The Melbourne property market has been one of the strongest and most consistent performers over the last four decades.

Over the last 40 years:

The median house price in Melbourne has increased by 7.9% per annum

The median unit/apartment price in Melbourne has increased by 7.73%per annum

Of course, like all property markets, the Melbourne housing market moves cyclically.

After peaking in November 2017 the market took a breather then bottomed in mid 2019 and then Melbourne’s house prices exhibited their fastest recovery ever.

But now Coronavirus means those forecasts of double-digit capital growth for Melbourne property made earlier this year fall by the wayside.

It’s an irony that Melbourne, which has won the mantle of the world’s “most liveable city” more times than any other city in the last decade, has now gone into Victoria Stage 4 lockdown.

So what does this mean for the Melbourne property market?

First let’s start with some context….

Despite a triple whammy consisting of:

A pandemic that has kept much of the Australian economy on temporary life support, either via the federal government’s JobKeeper and JobSeeker schemes or loan repayment relief from banks. Australia slipping into recession, something we haven’t experienced for over 30 years World social and political unrest

Melbourne property values have remained remarkably resilient.

Here’s a chart of the Melbourne dwelling price trends over the last decade …

But the pandemic and its associated economic shock are likely to have long lasting impacts on our housing markets.

Just as the Melbourne property market stated to show signs of a recovery through June and early July with more buyers and sellers entering the market, Melbourne entered Stage 3 Lockdown and has now entered Stage 4.

Under Stage 4 ‘Stay at Home’ Restrictions the default is that workplaces in metropolitan Melbourne are closed unless the workplace is part of a permitted industry.

All Victorians are required to work from home, except where this is not practicable.

What does this mean for Melbourne property values?

It’s too early to tell, but the lockdown has placed Melbourne’s property market on hold for at six weeks while buyers and sellers have to sit on the sidelines.

However a small number of transactions are continuing to take place

If you have already arranged to move, plan to, or end up having to during the six-week lockdown period, that is still okay.

Premier Daniel Andrews has indicated sale settlements and moving home will continue to be permitted.

Obviously there will be some people who recently sold their home who will need to find a new one.

And there are some people who bought their home recently who now need to find sell the old house.

These people will be in trouble as the Lockdown regulations forbid personal inspections of properties.

Sure there are those virtual tours, but don’t buy a property site unseen – there are too many unknowns and virtual tours are a bit like reality TV shows – not like real life.

But once this is over life will go on…

People will get married, get divorced, have babies and unfortunately die (hopefully not from Covid) meaning people will still need to transact property.

As for property values…property prices didn’t crash during the last lockdown and are unlikely to do so this time round as there won’t be many forced sales.

However what happens at the other end of the Victoria’s stage 4 lockdown will depend a lot on consumer confidence, how high unemployment gets and what government support packages are put in place to support Victorians.

Melbourne’s real estate market could be just like New Zealand’s, which suffered a month of no activity under that country’s effort to contain spread of the virus, but picked up again after that with significant pent-up demand.

In New Zealand once the economy opened, everyone was raring to go and the result was record numbers of property transactions.

NOW READ: Victoria Stage 4 Lockdown – what does it mean for the Melbourne property market?

Yes… this too shall pass, so let’s look at the long term prospects for Melbourne’s housing markets.

If you’re looking for some key pointers to the future of Melbourne property consider these:

Melbourne’s population was growing at around 120,000 people per annum. That’s like adding a Darwin or a Ballarat each year to Melbourne’s population. Sure this will slow down for a while due to the lockdown caused by Coronavirus, but will resume in due course.

For years the Victorian economy has been Australia’s strongest State economy creating more (higher paying) jobs than other states and once we get across the proverbial bridge the government has built for COVID-19, Victoria’s economy will surge again

Record international and interstate migration will return once we get through these challenging times.

For the last few years 1,500 new households were being formed in Melbourne each week and the supply of new housing was struggling to keep up with this burgeoning demand. Again this will cease in the short term, but there is no reason to suspect the long term trend will not continue.

and the supply of new housing was struggling to keep up with this burgeoning demand. Again this will cease in the short term, but there is no reason to suspect the long term trend will not continue. First home buyers are back in the market buoyed by the HomeBuilder grant and historically low interest rates

There has always been strong foreign interest in Melbourne from tourists, migrants, investors and developers and in time this will return.

