The phrase “Anywhere but Melbourne” or “Anywhere but Victoria” has become a growing sentiment among property investors, and the data reveals a startling truth behind this market exodus. A closer look at the Victorian rental market shows that thousands of landlords are quietly exiting, leaving behind a profound void and reshaping the property landscape
The figures are striking: over the past year, more than 10,000 rental properties have disappeared from the state’s active rental bonds. This contraction is even more alarming at the local level, with sought-after municipalities like Port Phillip, Boroondara, and Stonnington seeing drops of up to 2,000 rental properties since 2017. This dramatic loss in supply comes at a time when tenant demand is at an all-time high.
What’s driving this exodus is a critical shift in the regulatory and economic environment. Since 2017, landlords have faced more than 150 rental reforms, which, while intended to improve tenants’ rights, have made being a landlord increasingly complex and costly. This, combined with higher land taxes, rising compliance costs, and new minimum standards, has pushed many investors past a “tipping point”. Chief Economist Nerida Conisbee noted that the financial pressures, particularly the land tax hikes at the start of 2024, have made investing in affordable suburbs “no longer viable” for those with slim profit margins. This has led to hundreds of investment homes being auctioned off in suburbs like Craigieburn and Reservoir.
In some lifestyle areas, like the Mornington Peninsula, investors are sidestepping strict residential laws by pivoting their long-term leases to short-stay rentals. Every property that transitions to an Airbnb-style holiday home is one fewer home for a local renter, a pattern that is deepening local rental shortages and homelessness.
The ultimate result of this landlord flight is that renters are paying the price, facing the tightest conditions in decades. Melbourne’s vacancy rate has plummeted to 2.4%, while regional Victoria sits at an even more painful 1.8%, relentlessly pushing up rents. New rental supply is heavily concentrated in outer-fringe suburbs and city apartments, creating a geographic mismatch that leaves essential workers unable to afford to live near their jobs. The data shows that the solution to the rental crisis requires a more balanced approach that protects tenants without punishing investors to the point of extinction, as the current policy direction threatens to only “deepen” the crisis.