Understanding Your Micro-Market in Melbourne’s North
Why Rental Results Can Vary So Much Across Melbourne’s North
Your property isn’t competing with a suburb median. It’s competing with the homes renters can choose from right now.
When we talk to property investors about the rental market, one of the things we often find ourselves explaining is that there really isn’t one single “Melbourne rental market”.
Even saying Melbourne’s North can be too broad.
What is happening in Craigieburn can be very different to what is happening in Donnybrook. Donnybrook can behave differently to Kalkallo or Mickleham. And sometimes, two properties only a few streets apart can experience completely different levels of renter enquiry.
This is what we mean when we talk about understanding your micro-market.
And if you own an investment property in one of Melbourne’s northern growth areas, understanding that micro-market can have a very real impact on your annual return.
What exactly is a micro-market?
A micro-market is the smaller, immediate market that your property is actually competing within.
Suburb median rents and broader market statistics are useful, and we absolutely consider them, but they only tell us part of the story.
When we’re assessing a property, we want to look much closer.
What comparable properties are available right now? How many are competing directly with yours? What are they asking? How long are they taking to lease? What features do they have? Are renters attending inspections but not applying? Are there a large number of new homes becoming available at the same time?
Most importantly:
What are renters prepared to pay right now?
Because your property isn’t really competing against the median rent for your postcode.
It’s competing against the other properties a renter can inspect this Saturday.
Why this matters so much in Melbourne’s northern growth corridor
This is particularly important in areas such as Donnybrook, Kalkallo, Mickleham, Craigieburn and the surrounding northern corridor.
These are growing communities, and with that growth comes significant volumes of new housing.
It’s not unusual to see several investors receive the keys to very similar properties within a relatively short period. Suddenly, there may be a number of four-bedroom, two-bathroom, double-garage homes all becoming available for rent at the same time — sometimes within the same estate.
To an owner, your property is individual.
To a renter scrolling through listings, they may be comparing it with another five, ten or even fifteen homes that look very similar.
That creates choice for renters and competition for owners.
And that's where the micro-market really starts to matter.
Two similar homes can achieve very different results
On paper, two properties can appear almost identical.
They might have the same number of bedrooms and bathrooms, similar land size, the same number of car spaces and even be of a similar age.
But renters don't choose a home from a spreadsheet.
One may have a better floorplan.
Another may have better heating and cooling.
One may have established landscaping and a genuinely usable backyard.
Another might have better storage.
One might be positioned closer to a park, school or transport.
Another may simply present better online and at the inspection.
Then there is price.
If a renter has narrowed their choice down to three very similar homes, an extra $10, $20 or $30 per week can absolutely influence their decision.
Like everyone at the moment, renters are mindful of where their money is going.
Over a year, $20 per week is more than $1,000.
So while $20 might not seem significant when we're discussing the return on an investment property, it can feel very different to the person deciding where they're going to live.
The rent you want and the rent the market will pay can be two very different things
This is one of the most important conversations we have with our owners.
We always want to understand what you are hoping to achieve from your investment.
That's important.
But our role is also to tell you what we're seeing in the market — even when the two figures don't necessarily line up.
Sometimes an owner's desired rent and the current market rent align perfectly.
Sometimes we're able to tell an owner that we think the market will support more than they were expecting.
And sometimes, unfortunately, what an owner would like to achieve and what renters in that micro-market are prepared to pay can be vastly different.
That's not always an easy conversation.
We understand owners have mortgages, council rates, insurance, maintenance and other costs associated with holding an investment property.
Those expenses are very real.
But a renter doesn't determine what they're prepared to pay based on the owner's expenses.
They determine value by looking at what else they can rent for the same money.
Our job is to bring those two sides of the conversation together.
Every week vacant is approximately 2% of your potential annual rental income
This is where rental pricing becomes about much more than the weekly figure advertised online.
There are 52 weeks in a year.
That means every week your property sits vacant represents approximately 2% of its potential annual rental income that you can't get back.
Four weeks vacant?
That's approximately 8% of your potential annual rental income gone before the tenancy has even commenced.
Let's put that into actual dollars.
Imagine the current micro-market is telling us that your property is likely to lease relatively quickly at $500 per week.
You would really like to achieve $520 per week, so you decide to hold out for the additional $20.
At $500 per week, a fully occupied year represents $26,000 in gross rental income.
If the property remains vacant for four weeks while trying to achieve the additional $20, approximately $2,000 in potential rent has already been lost.
The additional $20 per week you're trying to achieve is worth $1,040 over an entire 52-week period.
So you can potentially lose $2,000 waiting to gain $1,040.
And that's assuming someone eventually agrees to pay the higher rent.
This is why we encourage owners to look beyond the weekly rental figure and consider the overall return.
Does that mean dropping the rent whenever a property doesn't lease?
