Although Melbourne’s coronavirus restrictions were eased in late October, an apartment block in the Hawthorn East neighbourhood still bears the scars of lockdown. The once-elegant communal garden favoured by residents for their morning pilates is now totally overgrown, neglected by the gardeners judged non-essential by statewide restrictions.
“With 10 months of growth, the bamboo that stretched up to the first floor is now nearly as high as the third,” says resident Chloe Farah, 37.
Landlords in the building are faring badly, too. When she bought her apartment at the start of last year, Farah kept an eye on her previous rental home, which is in the same building, via property websites.
“Since April it has come up for rental three times, most recently at A$350 (£198) per week. When I was living there I was paying A$410 per week,” she says. By July, she says, 96 of the 252 flats in her building were vacant.
Vacancies and falling rents have become a feature of the apartment market in central Melbourne, which has suffered the brunt of the city’s economic shutdown. Once-busy central suburbs such as South Yarra, Prahran and St Kilda felt deserted for much of 2020.
“A year ago, if you searched online for a two-bedroom apartment for A$500 per week in a central suburb you might get 100 results, now you would get three times that,” says Anthony Wiseman, a letting agent with Marshall White.
In the year to December, the average rent in Melbourne’s inner city fell 11.3 per cent, exceeding the city-wide fall of 5.5 per cent, according to CoreLogic. Despite a 20 per cent rent reduction, one apartment overlooking Albert Park, site of the Melbourne Grand Prix, which Wiseman manages, has been vacant since February.
Tenants taking advantage of current rental offers could see cheap rents for years. State-wide rules give tenants the right to appeal “excessive” rent hikes with a government body. “It will take some landlords five years to get rents back to what they were,” says Wiseman.
Evaporating demand is due in part to the reliance of Melbourne’s rental market on those from abroad, including students and corporate relocations. The concentration of renters among staff in sectors such as hospitality and the arts, particularly hard hit by Covid-19 restrictions, has added to the pressure, says Eliza Owen, head of research at CoreLogic Australia.
A recent investor-fuelled building boom has created an excess of supply, says Owen. “Total rental listings have more than doubled in parts of inner Melbourne since 2012.”
While rental prices fall in the city centre, Melbourne’s sales market has been swift to recover, especially in roomy suburbs further out. The 22,168 sales in the last quarter of 2020 were more than double the 10,684 from the previous three-month period and just 2 per cent lower than the last quarter of 2019, according to CoreLogic.
In April, Liz Raynes-Greenow, a 63-year old finance consultant, planned to sell her five-bedroom house in Malvern East, south of Melbourne’s centre, and find something smaller nearby for her and her husband.
“When Covid hit we were fearful that prices would drop dramatically and we’d have to sell at a loss.” Instead, when the market reopened, she had three offers within five days. The highest, at just under A$3m, was a little more than she had hoped. Now she worries that prices will continue to climb before she can find the right home nearby.
Well-heeled suburbs on the Mornington Peninsula have benefited in particular, with prices gaining 6.4 per cent last year, according to CoreLogic. Sometimes described as “Melbourne’s answer to the Hamptons”, most of the peninsula is roughly an hour’s drive from the city centre.
It offers a range of good family homes on large plots, many with views of the sea, and elevation provided by the local hills. Pristine beaches, excellent hiking, and celebrated vineyards in Red Hill and Main Ridge add to the appeal.
In the few weeks between the two lockdowns, Dave Hickling moved from a two-bedroom house in the northern suburb of Heidelberg to a four-bedroom house on 2.5 acres with a garage and pool in Mornington, a village on the peninsula.
The shift to homeworking caused him to bring forward his planned move to the city’s edge by more than five years. “I only need to be in the office a couple of days per week,” he says. “We decided to buy the dream house now. There is so much to do and the area is so stunning.”
Amanda Haimona, of local agent Bonaccorde, says that plots here are typically 1,000 sq m, compared with around 400 sq m in Melbourne’s more central coastal neighbourhoods, such as Brighton or Sandringham, from where many of her recent buyers have arrived.
Back in Melbourne’s centre, it will be some time before life returns to normal. After a Christmas visit to her parents in Sydney, travel restrictions barred Farah from returning to Melbourne until 22 January. When the gardener will get round to trimming the bamboo outside her flat is anyone’s guess.
Melbourne apartment rents fell 7.6 per cent in the year to December 2020, further than any other Australian city
Subject to Covid-19 restrictions, direct flights link Melbourne to Sydney (1hr 20m), Singapore (8hrs) and Hong Kong (9hrs)
What you can buy for . . .
A$950,000-A$1.045m (auction guide) A two-bedroom apartment near Mornington Park. Available through McEwing & Partners
A$2m-A$2.2m A new four-bedroom home in Mount Eliza, through RT Edgar.