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Investing in Melbourne Property

Melbourne is Australia’s second largest city in terms of population – but probably not for much longer, with many analysts predicting the city to outpace Sydney in the next decade or so.

Investing in Melbourne Property

Melbourne continues to take a top rank as one of the world’s most liveable cities, and it’s not hard to see why, given it is the sporting capital of the nation, as well as a major destination for great food, café culture, fashion & art and top universities.

On top of its many other drawcards, Melbourne offers world-leading healthcare, education, amenity and infrastructure along with a leading economy. In short, Melbourne is a truly global city, many investors choose to invest in Melbourne as an important property location for their portfolio.

Melbourne property market has been consistently strong over the last 40 years. While the city was rocky footing during the height of the COVID-19 pandemic, Melbourne’s property market has made a swift recovery and is on the cusp of further growth. So, if you’ve been thinking about breaking into Melbourne’s property market, now may be the time.

Melbourne’s Property Market Trends

Most sectors of Melbourne’s property market have seen strong growth in 2021, with the exception of inner-city and high-rise apartments. The lower than expected population growth in Melbourne due to COVID-19 has also lead to an oversupply of housing in some suburban new estates in the outer ring.

Overall, Melbourne’s housing prices have seen more growth than units, due to low interest rates, grants for first time buyers and repayment holidays. Melbourne’s auction clearance rates have also reached all-time highs, showing the market is as competitive as ever — even in more challenging financial times.

Melbourne’s Average Rental Yield

While Melbourne’s property market is booming, the city has experienced slightly weaker rental returns in the last year or so. This is due to a higher supply of rental properties, and less demand. In 2021, the average rental yield in metropolitan Melbourne is 2.7 per cent, returning an average rent of $480 per week.

The layout of the city

Melbourne was rated the world’s most liveable city in the world for six consecutive years in the EIU report. While Vienna, Australia took the title in the last two reports (in 2018 and 2019) Melbourne still held strong as the world’s second most liveable city.

The layout of the city likely has a lot to do with Melbourne’s stellar reputation, with it often being described as being designed ‘on a grid’. This makes it extremely easy to navigate and to get around via walking or public transport. The city is roughly divided into East and West, with affluent neighbourhoods to the east and lively and affordable suburbs to the west.

Investing in Melbourne Property

World-class infrastructure

Melbourne has the longest tram rail in the world, and also boasts well-connected trains and a multitude of bus routes to get you where you need to be. In the city, trams are free, and they’re a great way to get around. Despite the Yarra River and Maribyrnong River running through the city and some well-known suburbs, public transport works remarkably well — so well that many people opt not to own any cars. Melbourne’s infrastructure is set to become even more impressive, with projects such as high capacity metro trains and major road upgrades already underway.

Recovering economy

There is a diverse range of industries in Melbourne. You can decide to embark in a career in arts, a career in medicine, or anything in between. Because Melbourne is a booming city, there are lots of options when it comes to employment. In the last 10 years, there have been more than 500,000 new jobs created in Melbourne. While there are currently high unemployment rates across Australia, this is expected to be alleviated by the easing of restrictions that are being seen in states such as Victoria.

Vibrant culture

Melbourne is deemed a UNESCO City of Literature and is known for its writing other arts festivals which drive people from all over Australia and all over the world to pay the city a visit. In addition to the arts and music culture, the city is quite literally culturally diverse.

People from 140 different ethnic backgrounds live in Melbourne, with large populations of Chinese, Italian, Indian, Greek, German, and Vietnamese people living in the city and its suburbs. There are welcoming places for people of the same cultural groups to meet and come together, as well as environments in which the wider Melbourne community can learn from one another. This rich cultural diversity also ensures a wide variety of amazing restaurants to choose from!

Continued growth

Melbourne is the largest city in Victoria and the second largest city in Victoria but looks like it might soon overtake Sydney. The city has been growing at a rate of around 3 per year, which may mean that Melbourne will be a more populous city than Sydney within the next decade. While the rate of growth is likely to slow down due to the travel restrictions that have been put in place, Melbourne remains one of the fastest growing cities in the world. All this growth is a strong drawcard when it comes to investing in property.

International Students

International students in Melbourne is one the pillar to push Melbourne property market. International student numbers in Australia are set to eclipse their 2019 peak once borders reopen. According to Asian real estate advertising and sales platform Juwai IQI, international student enrolments at Australian universities are expected to spike over the coming years as students look to upskill in order to remain competitive in the shrinking labour market.

Where can I invest property in Melbourne?

It depends on your lifestyle and budget, but you may want to consider some older, well-established suburbs or some of the booming inner suburbs. Right now, a lot of middle suburbs, and some of the outermost inner suburbs also look to be great places to invest in properties The city does continue to sprawl outwards, with suburbs expanding farther out in all directions, but it’s not always the best idea to invest in some of these newer suburbs. In fact, some of these newer outer suburbs are quite because they don’t have quite the same value or stability as older suburbs.

Melbourne’s South East has been consistently ranked Melbourne’s best suburb for investing. It has a median house price of $593,000 and a rental yield of 5.3 per cent. There’s plenty of expansion happening in the area, such as new schools and estates, but it has managed to maintain a serene feel.

Another Melbourne property market to watch is Melton, located 35 kms West of the CBD. This area has a median house price of $390,000 — making in an accessible option for first-time investors — and has seen great upwards mobility over the last 10 years. With great connectivity to Melbourne’s metropolitan hubs via interstate road networks, it’s not hard to see why Melton is predicted to see 40 per cent population growth in the next 40 years.

Mickleham is another promising place to buy an investment property in Melbourne. This Northern suburb is one of the city’s fastest-growing suburbs, thanks partly to its popularity with families. Median house prices are $578,000 here, with an average rental yield of 3.77 per cent. Experiencing an annual growth rate of 28.92 per cent, this area holds exceptional long-term potential.

How much does a house cost in Melbourne, Australia?

The price of a house or apartment varies greatly in Melbourne. Overall, the median property price in Melbourne in March 2021 across both houses and units was $736,478. While the overall median for houses surpassed one million dollars in 2021, that doesn’t necessarily mean you will have to shell this out in order to buy in Melbourne. In less expensive inner suburbs, like Footscray, you might get lucky and find a house selling for around $730,000. In more distant suburbs, it’s possible to find units for or as little as $345,000. On the other end of the spectrum, you could spend closer to $5 million in the most expensive suburbs. There’s something for every budget!

What is the cheapest suburb to buy in Melbourne?

If you’re looking to purchase a house in an inexpensive suburb not too far from the CBD, you might find luck in Melbourne’s western suburbs. The cheapest nearby suburb is West Footscray, just a 20-minute drive or 30-minute train commute from to the city, with Footscray coming in second.

Buying a property in Melbourne can be quite competitive, with record highs in prices and lows in auction clearance rates. So, you may want to consider using a Melbourne mortgage broker to help you secure a loan. A good mortgage broker in Melbourne will be able to compare hundreds of home loan products to find you the best possible deal. They will also be able to provide you with insights into the Melbourne property market and guide you through to settlement.

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