Why Melbourne’s Property Market Could Be Your Next Smart Investment Move

1. Melbourne’s Property Prices Have Stabilised Post-Pandemic

After a volatile few years, driven by the effects of COVID-19, Melbourne’s property market is now stabilising. While some markets in Sydney and other capitals surged during the pandemic, Melbourne’s growth remained more tempered, leading to current opportunities for investors.

According to the latest CoreLogic data, Melbourne’s home values have increased at a slower pace compared to other capital cities over the past 12 months. As of mid-2024, the median house price in Melbourne was $770,000, compared to Sydney’s $1,100,000. This price gap suggests that Melbourne’s market may still be underpriced relative to its growth potential and may be poised for a strong rebound.

Additionally, CoreLogic reported that Melbourne’s house price growth has outpaced the broader national average in recent months, indicating that the city’s real estate market is on an upward trajectory—albeit more gradually.

2. Strong Population Growth and Migration Trends

One of the key drivers of property price growth is population growth, and Melbourne is experiencing a significant uptick in this area. After a dip in population growth during the pandemic, Melbourne is seeing a rapid rebound in migration.

In fact, Melbourne is forecasted to grow by 2.1% annually over the next few years, adding an estimated 100,000 new residents by 2025. This surge in population is partially driven by international students returning to the city, as well as interstate migration, with more Australians flocking to Melbourne due to its affordability compared to Sydney and Brisbane.

Melbourne’s large and diverse population creates consistent demand for housing, particularly in key inner-city and suburban locations. With population growth comes greater demand for housing, which puts upward pressure on property prices and rent. As migration trends continue to rise, this will lead to more competition in the housing market, making now an opportune time for investors to lock in properties before demand drives prices higher.

3. Infrastructure Development is Set to Transform the City

Melbourne is currently undergoing significant infrastructure development that will change the landscape of the city—and its property market—over the next few years. Key projects that are expected to increase the value of properties include:

  • Melbourne Metro Tunnel Project: The $11 billion rail project will ease congestion in the city’s transport network and provide faster travel between key suburbs and Melbourne’s CBD. This will significantly improve connectivity and accessibility, making properties near metro stations more desirable.
  • Fishermans Bend Urban Renewal: This major development project aims to transform a former industrial area into a vibrant urban precinct. With new residential, commercial, and recreational facilities, Fishermans Bend is expected to increase in value as demand for properties in this newly revitalized area rises.
  • Suburban Growth Areas: Outer suburbs like Werribee, Tarneit, and Cranbourne are experiencing a surge in new housing developments, new shopping centres, schools, and medical facilities. These areas offer affordable entry points for investors who are looking for long-term growth potential.

According to Urban Renewal Authority projections, these infrastructure investments will create thousands of new jobs, boost local economies, and drive demand for nearby housing. This is expected to create long-term capital growth for properties situated near these major developments.

4. Rental Market Tightening and Growing Yields

Another factor that suggests Melbourne’s property market may be undervalued is the growing demand for rental properties. The latest SQM Research report reveals that rental vacancies across Melbourne have dropped significantly, with vacancy rates falling to 1.6%—much lower than the historical average of around 2.5%.

This tightening rental market is coupled with an increase in rents. Over the past 12 months, Melbourne has seen rents rise by 7-8% across multiple segments, with inner-city apartments and houses in the suburbs experiencing some of the highest rent increases. With ongoing demand for rental properties, investors are now seeing improved rental yields, especially in areas like the inner-northern suburbs (e.g., Brunswick, Coburg) and inner-eastern suburbs (e.g., Hawthorn, Camberwell).

For investors, this growing demand for rentals means better cash flow and potentially higher returns on investment. As Melbourne’s housing stock continues to be absorbed by renters, rental yields are expected to rise further, offering lucrative opportunities for buy-and-hold investors.

5. Favorable Market Conditions and Government Incentives

The current economic conditions, while somewhat challenging, have created a buying environment that could benefit investors in the long term. Interest rates, which were significantly high in 2023, are now stabilizing, and banks are offering more competitive mortgage rates for investors with strong financial profiles.

Additionally, the Victorian government continues to offer a variety of incentives for property buyers and investors, including:

  • Stamp Duty Concessions: For first-home buyers and certain investors, the state offers reduced stamp duty rates on properties under specific price thresholds.
  • Build to Rent: The government has introduced incentives aimed at encouraging large-scale rental developments. These initiatives are expected to increase the availability of rental properties, further supporting the market dynamics.

These factors, combined with Melbourne’s strong economic fundamentals, make the market attractive to investors looking for value in the current climate.

Why Now is the Time to Consider Investing in Melbourne Property

In conclusion, Melbourne’s property market is currently undervalued compared to its long-term potential. With strong population growth, substantial infrastructure developments, a tightening rental market, and favorable government incentives, Melbourne is poised for significant growth in the coming months and years.

For investors looking for opportunities in the real estate market, Melbourne presents an attractive proposition. By taking advantage of current conditions—before the market shifts and property prices begin to rise—investors can position themselves for long-term capital gains and strong rental returns.

With the right strategy, now could be the perfect time to explore Melbourne’s property market and secure an investment before the city’s full growth potential is realized.

Key Takeaways

  • Melbourne’s property prices are currently below historical growth trends, offering a window of opportunity for investors.
  • Strong population growth and migration trends are fueling housing demand.
  • Major infrastructure projects, like the Melbourne Metro Tunnel, are set to transform the city’s real estate landscape.
  • The rental market is tightening, resulting in higher rental yields and greater demand for housing.
  • Government incentives for investors provide additional opportunities to capitalize on Melbourne’s growing property market.

If you’re interested in learning more about Melbourne’s property investment opportunities, contact us today to explore the best areas for investment.