The Melbourne property market has been a very strong and consistent performer in the past few years. However, is it too late to buy a property in the city?
There is no single answer to this. There are still several areas, which will continue to grow strong in the future but there are some sub markets to avoid as well. Melbourne has multiple markets divided by price points, property types and geographic locations.
Melbourne home values have increased over the past few years and have been the second fastest to rise among all capital cities. Auction clearance rates have often been high and time on market has dropped as well. The median house price was $710,420, which is an 11% increase and residential property prices within top Victorian government school enrollment zones have increased up to 32% over the last year alone.
Melbourne’s long term rental has also increased, along with property values. Rental growth has continued to be moderate to flat, so investors who may experience rental income increases of $8-10 a year would be considered good.
Melbourne has been ranked as the most liveable city in the world for seven consecutive years.
It is Australia’s second-largest city, which has a population of about 4.5 million people. It also hosts more than a million international visitors and overseas migration a year and has the country’s most advanced network and systems of infrastructure. According to reports, Victoria’s employment increases strongly with 95,500 new jobs added to the economy as of August 2017.
Melbourne is attracting more growth than Sydney because it has access to affordable housing. Today, the Melbourne property market is no longer dominated by demand for detached homes. More Australians are opting for apartments, units and townhouses because of changing demographics and evolving family situations.
In 2016, there was an 11% rise in the number of people living in townhouses. Apartments and units are the preferred type of young people because of its lower entry costs and location. Meanwhile, commercial property remains strong as well. As a general rule, properties with a higher land content will perform better than building acquisition only, as oversupply of the apartment market becomes more apparent daily.
There is more property development in Melbourne CBD but poorly built apartments are worrisome as they may become the slums of the future. Whilst the south eastern and bayside suburbs of Melbourne have outperformed the Melbourne property market, better value can be had in the western and northern suburbs which have had some of the strongest growth in recent times. Regional areas like Geelong and Ballart should not be overlooked as the combination of population growth, people seeking an alternative lifestyles and price points make regional areas attractive,
Based on studies, properties near the CBD and not in it and in bayside suburbs will likely increase in value faster than other properties and suburbs. However, be careful of oversupply. Despite a strong population growth, Melbourne still has an oversupply of new inner city apartments and it may result in sluggish rental and minimal capital growth.
If you want to invest in a Melbourne property, you should choose one which is below its intrinsic value or one with a high land to asset ratio. You should also shop around locations that outperform the averages. Suburbs where wages are increasing above average may translate to tenants willing to pay a premium price to live there. You should choose one which can increase capital through renovations, redevelopment and refurbishment and once you’ve chosen a property, don’t forget to take advantage of negative gearing.
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