Melbourne’s Many Markets

What’s So Special About Melbourne?

What types of properties perform well in Melbourne?

How do Melbourne’s areas compare?

Advanced Strategies & Things to Look For

How do I choose an investment property in Melbourne?

How can I keep up with the market?

But remember… Melbourne is not one property market…

There are multiple markets in this diverse sprawling city.

It is divided by geography price points and type of property into many submarkets – this means you can’t just buy any property and count on the general Melbourne property market to do the heavy lifting over the next few years, so careful property selection will be critical.

So to help you better understand what’s going on in Australia’s second largest property market are 29 things you should know if you’re considering investing in Melbourne property:



1. Melbourne Property Market Prices

Over the last 4 decades, Melbourne home values have risen at the fastest pace of all capital cities.

Before Coronavirus hit our markets, Melbourne property prices were surging with dwelling values up 12% higher to reach new highs.

However recently Melbourne house prices and market activity are being adversely affected by stage four lockdown conditions.

Home values were down 1.2% in August following a similar result in July, taking the cumulative decline to 4.6% through the COVID period so far.

Similarly, our estimate of home sales has fallen by 20% compared with June, demonstrating the impact from lower household confidence and social distancing policies that prevent inspections and on-site auctions.

The upper quartile of Melbourne’s housing market is wearing the brunt of the downturn with values down 7% since March.

Meanwhile, the lower quartile of the market has recorded a smaller 1.7% drop.

Despite the weaker conditions, Melbourne housing values remain 5.9% higher than they were a year ago, demonstrating the strong capital gains that were present prior to COVID-19.

Melbourne has relatively high exposure to overseas migration which is likely to be one of the factors behind Melbourne’s weakness, along with the policies restricting on-site auctions and open homes.

While house prices have been resilient, Melbourne rental rates are experiencing weaker conditions due to higher supply of rental properties, and less demand.

With regards to property values, in the short term:

With no transactions occurring property values really aren’t going anywhere.

Once the lockdown opens up it is likely that pent-up demand will mean property values will respond differently in different markets segments

A grade homes and investment grade properties in Melbourne are likely to fall a little ( -5%) moving forward.

B grade (secondary) dwellings may fall in value by 10-15% and

C grade properties are likely not to sell at all.

At Metropole we’re finding that strategic investors with a long-term view and homebuyers looking to upgrade are still in the market, getting ready to pick the eyes out of the off market properties.

But this will be on a on very low levels of transactions and the pace of recovery from that point will depend on the state of the wider economy.

The worst affected market will be the more expensive properties and properties in the blue-collar areas and new housing estates where young families are likely to have overextended themselves financially and with many people will be out of work for a while.

On the upside, households and property investors whose incomes remain stable and secure will be able to take advantage of historically low interest rates.

This should support a return to stronger levels of price growth in the medium term.

NOW READ: Is now a good time to buy property?

At Metropole we’re finding that strategic investors with a long-term view and homebuyers looking to upgrade are still in the market, picking the eyes out of the off market properties.

It’s likely that they see the long-term fundamentals as Melbourne rates as one of the 10 fastest growing large cities in the developed world,.

Melbourne’s population was forecast to increase by around 10% in the next 4 years.

Clearly this will slow down now, with restricted borders protecting Australia, but once we “cross the bridge” Melbourne will remain one of the most liveable cities in the world.



2. Long Term Melbourne Property Market Trends

Historically, the city’s property market has gone from strength to strength.

In 1966, the median house price in Melbourne was just $9,400.

Values have doubled more than six times since then, with the median crashing through the $100,000 barrier in 1988, and pushing through the half-million-dollar mark in 2010.

Today one in three Melbourne suburbs have a median house price of at least $1 million, with 90 percent of suburbs within 10km of the CBD have a million-dollar median house price and almost 50 percent of suburbs in the middle ring also in the million-dollar club.

And changing demographics is playing a big role in driving shifting market trends.

The big house on a big block is no longer a sure-fire strategy for success, as single-person homes and households without children are increasingly favouring living in medium density inner city and waterfront apartment properties.

Meanwhile, families are trending towards locations that offer effective transport infrastructure, with access to amenities and quality education.

