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ince 2017, three of Melbourne’s most desirable councils—Port Phillip, Boroondara and Stonnington—have each lost more than 1,000 active rental bonds. Across Victoria, the total number of bonds fell by 10,274 last year, yet the state now holds 72,000 more bonds than it did in 2017, a rise that is almost entirely concentrated in outer‑suburb areas such as Melton, Wyndham and the City of Melbourne. The contraction of supply in the city’s inner‑suburbs has driven the vacancy rate to just 2.4 % in June, a steep drop from the 5 % average recorded between 2020 and 2022, and has forced renters to compete for a shrinking pool of affordable homes.

    The decline is most pronounced in Port Phillip, where bonds fell from 22,199 in June 2017 to 20,185 in June 2025—a loss of 2,014. Boroondara saw bonds drop from 19,913 to 18,361 (1,552 fewer), and Stonnington fell from 22,453 to 21,376 (1,077 fewer). Frankston’s bonds slipped from 13,792 to 12,803 (989 fewer), while the Mornington Peninsula lost 880 bonds, falling from 11,268 to 10,388. Even smaller councils such as Yarra Ranges, Warrnambool, Maroondah, Greater Bendigo and Campaspe recorded declines ranging from 320 to 485 bonds.

    The trend is mirrored by the number of rental properties available. In 2024, the vacancy rate in Melbourne’s inner‑city dropped to 2.4 %, compared with 5 % during the pandemic years. In regional Victoria, the rate fell to 1.8 %, the lowest it has been since March 2022. Rent prices have risen in tandem: a two‑bedroom unit in South Melbourne is listed at $700 per week, while a similar apartment in South Yarra goes for $680. In Bendigo, a three‑bedroom house commands $900 per week, and Frankston’s most affordable rentals now fetch $650 per week.

    Census data from 2021 shows that 537,865 households—30.2 % of Greater Melbourne—are renting, up from 472,462 (30 %) in 2016. Yet the bulk of the 72,000‑bond increase has come from the city’s fringes, with almost 40,000 new bonds in the City of Melbourne alone.

    Experts attribute the exodus of landlords to a combination of high taxes, stringent compliance requirements and a wave of reforms that began in 2017 and has since ballooned to 150 changes. Anne Flaherty of PropTrack notes that the decline in inner‑city rentals is “quite shocking” given the population growth that should have driven demand. She cites investor flight during the pandemic, when a moratorium on evictions, rising rents and falling property values pushed many to sell. “It’s improving, but it’s nowhere near the level needed to recover,” she says.

    Nerida Conisbee, chief economist at Ray White Group, points to land‑tax increases that took effect in early 2024. “Land‑tax costs are tipping landlords over the edge and forcing sales,” she explains. “For investors with limited cash flow, higher taxes can turn a viable investment into an unviable one.” Conisbee also warns that high‑priced neighbourhoods are losing rental stock because fewer landlords can afford to hold properties there.

    The Real Estate Institute of Victoria’s CEO, Toby Balazs, warns that without incentives for new builds and investor entry, the rental market will continue to deteriorate. Ben Kingsley, chair of the Property Investor Council of Australia, argues that long‑term landlords are selling rather than upgrading to meet the ever‑growing list of standards, a move that drains capital from the economy.

    Tenants Victoria’s chief executive, Jennifer Beveridge, highlights the geographic mismatch created by the supply squeeze. “A teacher or nurse might find a rental in Melton, but if they work in Port Phillip or Stonnington, they’re either facing a crushing commute or being priced out entirely,” she says. “This mismatch is fracturing communities and forcing essential workers away from the areas they serve.” Beveridge notes that the decline in supply in high‑employment councils such as Boroondara, Stonnington and Port Phillip is pushing even well‑paid professionals to the brink of affordability.

    In response to the shortage, build‑to‑rent developers have stepped in. Greystar Australia has added roughly 1,300 homes to South Yarra and South Melbourne over the past few years, partially offsetting the loss of rental stock. Managing director Matt Woodland says the company’s projects, such as the Gladstone in South Melbourne, provide a simple leasing experience that has been well received. “We’re not a replacement for traditional investor‑owned rentals, but we’re helping to fill the gap,” he says. “Getting more build‑to‑rent complexes up and running will require either lower construction costs or government policies that reduce regulatory burdens.”

    The Victorian government has announced a major overhaul of planning laws, aiming to accelerate housing supply and modernise NIMBY‑driven regulations. A spokesperson said, “The best way to make housing fairer for young Victorians is to build more homes faster.” The reforms are part of a broader strategy to protect renters’ rights while encouraging investment.

    In summary, the past seven years have seen a sharp decline in active rental bonds in Melbourne’s inner‑city councils, driven by a mix of regulatory pressure, tax increases and investor flight. Vacancy rates have fallen, rents have risen, and the supply gap is forcing renters to move further afield or face unaffordable costs. While new build‑to‑rent projects and planning reforms offer some relief, the long‑term health of the rental market will depend on balancing investor incentives with affordable housing supply.