Rent Growth: Slow going by 2 bedroom units…

Inner Melbourne 2 Bed rents have tracked at nearly half the rent growth (CAGR) of 1’s and 3’s between 2004 & 2019.

These inner city suburbs are dominated by 2 Bed dwellings. They represent 43.5% of housing supply in the 2021 Census (Inner Melbourne SAL4) and a similar amount to 1 & 3 Bed housing combined.  Is this slower rent growth attributable to this higher supply created by specific BTS metrics?

Or are there demand effects at play?

Do renters today prefer to secure a smaller apartment on their own (a studio or small 1 Bed) as opposed to sharing a 2 Bed with a roommate?

The strong rent growth exhibited in 3 Bed units can be attributed to the fact that limited supply has been delivered to the Inner Melbourne investor (renter) market.  As such there is unmet demand pushing the prices up on these larger units.

The big question is how deep is the 3 Bed rental market?

Read further about The Build to Rent Equation.

Source: Victorian Department of Families, Fairness & Housing, Australian Bureau of Statistics, Franklin St.
Date: August 2023