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Investor shift and supply shortfall pave the way for 20% Melbourne rent rises
Melbourne rents could soar to 20 per cent in the next couple of years, as investors pivot to new builds due to federal tax reforms and many established rental properties leave the market.
One buyer’s agent has warned that Melbourne’s rents could surge by 20 per cent as investor demand is redirected to new builds following the federal tax reforms, but new supply remains constrained.
According to Industry Insider Property Toorak founder and senior property advisor, Andrew Date, investor behaviour has already shifted following the negative gearing and capital gains tax (CGT) reforms announced in May.
Date said he had seen clients “almost immediately” move away from established homes and refocus on new builds to keep their tax benefits.
He said that the pivot was most notable among investors in the $600,000 to $1.5 million price range, particularly higher-income earners looking to offset their tax liabilities.
Since the budget, Date said demand for new builds had been rising, yet new supply in Melbourne was still failing to keep pace.
“There are not enough cranes in the air to keep up with the number of people coming into our state,” he said.
According to the Australian Bureau of Statistics (ABS) data, Victoria’s construction pipeline remained constrained, with dwelling commencements falling to 13,489 in the December 2025 quarter, down 39 per cent from a peak of 22,155 in early 2021.
Meanwhile, completions came in at 13,678 over the same period, compared to a high of 18,441 in mid-2021.
Despite Victoria's Housing Statement being designed to create 800,000 new homes over the decade to 2034, Date said the state was 20,000 homes short of its annual goal amid high construction costs, labour shortages and financing pressures.
At the same time, investors have been pushed towards a relatively limited pool of new stock, and some long-term investors have been selling established properties because of rising costs.
Faced with surging holding costs, land tax, compliance obligations, property management fees and council rates, Date said that many investors had been choosing to sell and reallocate capital into more passive asset classes, such as superannuation.
He warned that if those established properties were not bought by other investors, rental stock would be removed from the market and put upward pressure on rents.
“That’s why I believe rents in some markets could rise by around 20 per cent over the next two to three years,” he said.
According to SQM Research, asking rental rates have already risen 0.7 per cent between the end of April and the end of May 2026, more than double the national average of 0.3 per cent over the same period.
Date said the largest increases in rents will be in areas with strong demand and constrained supply, including those with sought-after school zones, good infrastructure, premium townhouses, family homes and high-quality apartments.
“The government is clearly trying to encourage investment into new housing. The question is whether enough can be built quickly enough to prevent further pressure on rents in the meantime,” Date concluded.
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