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Melbourne's rental vacancy rate is declining more rapidly than in any other part of the country. In August, it dropped to 1.19 percent, marking the city's second lowest recorded vacancy rate. The lowest, at 1.13 percent, was observed in March of this year. PropTrack has also disclosed a significant decrease of 0.74 percentage points in the number of homes available for lease in Melbourne compared to the previous year, making it the largest decline nationwide. While Melbourne ranks fourth among the worst capital cities in Australia in terms of vacancies, economists typically regard a 3 percent vacancy rate as a sign of a tight housing market.
In certain areas of Melbourne, such as the outer east, south east, and northwest suburbs, the availability of rental homes has become incredibly scarce, with fewer than one in 100 rental properties currently on the market. Citywide, there is now a 50 percent decrease in available homes compared to the pre-pandemic period.
The situation is even more dire in regional Victoria, where the vacancy rate has plummeted to just 1.07 percent. Anne Flaherty, an economist at PropTrack and the author of the report, attributed these low vacancy rates to several factors, including population growth and increased immigration levels following the relaxation of Covid-19 restrictions.
Furthermore, the rising costs of construction and shortages of building materials have hampered residential development projects like apartment buildings. Simultaneously, many landlords in Victoria are divesting from their investment properties due to escalating regulations and associated costs. Among these factors is the state government's intention to reduce the tax-free threshold for land tax on secondary homes from $300,000 to $50,000 in the upcoming year.
Additionally, the deteriorating affordability of housing is pushing a significant number of potential first-time homebuyers to opt for renting instead. According to the Real Estate Institute of Australia's Housing Affordability Report for the June quarter, housing affordability has decreased by 13.6 percent over the past two decades.
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