Melbourne’s property market has experienced a relatively sluggish performance compared to other major Australian cities since the onset of the COVID-19 pandemic. While cities like Sydney, Brisbane, and Perth have seen substantial price increases, Melbourne’s growth has been more modest.
According to CoreLogic data, Melbourne’s home values have increased by only 10% since March 2020, compared to Sydney’s 29%, Brisbane’s 67%, and Perth’s 76%.
This underperformance has created a unique situation where Melbourne’s property market is now considered relatively affordable compared to its counterparts. This affordability factor is one of the key reasons experts believe Melbourne is primed for a strong comeback.
Factors Driving Melbourne’s Potential Outperformance
- Improved Affordability
The slower price growth in recent years has made Melbourne’s property market more accessible to a wider range of buyers. This increased affordability is expected to drive demand as interest rates stabilize and potentially decrease in the future. - Population Growth and Immigration
Melbourne has historically been one of Australia’s fastest-growing cities. As international borders reopen and immigration resumes, the city is likely to see a significant influx of new residents, driving demand for housing. - Economic Recovery
As Victoria’s economy continues to recover from the impacts of the pandemic, increased job opportunities and economic growth are expected to boost consumer confidence and property demand. - Infrastructure Investments
Ongoing and planned infrastructure projects, such as the Melbourne Metro Tunnel and suburban rail loop, are set to improve connectivity and livability, making certain areas more desirable for property buyers. - Government Initiatives
Recent government measures, such as stamp duty concessions for off-the-plan properties, are providing additional incentives for property investors and first-time buyers.
Expert Opinions and Predictions
Dr Nicola Powell, Domain’s chief of research and economics, believes that once interest rates start to fall, Melbourne’s property market will likely outperform other capital cities. She notes that Melbourne’s underperformance since 2020 sets the stage for a strong recovery in the next market cycle.
AMP Capital’s Shane Oliver predicts that Melbourne could see price growth of 7-8% in the next upswing, potentially outpacing Sydney’s projected 5% increase. He attributes this to Melbourne’s relative affordability compared to other major cities.
Scott Kuru, co-founder of Freedom Property Investors, suggests that it’s only a matter of time before Melbourne reclaims its position as the second most expensive Australian city for housing, driven by lower interest rates, improved affordability, and government support.
Investment Opportunities and Strategies
For investors looking to capitalize on Melbourne’s potential upswing, several strategies are worth considering:
- Off-the-Plan Purchases: Taking advantage of stamp duty concessions for off-the-plan properties can provide significant savings.
- Inner-City Apartments: As the city’s vibrancy returns post-pandemic, inner-city apartments may offer good value and strong rental demand.
- Growth Corridor Properties: Areas benefiting from new infrastructure projects could see substantial price appreciation.
- Renovation Opportunities: Purchasing undervalued properties with renovation potential can lead to strong capital gains as the market improves.
Challenges and Considerations
While the outlook for Melbourne’s property market is positive, potential investors and homebuyers should be aware of some challenges:
- Short-Term Uncertainty: The market may face some headwinds in the immediate future due to economic factors and rising supply.
- Taxation: Victoria’s property tax system remains a consideration for investors.
- Market Variations: Performance is likely to vary across different suburbs and property types.