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Tenants in Victoria’s established tree-change areas are being asked to pay up to $400 a month more than last year, as overall regional rents hit a record high.
The Murrindindi Shire, about 90 minutes north-east of Melbourne, had the biggest annual growth in asking rents in the state at 23.3 per cent in the year to June, the latest Domain Rent Report shows.
The weekly median asking rent, across towns including Alexandra, Yea, Kinglake and Marysville, increased by $100 a week to $530.
Experts say the pursuit of lifestyle, affordability and employment is drawing renters to regional Victoria, and, along with landlords passing on higher borrowing costs, it is contributing to rising prices.
The second-highest rise (13.6 per cent) was in Mount Alexander, which takes in Castlemaine, Campbells Creek, Harcourt and Maldon, up $68 a week to a median of $563.
The Northern Grampians (Stawell, St Arnaud, Halls Gap and Great Western) followed, jumping 12.5 per cent, or $50 a week, to a $450 median.
The shires of Ararat, Indigo, Hepburn, Glenelg, Warrnambool, Golden Plains and Corangamite complete the top 10.
“The ones that are performing well are those that romanticise what regional living is like,” Domain chief residential economist Dr Nicola Powell says.
“Murrindindi is an established tree-change destination, and it remains relatively affordable even after the rise. Mount Alexander has lovely little wine bars, beautiful boutiques and paddocks. Those two together really say a lot about the types of locations that are front of mind for people.”
Victoria’s combined regional house rent has reached a record median of $520, but growth slowed over the quarter, Powell says. Regional unit rents fell over the quarter for the first time in a decade, down 1.3 per cent to $395 a week.
Some of the cooling is due to first home buyers leaving the rental market by taking advantage of government incentives and lower regional entry prices, Powell says.
Others are using renting to give country life a try. “Particularly if they’re moving from the city into regions, people rent for a period of time to understand the location,” Powell says.
Property manager Sophie Osborn, of Integrity Real Estate, which has an office in Kinglake, has seen this in action. Renters are typically families who want space and security, and many are doing a test run.
“I would say within the last five rentals I put on the market, at least three of them are people coming from surrounding suburbs to trial the area before they buy,” Osborn says.
She says new tenants are coming from the Yarra Valley or further afield in Bundoora, and the mix of leafy surroundings, schooling options and community spirit means demand has always been strong.
“I feel that has been the case for many years, and even the price rising has not changed the number of people wanting to live there,” Osborn says.
“That 23 per cent rise that we’ve had over the past year is quite large, but I am starting to see, especially with new listings, it slowing down but remaining tight.”
KPMG urban economist Terry Rawnsley says drivers in today’s regional rental markets are different to those in the pandemic era.
“I think what we’re seeing now is much more about local conditions, whether it’s job growth or relative affordability,” Rawnsley says. “There’s more of a spread of opportunities impacting rental prices, rather than one big surge to the regions like we had during COVID.”
Rawnsley says it is too early to see the effect of changes to negative gearing and capital gains tax announced in the federal budget. “The movements in rents at the moment are probably more linked to interest rate rises than anything with negative gearing.”
Affordability in regional centres compared with Melbourne continues to attract workers. “If you’re a tradie, a teacher or a nurse, you’re thinking, ‘I can do my job just about anywhere. I’m saving myself $50 or $100 a week on rent, but there’s still the local pub and other things that keep me occupied,’” Rawnsley says.
In Castlemaine, a flourishing retail and hospitality scene is supporting the rental market. “It’s brought the cool kids to town,” says Michael Cantwell, director of Cantwell Property.
“We’ve got people in their mid-20s to 30s who find Melbourne too expensive to live in now, but they have employment opportunities in Castlemaine. Rents have gone up, but they’re still far more affordable than what they see in Melbourne. We see rents around $600 a week for a family home, which would be well over $1000 in Melbourne.”
Cantwell says some investors buy a future residence and offer it as a rental in the interim, but others have left the market following the state government’s expanded land tax and compliance requirements. “Every time there’s a new change, we’ll have one or two owners ring up and say, ‘I’m out, we want to sell,’” he says.
However, he has noticed a healthy balance of supply meeting demand. “In the post-COVID boom, we had 20 people applying for houses; now it’s one, two or three,” Cantwell says. “It’s manageable and if somebody wants a home, we can normally find them a home.”