Absolutely not.
Understanding a micro-market works both ways.
If there are very few comparable properties available, enquiry is strong, inspections are busy and we're receiving good applications, the market may be telling us to hold firm.
There may even be circumstances where we believe there is an opportunity to achieve more.
But if there are fifteen comparable homes available, inspection numbers are low and renters are consistently choosing similar properties at a lower price, we need to pay attention to what that's telling us.
This is where having a property manager who is actively working within the local market becomes valuable.
We're not only looking at what is advertised online.
We're seeing the enquiry come through.
We're conducting the inspections.
We're talking to the renters.
We're seeing which properties receive multiple applications and which ones don't.
We're hearing the feedback.
And we're seeing when another group of similar new homes suddenly comes onto the market.
That information helps us have a much more meaningful conversation with an owner about what to do next.
Sometimes the right decision is to wait
Not every recommendation is about reducing the rent.
Sometimes we'll tell an owner:
Hold your position.
The enquiry is there. The price is supported. We simply haven't found the right renter yet.
Other times the conversation might be:
The market is giving us some pretty clear feedback. Let's look at the numbers before another week passes.
Neither conversation is about automatically going higher or lower.
It's about responding to what your property's micro-market is actually doing.
The same thinking applies at rent review time
Micro-market knowledge doesn't stop once we've leased your property.
It's just as important when the time comes to review the rent.
An owner may understandably want to increase the rent, particularly when their own property expenses have increased.
But again, the question isn't simply:
“Can we increase it?”
We also need to consider:
“What are we trying to achieve?”
We look at comparable rental evidence and the current micro-market, but we also look at the tenancy itself.
Do we have renters who look after the property?
Do they communicate with us and report maintenance appropriately?
Do they want to stay?
Where does their current rent sit against genuinely comparable properties?
And what would the financial impact be if an increase resulted in a good renter deciding to leave?
Sometimes the evidence strongly supports an increase and we'll recommend one.
Other times, after looking at the market and discussing the bigger picture, an owner may decide that keeping a great renter at the current rate is the better commercial decision.
Again, there isn't one answer for every property.
That's exactly the point of understanding the micro-market.
The highest weekly rent and the strongest return aren't always the same thing
We think this is an important distinction for property investors.
A leasing strategy shouldn't simply be about achieving the biggest number you can put on an advertisement.
It's about balancing:
Rent. Vacancy. Competition. Renter quality. Retention. And the overall return to the owner.
Sometimes securing an excellent renter immediately for $10 less per week will produce a better annual result than sitting vacant while holding out for the higher figure.
Other times the strength of the micro-market gives us every reason to hold firm.
Good property management is knowing the difference.
Data is important. So are conversations.
There is more property data available to investors than ever before.
Automated rental estimates, suburb medians and comparable listings all have their place. We use data too.
But data doesn't attend Saturday's inspection.
It doesn't hear a renter say they loved the property but chose another one because it had better heating and cooling.
It doesn't tell us that we've had 20 enquiries but nobody has submitted an application.
It doesn't necessarily know that another ten similar properties are about to be completed around the corner.
And it doesn't have the conversations we're having with renters and owners every day.
Data can tell us what has happened. Being active in the local market helps us understand what is happening right now.
We believe you need both.
Our job isn't to tell you the number you want to hear
When we're talking with an owner about rent, our job isn't to simply agree with the figure they have in mind.
And it isn't to automatically recommend the lowest price just to get a property leased quickly.
Our job is to understand what you want to achieve, show you what we're seeing, explain the potential risks and opportunities, and help you make an informed decision.
Sometimes we'll agree completely.
Sometimes we'll recommend pushing a little harder.
And sometimes we'll have to explain why holding out for another $20 per week could ultimately cost considerably more.
Those aren't always the easiest conversations to have.
But we'd much rather have an honest conversation at the beginning than promise an impressive rental figure to win your business and explain four weeks later why your property is still vacant.
So, what is your property's micro-market doing?
If you own an investment property in Melbourne's north, perhaps the question isn't:
“What's the median rent in my suburb?”
A better question is:
“What is my property competing against right now?”
Because that's the market your renter is looking at.
At Marks Property Specialists, we manage and lease properties throughout Melbourne's northern corridor. Being active in these areas means we're constantly seeing what's coming onto the market, what renters are responding to, what's leasing and where the competition is changing.
If you own an investment property in Donnybrook, Kalkallo, Mickleham, Craigieburn or the surrounding areas and would like to understand how your property sits within its current micro-market, we're always happy to have a conversation.
We'll ask what you're hoping to achieve, look at what's happening around your property and give you an honest assessment of what we're seeing on the ground.
Because ultimately, the goal isn't simply the highest advertised weekly rent.
It's achieving the strongest overall result from your investment.