Melbourne_Rental_Crisis | Investment Property Professionals Australia wide

Melbourne’s Rental Crisis: Dire for Renters — Unprecedented Opportunity for Investors

A properT network Insight – Clear Market Data, Practical Guidance, Real-World Impact

Melbourne’s rental market in 2025 is no longer just “tight”—it has entered a genuine supply emergency. Rents have reached historic highs, rental homes are becoming extremely difficult to secure, and demand is being fueled by population pressures that show no sign of slowing.

For renters, the situation is severe.

For investors, the window of opportunity is unparalleled in the last 15 years.

properT network exists to help clients make informed, strategic decisions. That means telling the truth clearly—without political spin, without sensationalism—just facts, numbers, and what they mean for buyers and investors.

The Warning: Melbourne’s Rental Market Has Reached Critical Levels

Melbourne’s median weekly rent has surged past $650, with many inner suburbs exceeding $900 per week for a basic two-bedroom apartment. Vacancy rates are hovering around 1.8%—well below the 3% threshold considered a balanced market.

In short:
Demand is skyrocketing.
Supply is shrinking.
And rents are still rising.

For families, young professionals, and essential workers, affordability has collapsed on the back of severe shortages of rental properties, both in Melbourne and in Victoria’s Regionals!

But for investors?

This environment is producing some of the strongest rental yields, lowest vacancy periods, and most stable long-term demand we’ve seen in decades.

Why Rents Are Exploding – and Why That Matters for Investors

At properT network we break market shifts into data-driven fundamentals. Melbourne’s rental crisis is the result of six powerful forces colliding at the same time:

1. Extreme Vacancy Shortages

A median vacancy rate of 1.8% means fewer than 2 homes out of 100 are available at any time.
Demand overwhelmingly exceeds supply—and that drives rents upward year after year.

2. Construction Collapse

Victoria added only 8,400 new rental dwellings in 2024, while population growth exceeded 140,000 people.
Melbourne needed roughly 56,000 new homes—meaning a shortfall of nearly 48,000 dwellings in one year alone.

NB : This is not a short-term blip. It will take years to reverse!

3. Investor Exodus

Over 21,000 rental properties disappeared from Victoria’s long-term rental pool last financial year because of:

increased taxes
stricter regulation
mortgage stress
landlords selling and exiting the market

This removal of supply is one of the most important drivers of rising rents.

4. Airbnb Growth

More than 8,000 dwellings in greater Melbourne are operating as full-time short-stay rentals.
That’s 8,000 homes not available to renters.

5. Wages vs Rent

Over the past five years:

Wage growth: 14%
… whilst Rent Growth: 38%

Rents are growing a massive 2.7× faster than wages, and that gap is widening. Affordability to own a property has dropped significantly. APRA has just released new Lending Criteria dropping a banks ability to lend you what you need, their new formula is 6 x Debt to Income Ratio on existing builds, see more here. This will further push a potential buyers ability to become owner occupiers further out of reach, meaning more Renters in an already over tight rental market!

How the Australian Government has made certain decisions culminating in this happening in Australia in 2025, is just irresponsible and unfathomable !!

6. The Mortgage Reset Effect

Thousands of Victorian investors faced doubling repayments as fixed mortgages ended. Many sold.
Every property sold to an owner-occupier = one less home for renters results in higher rents for the remaining stock.

Where the Rental Pressure Is Hitting Hardest in Inner Melbourne

Some of Melbourne’s most desirable and high-demand suburbs have experienced astonishing rent increases, see some examples below :

Southbank – ~$850/wk for a 2-bed unit
Carlton – ~$700/wk
Fitzroy – ~$750/wk
Glen Waverley – ~$680/wk for a family home
Footscray – ~$580/wk for a 2-bed unit

These increases are not uniform—they are accelerating fastest in areas with strong amenities, strong transport, and strong employment nodes. These are exactly the markets properT network has guided investors into for years.

