After what feels like years of sluggish performance and headlines about Adelaide and Perth, it may soon be Melbourne’s turn in the spotlight again. 

Is Melbourne the next investment hot spot?

There’s no denying Melbourne property has been off the boil, with API magazine reporting that only 8.6% of survey respondents considered Victoria the best state for property investing at the mid-point of 2024. However, smart investors look to buck trends, and by Q3, this number had risen to 25%. 

While other cities have seen prices continue to rise this year, all of a sudden Melbourne is looking affordable. With a median house price of $899,000 compared to Sydney’s $1.26 million, the southern capital is giving investors more for their money. 

Population Growth and Housing Demand

While property prices are generally flat, rental availability has remained at problematic lows as Melbourne remains a magnet for migration, consistently ranking as one of the most liveable cities globally. Recent data from the Real Estate Institute of Victoria (REIV) highlights the state’s appeal, recording the third-highest interstate migration numbers in the country. Population growth drives demand for rental properties, as new residents often rent before purchasing. This growing rental demand creates fertile ground for investors aiming to build or expand their portfolios.

Policy Shifts and Market Stimulus

The Victorian government’s recent stamp duty concessions for off-the-plan properties aim to entice investors back into the market. The removal of the price cap for home buyers and the extension of these benefits to investors, even temporarily, provide a boost to Melbourne’s property sector. However, industry experts like Craig Whatman of Pitcher Partners Melbourne caution that this "sugar hit" must be accompanied by structural changes to address housing supply shortages.

New policies are crucial for encouraging early investor engagement in developments, ensuring financial viability, and increasing rental stock. Without adequate investor participation, the market risks stagnation, leaving renters and owner-occupiers struggling to find suitable housing.

Suburbs to Watch

Certain Melbourne suburbs are emerging as hotspots for investors. Infrastructure projects like the Melbourne Airport Rail Link are enhancing the appeal of areas such as Sunshine and Footscray. Affordable options in Werribee and Hoppers Crossing attract buyers in growth corridors, while Coburg and Reservoir offer proximity to the CBD. Coastal suburbs like Frankston, with high rental demand and vacancy rates below 1%, stand out as prime investment opportunities.

Implications for Rent Roll Values

As investor activity increases, rent roll portfolios stand to benefit significantly. A higher volume of rental properties in Melbourne could mean increased management fees for property managers. Additionally, improved investor sentiment often leads to better-maintained rental properties and stable tenancies, which enhance rent roll valuations.

However, challenges remain. A lack of housing supply and rising costs for developers could limit the number of new rental properties entering the market. Property managers will need to stay agile, leveraging local market knowledge to attract investors and retain tenants.

Looking Ahead

Melbourne’s property market is poised for a revival, driven by renewed investor interest, population growth, and government incentives. While structural challenges persist, the city’s affordability and infrastructure development make it an attractive option for property investors. For property managers, this resurgence represents an opportunity to grow rent roll values and strengthen their market position.

As the market evolves, staying ahead of these trends will be essential for those looking to capitalise on Melbourne’s property revival. For investors and property managers alike, Melbourne’s next chapter promises both challenges and opportunities.