Upgrades to major highways and new rail links may close the gap between suburbs that were previously closed off by poor infrastructure.

While the number of property sales in Melbourne is currently at very low levels, asking prices are holding up well:-

Of course, we are currently in the middle of a financial crisis caused by COVID-19, but the following chart shows how Australian residential property has historically fared well against negative economic shocks.

The following chart from Dr Andrew Wilson of My Housing Market shows how the number of dwelling sales in Melbourne has slumped.

Currently the lockdowns in Melbourne means our markets have gone into hibernation.

Some market segments are suffering more…

Currently investors and home buyers are abandoning the off the plan apartment sector for many reasons including concerns about construction standards, and many of those who purchased off the plan a few years ago are now having trouble settling with valuations coming in on completion at well below contract price at a time when banks are more reluctant to lend on these properties.

At the same time interest from foreign investors has slumped.

.

3. Melbourne’s Rental Market

Traditionally in Melbourne, vacancy rates have been tight; hovering well below the level of 2.5% vacancies, which traditionally represents a balanced rental market.

At Metropole Property Management our vacancy rate is less than half this rate, in part because our clients have chosen investment grade properties, but we’d like to think it also has a bit to do with our proactive property management policies.

While over the long term rentals have grown in line with property values, more recently asking rents have fallen, in part due to the influx of rental properties that were previously let on short-term leases such as AirBnB and student accommodation.

The lower yield investors have been achieving is a reflection of higher capital growth and the value of Melbourne properties.

As a consequence, overall yields have declined over the past few years as can be seen from the following chart from SQM Research.

Melbourne’s capital Growth

Melbourne now has 119 suburbs with a median of $1million or more – up from 98 a year ago, according to realestate.com.au data.

The Melbourne real estate market has seen the biggest rise in suburbs joining the million-dollar club in Australia over the last year

“At this stage, it’s too early to tell what impact Melbourne’s second lockdown will have on the market,” according to Nerida Conisbee realestate.com.au’s chief economist.

3 suburbs – Aspendale, Niddrie and Spotswood – fell off the $million list.



What’s so special about Melbourne?

4. Melbourne’s demographics

As Australia’s second-largest city, Melbourne is home to around 4.82 million people which accounts for 19.05% of the national population.

In fact, Melbourne has been ranked the world’s most liveable city for 7 years in a row, up until 2018 when it was just pipped to the post by Vienna, Austria

Melbourne is Victoria’s business, administrative, cultural and recreational hub of the state.

On an average day around 854, 000 people use the city, and each year Melbourne hosts over a million international visitors.

The culturally diverse and creative city is home to residents from an estimated 180 countries, who speak over 233 languages and dialects and follow more than 100 religious faiths.

Of the 130,000-odd thousand people who live in Melbourne’s inner city (the CBD), more than half are aged between 15 and 34, and they are generally living in single-person households or as couples without children.

According to Census data, this is strongly influenced by the high number of higher education students (both domestic and international) that reside in the city.

Immigration from China and India accounted for 32% of overall growth in population numbers, making Mandarin the second most commonly spoken language in the city.



5. Melbourne’s Layout

A well-planned city that is amply serviced by a range of public transport options, Melbourne is laid out under the ‘Hoddle Grid’, so named after its designer Robert Hoddle, which runs roughly parallel to the Yarra River.

As with most large cities, greater Melbourne is divided into ‘east’ and ‘west’ neighbourhoods; those in the east are more established and generally considered more affluent, while those in the west are more affordable, newer suburbs with less established reputations.



6. Melbourne’s Infrastructure

Melbourne residents enjoy the use of some of Australia’s most advanced and well-connected systems of road, rail and tram infrastructure, which give locals plentiful options when deciding how to get around the city and its surrounding suburbs.

The city received a perfect score of 100 for its world-class infrastructure in the 2013 EIU Liveability Report, where ongoing investment in Melbourne’s infrastructure was highlighted as being one of the factors that keep Melbourne at the top of the index.

And the State government is spending a lot on infrastructure recognising that good infrastructure is not an end in itself, but an enabler of better social, economic and environmental outcomes.

Meanwhile, Melbourne Airport handles more than 30 million passengers annually along with 350,000 tonnes of air freight, making it Australia’s largest air freight hub.

