If you are thinking about whether it is the right time to invest in a property in Melbourne, you are not alone. With rising inflation, increasing interest rates, and the negative media news, making a significant decision such as a property purchase can be overwhelming, be it for investment or as an owner occupier.
The question is - are you looking at the complete picture or just the headlines?
In this blog, our experts have put together five reasons why Melbourne continues to be an investment destination of choice and has excellent long-term prospects.
1. Melbourne Property Market over the last four decades
Melbourne’s property market has been one of the most consistent and strongest performers over the last 40 years.
Melbourne houses as well as units have grown at a much faster pace compared to other capital cities in Australia considering the longer-term averages. In fact, Melbourne houses have had an average annual growth of 8.1%, and units of 6.6% over a 25-year period.
While these are averages, each year would have been different with some achieving double-digit growths, while others with limited or negative growth.
For perspective, in 1981, the median house price in Melbourne was just $44,000 compared to over $990,000 in 2022. Whereas for units, the median price in 1981 was $36,500 compared to $671,000 in 2022.
Source – Corelogic, Mcrindle
In fact, house prices have been rising significantly since 2019 with a brief dip during the early part of the pandemic, but they bounced back rapidly. Today, one in three Melbourne suburbs have a median house price of at least $1 million. Most suburbs (90%) within 10 kms of the CBD and around 50% of suburbs in the middle ring have a median house price above $1 million.
2. RENTAL MARKET IN MELBOURNE
Melbourne’s rental market is strong with ultra-low vacancy rates and rising rental prices making it attractive for investors.
Melbourne’s impressive rental demand has continued to gain pace since 2021 with vacancy rates dropping consistently month on month with a vacancy rate of ~1.5% recorded in November 2022. This is one of the lowest vacancy rates on record.
House and unit rents have also risen consistently over the last year with house rents seeing a 10.4% increase during the last year and unit rents having over 20% increase during the same time.
The housing supply has consistently lagged in population growth, and with overseas migration once again ramping up, supply shortages are projected to further intensify the rental availability.
These will boost investors’ cashflows and return on investments.
Source: SQM Research
3. Rising immigration numbers
Being one of the finest cities in the world, Melbourne attracts a large number of tourists, professional immigrants and international students.
With the commitment from the government to boost immigration (lifting Australia’s permanent migrant intake from 160,000 to 195,000 per year) and extending the stay for international students for an additional two years, housing demand has already started skyrocketing and it will continue to surge even further.
Australia is in dire need of an additional talented workforce and most of these migrants are skilled professionals bringing with them highly regarded and in-demand skills to fill the growing job market.
Since the opening of international borders, the total number of international arrivals has increased significantly. This includes the return of Australian residents, expats, qualified workers, and international students.
Source – Australian Bureau of Statistics
While Victoria’s population is growing fast with an addition of more than 100,000 people a year, Melbourne continues to take the centre stage. In fact, Melbourne is expected to overtake Sydney and become the most populated city in Australia by 2027, with a population forecast of 5.69 million*.
*Source – Australian Government Centre for Population
4. One of the most liveable and friendliest cities in the world
Melbourne is the Australian city of choice for expats. And recently has also been voted as the friendliest city in the world.
Melbourne has ranked amongst the top 10 most desirable Cities in the world as per the Expat City Rankings 2022. These rankings are awarded to the cities based on the score for stability, work-life balance, happiness, culture and environment, and ease of settling in for expats.
Melbourne was the only Australian city to make the top 10, coming in at 8th for ease of settling in for the expats.
Melbourne also prides itself on being awarded the friendliest city in the world and is home to diverse cultures and communities. The ease of making new friends, affordable cost of living, events and being a sporting capital are just a few reasons the city is the first choice for expats to move to Australia.
Melbourne was also ranked as the most liveable city in the world for 5 straight years from 2014-2019 and it’s still amongst the top 10 most liveable cities in the world.
5. Improving the Victorian economy, jobs, and infrastructure projects
After enduring one of the longest lockdowns in the world and over 2 years of border closures, international and interstate travellers are returning to Melbourne in full swing. As a result, private investment and consumer spending is increasing and the Government is progressing with the “Big Build” – with an average expected expenditure of $21.3 billion annually over the next four years.
“Victoria’s outlook is bright – we’re building big, we’re bouncing back, and we aren’t slowing down.” –Tim Pallas (Treasurer)
Victoria has also led the nation in job creation with 300,000 new jobs since September 2020, despite the lockdowns. With a historically low unemployment rate, an additional 373,000 workers are expected to be needed by 2025 to meet the growing demand for new jobs and to replace retiring workers.
Source – www.vic.gov.au
Source: Department of Treasure and Finance
Together with the state’s consistently high gross domestic product (GDP) returns and high demand of workers, the city of Melbourne is expected to continue grow further. More people are choosing Melbourne as its infrastructure is improving at a rapid pace – high speed rail, better schools, convenient travel, more accessible amenities, multicultural and closer-knit communities.
These factors strongly support the local economy and the real estate market.
Having stated the facts, the question still remains, is now the right time to purchase an investment property in Melbourne?
The short answer is ‘Yes’. However, we strongly believe when it comes to investing in property, ‘timing the market’ is not as important as ‘time in the market’. Property investment is a long-term game. And over the course of your investment journey, you will see many troughs and peaks. What is truly important is to have the right education, a solid investment plan and a long-term strategy. And that is the ‘winning formula’ when it comes to Investing in Property!
TEAM SONI CAN HELP
Whether you are considering purchasing your first home, next home, or an Investment Property – it is more imperative than ever to make an informed and guided decision.
At SONI, we are committed to educating our clients by giving them clarity to the unknowns. We simplify purchasing property with our experience, knowledge, and proven system. We will help you create your personalized property investment strategy that is unique to your circumstance and aspirations enabling you to build wealth through property.
We are committed to making 2023 a breakthrough year for your property investment journey if you are up for it!