't let that happen to you! Contact me now!