The city is also home to a number of world-renowned universities.

However as Melbourne suburbs sprawl further and further out from the CBD, the difference in the level of amenities between the inner suburbs and the poorly serviced outer suburbs is becoming more glaring, causing people to pay a premium to leave closer to the CBD and the better serviced inner suburbs.



7. Melbourne’s Economy

As a cosmopolitan, creative city that is served by a number of industries, Melbourne residents enjoy employment in diverse industries, from tourism, hospitality, and entertainment to commerce, industry, and trade.

Almost half the jobs created in Australia over the last decade have been created in Melbourne and Sydney.

Over the last 10 years, more than 500,000 new jobs were created in Melbourne as Victoria is transitioning from a manufacturing state to one driven by service industries, which is creating strong job growth and resultant overseas and interstate migration.

At the same time, the momentum of the Melbourne property market is creating a “wealth effect” for many of its residents have higher-paying jobs at a time that they are feeling wealthier as the value of their homes keep increasing.

8. Melbourne’s growth

Victoria remains the nation’s population growth powerhouse but growth has started to slow a little. Currently Victoria represents around 26 percent of Australia’s population and 3 out of 4 Victorians live in Melbourne making it Australia’s least decentralised state.

Melbourne’s population now stands at over 5 million people and Melbourne is still the fastest-growing cities in the country, growing at around 2.4% per annum.

The estimated population increased by 2.2% over the 2018 calendar year taking it to 6,526,413 persons with an increase of 139,430 persons over the past year.

The 139,430 person population increase consisted of natural increase of 40,256 persons, net overseas migration of 85,965 persons and net interstate migration of 13,209 persons.

Although the population continues to increase rapidly, both net overseas and net interstate migration are lower than they were a year ago and natural increase is higher than a year ago but lower than the previous quarter.

Of course there will be little immigration to Melbourne over the next year or so, putting a temporary halt to its substantial population growth.

However there is still an element of natural population growth (more births and deaths) and it is likely that population growth will surge once our borders are opened again, the popularity of Melbourne together with the fact it is the economic hub of Australia,

Like most housing markets in Australia, dwelling markets across Victoria now face new challenges in the wake of Coronavirus. The chart below shows Melbourne’s population increase attributable to net overseas migration in the year to June 2019, alongside the four latest four quarter average of the workforce employed in accomodation and food services and arts and recreation services. Clearly these areas of employment are likely to suffer more as we are cocooned by coronavirus. The graphs above highlights that Victoria’s change in population is trending lower due to quite large declines in natural increase and net interstate migration and a more moderate fall in net overseas migration. However Victoria still records the largest raw number increase in population of all states and territories in Australia

As you can see from the graph below, more than three quarters of net overseas migration has been into NSW and Victoria, most of this coming from China and India.

Most of these permanent migrants are coming for jobs and are of household formation age.

Many initially rent the homes, but many want to eventually buy a home as part of their “status” of being an Australian.

A large chunk of this population growth is happening in Melbourne’s outer west, where the number of residents has increased by a figure equal to the population of Hobart over the last decade.

In fact, seven of the country’s top 10 growth areas were outer suburbs of Greater Melbourne, with international migration a big driving force behind Melbourne’s population growth.

The ripple effect of house price growth caused significant house price growth in Melbourne’s outer suburbs over the last few years.

Similarly, some regional centers including Geelong have performed well, but moving forward it is likely that the more affluent middle rings suburbs which are going through gentrification are likely to exhibit the best property price growth.

By the way…

Just because there is significant population growth in these areas doesn’t mean there is strong capital growth of property values in these areas.

In fact, there isn’t!

That’s why I would avoid investing in these new outer suburbs as they lack the demographic and economic drivers to push up property values as opposed to the inner and middle-ring suburbs where there is more “old money.”

Melbourne is set to overtake Sydney and become Australia’s largest city by the 2030s according to demographer Bernard Salt.

And that’s not really that far away, is it?

If these forecasts pan out, and they are likely to be correct, they will underpin the strength of the Melbourne property market and deliver surety to investors who own property in the right locations.

Why is Melbourne attracting more growth than Sydney?

Melbourne offers what Sydney cannot or will not offer: access to affordable housing on the urban fringe.