Same and Similar Rental Crisis in Regional Victoria

The Victorian regional rental crisis is characterised by record low vacancy rates, rapidly increasing rents, and severe lack of affordability. This crisis is driven by factors as per Inner Melbourne, including a decline in rental stock, wages not keeping pace with rent hikes, and a growing lack of housing supply, which makes it difficult for businesses to attract workers and exacerbates homelessness. Major regional centers like Bendigo, Ballarat, and Wodonga amongst others, are considered unaffordable.

The advent of Share Housing is becoming more commonplace and sought after in Regional Victoria, but be very mindful of looming high supply and or locations unsuited to Co-Living style accommodations.

Ask us where, what works, what doesn’t work and how – before you are lured in by the high yield potential being spruiked, these are on “paper only”. See more here on why there is a rise in CoLiving property demand.

The Reality for Renters – And Why This Matters for Investors

The human stories behind the numbers are deeply concerning:

Nurses paying nearly 60% of take-home income on rent needing to live close to work.
Young families with less than $300 left each month after essentials just to provide a roof over their heads.
Share houses adding extra roommates because rent has risen too quickly. Resulting in the Rise of Investment into Co-Living properties. See why here.

This isn’t sustainable for renters.

But it does indicate that rental demand is so intense it is reshaping how people live.

High rents + low supply = stability and strong yields for Investors.

Government Targets vs Market Reality Check

The Victorian Government’s plan for 80,000 dwellings per year is, by expert consensus, simply unachievable under current planning, tax, and construction settings. Approvals remain slow, investor taxation remains heavy, and construction capacity is hamstrung and limited.

The real outlook?

Melbourne will not catch up to demand in the next 3–5 years and probably closer to 10 years or longer.
Vacancy rates are likely to remain under 2.5% for the foreseeable future.
Rent growth of 6–10% per year is increasingly likely in high-demand suburbs.

For investors, this means a rare multi-year period where rental yields continue to rise, tenant demand remains strong, and strategic acquisitions create significant long-term upside.

The Investor Opportunity (Right Now)

properT network’s analysis is clear:

“We are in one of the strongest rental conditions for investors in modern Victorian history.“

The combination of:

✔ record demand
✔ chronic undersupply
✔ collapsing construction activity
✔ rising rents
✔ extremely low vacancy

…creates an environment where well-located investment properties can outperform both in yield and long-term capital growth.

This aligns with what we tell our clients every day:

Crisis for renters becomes opportunity for investors—if approached strategically, responsibly, and backed with data.

What Smart Investors Are Doing Now

Our investors are:

1. Targeting high-demand, infrastructure-rich suburbs

Areas where tenants are competing heavily for available homes.

2. Focusing on quality townhouse and unit stock with strong rental appeal in inner Suburbs and or Houses or Townhouses in outer Melbourne.

New Builds, for higher rents, higher depreciation and potential for higher future resale values – real homes renters want and desperately need.

3. Securing properties before the next rental surge in 2025–2027

By Investing now, this positions investors ahead of future yield increases and predicted capital growth cycle.

4. Leveraging properT network’s data to identify resilient, future-proof suburbs

Not every suburb will perform equally. AND definitely, very few properties are Investment Grade and worthy of your Investment Dollars. Ask us what, where and why?
But the right suburbs are seeing 10–25 rental applications per listing.

Final Word: A Challenging Time for Renters—A Strategic Window for Investors

Victoria’s rental crisis is real, deeply felt, and not close to ending.

For renters, this is a period of financial stress and limited options.

For investors, however, the next 24–36 months represent a continual rare alignment of:

strong rental yields
high tenant demand
low vacancy
long-term growth potential
minimal competition from exiting landlords

This is the time when smart, informed investors build their portfolios—while others are sitting on the sidelines.

properT network will continue to provide transparent market data, strategic guidance, and property opportunities that align with long-term stability—not speculation.