Victoria's regional rental markets are performing better than the capital city market, with the former reporting shrinking vacancies, according to the latest figures from the Real Estate Institute of Victoria (REIV).

The vacancy rate in regional Victoria has declined to 1.8% in June, lower than Melbourne's 3%.

Gil King, CEO of REIV, said there is an ongoing rental market squeeze in regional Victoria, which is pushing rent prices up in some areas. Geelong, for instance, recorded a $10 gain in rental prices to $400 per week.

"Rental prices in regional Victoria are holding firm, with median house rents remaining unchanged on $350 per week for the past six consecutive months. Regional units are sitting at $300 per week, a $5 increase on the previous month of May," he said in a report in The Real Estate Conversation.

King said the low level of vacancy in June indicates the strong demand for long-term rental housing in regional markets. Furthermore, it shows that the state's rental markets are in good position to weather the impacts of the COVID-19 outbreak.

"While the availability for long-term housing in Victoria continues to grow, more rental homes are urgently needed to help keep up with the growing demand. We need more rental stock to help meet our communities constantly growing housing needs," he said.

However, the rental markets have been one of the most affected housing segments amid the COVID-19 outbreak. Michael Yardney, director of Metropole Property Strategists, said Victoria's stage four restrictions will discourage many tenants from moving.

"The rental market has been more heavily affected than the buyers' market in the current crisis, with a combination of falling demand and rising supply," he said in his recent think piece in Property Update.