Melbourne planned for growth from the Kennett years resulting in the formation of a plan for five million residents in 2030 and announced in 2002.

Either way, Sydney’s lead is now closer to 350,000 but is narrowing at a rate of 20,000 a year.

If present rates were to continue Melbourne would replace Sydney as Australia’s largest city at some point in the 2030s.

9. Melbourne’s culture

The city of Melbourne is nothing if not multicultural, with dozens of different cultures and nationalities – 140 to be exact – living side-by-side.

The city’s Multicultural Hub was launched as a friendly, supportive environment for Melburnians of all cultures to get together and work, share and learn, while the city’s diverse and awarded restaurant scene is highly influenced by immigrants from diverse backgrounds including Chinese, Italian, Greek and Lebanese.



What types of properties perform well in Melbourne?

10. Melbourne Houses

Decades ago, the Australian property market was dominated by demand for freestanding houses.

The appetite for ‘the Australian dream’, complete with a comfortable home on a big block with a picket fence and a pet dog, was insatiable, and home buyers, as well as investors, flocked to houses as a preferred investment type.

Today, the concept that land goes up in value is still well recognised, but not all land is created equal.

What’s more, changing demographics and evolving family situations have shifted dynamics to the point where more Melbournians are trading backyards for courtyards and balconies meaning apartments, units and townhouses can be just as highly sought as freestanding homes.

With median house values in Melbourne virtually doubling in the last decade, many people can’t afford freestanding homes, so they smartly start their home buying or investment journey with apartments instead.



11. Melbourne Town Houses

The term townhouse originally referred in British usage to the city residence of a member of the nobility, as opposed to their country estate.

Today the term refers to medium density (often multi-story) dwellings that maybe, but not necessarily, terraced (row housing) or semi-detached.

In fact, the 2016 Census showed an 11% increase in the number of people living in townhouses – a popular style of Melbourne accomodation where people live in modern accomodation on compact blocks of land close to ammenities in the middle ring suburbs.



Yes, Melburnians are trading their backyards for courtyards and balconies.

12. Melbourne Units

Units (sometimes called villa units) is the name given to single-story, older-style dwellings, mainly built in the 1960s and 70s.

Today, developers rarely build in this style because it’s not as profitable as building ‘up’.

This style of property makes an attractive investment, as they are increasingly popular with small families and young tenants, who enjoy the privacy with no one above or below and the small yard.



13. Melbourne Flats / Apartments

If you invest in a flat you are generally buying an apartment that has other dwellings attached to it; these could be above or below, next door, or a combination of the above.

They are the preferred style of accommodation for young Melbournians and are generally easy to the tenant and therefore, if well located, make great investments.

As the entry costs are lower, they are also the first type of accommodation bought by many first home buyers

.



14. Commercial, Retail and Industrial properties

Commercial properties, (retail shops, factories, warehouses, and office spaces) are in a very different league residential property and out of the domain of the every-day investor.

Whilst there are many benefits of investing in commercial properties, they are more suitable for the sophisticated and experienced investor, particularly as they are more yield-driven than capital growth-driven.

Consider it this way: for most advanced investors, your job is to build your asset base.

Once your portfolio is big and robust enough, you begin transferring into a cash flow strategy and at this point, a commercial property can be a good investment.



How do Melbourne’s areas compare?

15. Inner City

Melbourne’s inner city core has a population of around 29,450 people, a figure that is expected to double to 59,900 over the next 20 years.

As a result, there is much more property development activity in Melbourne CBD than anywhere else in the larger metropolitan area, with the majority of these developments comprising of high-density high-rise apartment buildings.

The area of Southbank, just south of Melbourne’s CBD, currently boasts over 9,000 distinct dwellings, the majority of which are family households (45%).

The number of residential properties is set to rise to more than 26,000 over the next 20 years.

Currently, I’m worried by a large number of poorly built inner-city apartments on the market or planned for completion.

Many, in fact, most of these are being bought by overseas investors and as these are likely to become the slums of the future.

Just to make things clear…I would avoid this segment of the Melbourne property market.



16. Bayside and South-Eastern Suburbs

Melbourne’s south-eastern suburbs boast distinct communities, neighbourhood attributes, and differing property growth cycles.

