Low income earners in Melbourne who’ve been locked out of the property market would be dismayed to learn that rentals may soon be out of reach as well.

According to the Domain Group, rental rates in Melbourne are at record highs and are rising faster than incomes. The number of vacant properties is also shrinking, and properties defined as affordable for low income earners are disappearing.

Melbourne’s renters are resorting to living in shared houses or moving back in with parents. The worse-off are facing homelessness, as the prospect of new and more affordable rentals entering the market fades.

Even though new apartment stock is scheduled to enter the market, housing experts say a lot of this new stock (mostly one- and two-bedroom apartments) is geared towards investors rather than renters. Many of these apartments will be kept empty by their foreign owners or leased through sites like Airbnb.

Meanwhile, a booming tenant population, fuelled by interstate and overseas migration, is pushing up rental rates. According to recent Domain Group data, median unit and house rents are at a record $380 and $400 a week, respectively.

Rates aren’t any more affordable at the bottom rung of the market. A typical one-bedroom unit in Albion costs at least $200 a week. This excludes boarding houses, bedsits, and student housing.

Statewide, the proportion of new and affordable rentals in Victoria – defined as costing no more than 30% of assistance – has shrunk from 20.7% to 17.8% in the past five years. The supply has decreased even though at least 10,000 new rentals were added at that time, according to rental data from the Department of Health and Human Services.

Although more landlords have entered the market, studies over the past 20 years clearly show that huge growth in private rental investment has not led to more choice, particularly at the lower end of the market. Investors mainly target higher-priced, established, or inner-city properties where demand is stronger, according to Terry Burke, a professor at Swinburne University.