Asking rents are rising in some of Victoria’s lesser-known regional towns as an exodus of investors reduces already limited rental stock.
Glenelg Shire, nestled in the far south-west corner of Victoria near Portland, and about 350km west of Melbourne, had the largest annual growth in asking rents in the state at 17.8 per cent in the year to September, the latest Domain Rent Report shows, jumping from $450 to $530 a week.
Mount Alexander, which takes in Castlemaine, Campbells Creek, Harcourt and Maldon, came in second with a 15 per cent hike in asking weekly rents ($500 to $575), followed by Northern Grampians (up 10.3 per cent); Campaspe (10 per cent); and Golden Plains (also 10 per cent) rounding out the top five biggest jumps in asking rent.
In contrast, some of the more lifestyle locations such as Alpine and surrounding Latrobe, Mansfield and Indigo (home to popular Beechworth) held steady over the year.
Domain chief residential economist Dr Nicola Powell said that while house rents have flatlined in regional Victoria as a whole, the different local government areas varied.
“What’s interesting is that it’s the smaller regional markets rather than those major lifestyle destinations which we know were the ones that were leading growth,” she said.
“Glenelg, Mount Alexander, North Grampians – these are all small rental markets with limited stock. What that means is a relatively small increase in demand can have a much larger impact on rents.”
KPMG urban economist Terry Rawnsley said some of the local areas in the top five, such as Campaspe, Golden Plains and also the Grampians, have had a successful agricultural year, which can translate to a stronger labour market.
“Farm production has been pretty good last year, so that kind of helps stimulate the need for farm workers,” Rawnsley said.
“There’s a bit more pay flowing around, the towns and the farmers have more money, they come in and buy a new Land Cruiser, go to the pub and have a few meals, so I think that’s probably been pretty good for some places.”
Alpine Shire’s rental market, which has not grown, was probably linked to a poor ski season, Rawnsley added.
“[This means] less work is required, [and] landlords find it hard to put up rent when the economy’s so weak, so I think that’s probably explaining a few of those ones up around that way, such as Mansfield … [where you] can see that local effect coming through,” he said.
While it’s too early to see data on the impact of the federal government’s budget changes to negative gearing and capital gains tax, Rawnsley said some investors may be tempted to buy property in regional Victoria, where yields have been historically higher than in Melbourne.
“You might have investors maybe looking at some places [in regional Victoria], if they’re hunting for a better yield, so there might be money shifting out of the capital cities,” he said.
“If they were getting about 4 per cent return in Melbourne, they’ll be looking for higher yields to cover off the negative gearing changes, so maybe somewhere in Geelong may give them that 6 per cent return.”
In major regional cities such as Geelong, Ballarat and Bendigo, asking weekly rents have gone up between 5 per cent to 7 per cent, which Rawnsley said is a reflection of wage growth and the population growth in the areas.
But Narelle Waller, Principal at Belle Property Castlemaine and surrounds, is seeing something different. The local real estate agent said that over the last 12 to 18 months, the exodus of investors from the area has reduced available rental properties around the Mount Alexander area.
“Investors are actually pulling out of the market or we’re not getting investors in actually purchasing back into the market ... which is a really scary prospect for regional areas, because we don’t have the capacity to offer more homes,” she said.
She said that over the last year, her business has seen a rent decline of 6 to 7 per cent as investors sell off.
“That means that we’ve got people now looking for rent and we can’t offer them rental accommodation, even though we are trying,” Waller said. “Our rental yield probably averages anywhere between 3.9 to 4. 5 per cent if you get a good house, and people can end up getting that in the bank.”
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