However while intricate, they’re considered by many to be the best Melbourne property investment suburbs.

The inner south-eastern and bayside suburbs of Melbourne make great locations to invest.



17. Eastern Suburbs

These include some of the most affluent areas of Melbourne – the residents of the eastern suburbs enjoy a median personal income of $1,164 per week, according to ABS figures.

Around 33% of properties are owned outright or mortgaged here, with 20% of housing comprised of townhouses or semi-detached homes, and only 33% of residential properties being high-rise apartments.

This is a dramatic difference from the inner city, where apartments are the dominant dwelling type.

The inner eastern suburbs of Melbourne also boast some great investment locations.



18. Western & Northern Suburbs

While the outskirts of Melbourne’s west and north is home to several of the city’s fastest-growing outer-suburban areas including Truganina, which increased by 18%, Tarneit (16%), Point Cook (12%), Melton South (11%) and Wyndham Vale (10%).

However, these more blue-collar areas have lower average wages growth and therefore lower ability to sustain capital growth.

While these areas are experiencing strong population growth and they have enjoyed strong capital growth over the last few years as the rising tide of the strong Melbourne property market lifted all ships, now that the cycle has reached its mature stage, many of these locations, especially the blue-collar suburbs will struggle.

In general, there are better investment opportunities in Melbourne’s inner eastern and south-eastern suburbs.



19. Melbourne has high standards

Melbourne has been named as the world’s most liveable city by the Economist Intelligence Unit’s liveability survey for 7 years in a row and for very good reason!

Boasting excellent healthcare services, premium education facilities (including world-class universities), a stable and diverse economy, solid investment in infrastructure and a thriving, creative culture, it’s easy to see why Melbourne received an overall score of 97.5 out of 100.

With such a high standard of living and ready access to good quality facilities and amenities, it comes as no surprise that people continue to choose to call Melbourne home.

In addition, with over 120 suburbs with a median house price of over $1million, Melbourne has the second-highest median price in the country (behind Sydney).



20. Avoid Melbourne’s poor-quality apartments

Just because Melbourne has a well-deserved reputation for quality, that doesn’t mean the city is flawless – far from it.

In fact, the Melbourne CBD (Central Business District) is riddled with poor quality apartments, with one report stating that an estimated 55 percent of the city’s tallest apartment buildings are of “poor” quality, with common design flaws.



No one wants to live in a sub-standard apartment, regardless of how affordable it is, and there are only so many people who would find a hotel-sized apartment appropriate for full-time living.

The fact that an estimated 40 percent of apartments in Melbourne are smaller than 50 square meters, according to the Melbourne City Council’s planning department, shows just how big this issue has become – particularly when you consider that the minimum size a single bedroom apartment can be in Sydney, London and Adelaide is 50m2 or above.

Not only are the apartments lacking in breathing room – literally – they’re also flawed in a number of other ways, with kitchens placed in hallways, a lack of ventilation and natural light, and poor storage.

All of these design faults make these types of developments less attractive to potential tenants, which reduces the desirability of these properties.

Investors would be well advised to steer clear of apartments that don’t tick all the boxes.

Shoebox-sized living spaces, alongside common design flaws in the building itself, should raise some serious red flags for buyers.

The problem is many overseas buyers are purchasing these properties which will become the slums of the future.



21. Look for Melbourne’s best properties in the inner and middle-ring suburbs.

Studies – and time – have shown that properties close to the city’s CBD (but not in it) and in bayside suburbs close to the water will increase in value more quickly than other properties and suburbs.

The demand for property is higher in these regions, as there is no land available for release, but the areas remain close to employment or desired locations.

Not only are properties closer to the CBD closer have better access to amenities and more employment opportunities, but transport costs are often lower and, as a result, people are willing to pay a premium to live there.

The end result for property investors in Melbourne is that the inner and middle-ring suburbs will (generally) out-perform the averages for suburbs located further from the city.



22. Be mindful of a Melbourne inner-city apartment oversupply

Melbourne’s property market has been typified by strong population growth and to keep up with surging housing demand, there have been a huge number of new developments – mostly in the form of high-rise apartment buildings, in and around the CBD – that have been approved.

While the population growth is soaking up much of this new dwelling stock, the city is still over-supplied with too many new inner-city apartments.

With such a large number of development projects either completed, begun or approved in recent years, the risk for property investors in Melbourne is that there will be an oversupply of properties in and around Melbourne’s CBD.

This oversupply will result in minimal capital growth and sluggish rental growth on your investment – so avoid Melbourne CBD and near CBD properties

There is still a historic high number of dwellings are under construction across Victoria According to the ABS, there were 73,290 dwellings under construction across Vic at the end of March 2018, which was a historic high. The 73,290 is split between: a record high 23,804 new houses, a historic high 48,971 new apartments, and 515 non-new dwellings. There was a significant rebound in the number of dwellings under construction across the state over the quarter with the number under construction now 7.6% higher than the previous record high.

More recently approvals for new apartment have fallen well down from their peak, yet house approvals are climbing In May 2018, there were 6,435 dwellings approved for construction in Vic which was 11.8% higher over the month and 18.3% higher year-on-year.

Over the month there were 3,714 houses approved for construction, an increase of 9.7% over the month and a 7.9% increase year-on-year.

While unit approvals are down from their peak, the 2,721 approvals in May 2018 was 14.8% higher over the month and 36.4% higher year-on-year.

.



23. Make the most of Melbourne properties through negative gearing

While most investors understand the concept of negative gearing, just in case you’re not up to speed, here’s a quick refresher:

A property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs, and depreciation – exceed the income it produces.

Since the costs of producing an income are generally deductible against the taxpayer’s other income, property investors can effectively offset some of the interest expense against their wages.

Why would anyone go into a business deal to make a loss?

Generally, it’s because property investors in Melbourne hope that their income losses will be more than offset by their capital gains when they eventually sell (or refinance) their property.

And in Australia capital gain is not taxed unless you sell your property, and then it is concessionally taxed; again evoking the argument that it favors wealthy landlords.

Of course, negative gearing is more favorable for taxpayers who earn high incomes and just to make things clear…

Negative gearing is not an investment strategy – it’s just the way a property is financed at a particular point in time.



How do you choose an investment property in Melbourne?

We believe that 80% of your property’s performance is related to its location (one that outperforms the averages ) and 20% or so is related to buying the right property in that location.

Here are some of the factors to look for when selecting an investment grade property:-

24. Buy a property for below its intrinsic value

I’m a big believer in buying property for below its intrinsic value – that’s why I avoid new and off the plan properties, which generally attract a premium price tag.

I also look for properties with a high Land to Asset ratio – but remember apartments have an attributable land value underneath them



25. Buy a property in a location that outperforms the averages

In other words in an area that has a long, proven history of strong capital growth and one that is likely to continue to outperform the averages, and this is largely because of the demographics in the area and the future economic prospects for the area.

These suburbs tend to be those where a large number of owner occupiers desire to live in the area, because of lifestyle choices of the offer.

I look for suburbs where wages (and therefore disposable income) is increasing above average.

This translates to being an area where locals are able to and prepared to pay a premium price to live there, putting a financial floor under your investment property.



26. Buy a property with a twist

An investment must have something unique, or special, or different or scarce – some ‘X factor’ that makes it stand out from its neighbours – in order to land on my shortlist.



27. Buy a property where you can manufacture capital growth

An ideal investment is one in which you can manufacture capital growth through refurbishment, renovations or redevelopment.



How can I stay on top of current information?

28. Get property news, updates and advice by email

There is so much information available about various property investing trends, strategies and market information that it can be overwhelming knowing where (or how) to get started.

Join the 120,000-plus Australians who subscribe to my weekly newsletter, which offers a diverse range of analysis, articles and expert commentary that is essential for successful property investing.

Why not subscribe to the Michael Yardney Podcast where each week you’ll learn something new about property, success, and money in around 20 minutes

You can also sign up for my personal market updates by getting a daily dose of insightful commentary in your inbox each morning.

Join here; this is free and different from our newsletter subscription.



29. Take advantage of investment advice

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

Sure our property markets are improving, but correct property selection is even more important than ever, as only selected sectors of the market are likely to outperform.

Why not get the independent team of property strategists and buyers’ agents at Metropole to help level the playing field for you?

We help our clients grow, protect and pass on their wealth through a range of services including: