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.
- 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.
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.
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
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
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.
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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?
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'Melbourne property market forecast' have 211 comments
September 26, 2020 elyas
Hi Michael
i would like to develop a property into 3 townhouses. i havnt purchased a property yet. looking at areas such as box hill south, mt waverley, glen waverley, ashburton chadstone and neighbouring suburbs. what do you think of those areas doing in a 12 months and where you suggest is the best option
thank you
September 27, 2020 Michael Yardney
Elyas – while potentially these are all good suburbs, have you ever done a development before? In most of these suburbs the council won’t allow you to develop one property into three. How well do you understand the town planning regulations in these locations?
September 18, 2020 sam
Hi Michael,
We are living in Sydney and thinking of graving opportunity of slow market to buy 2 bedroom apartment or house in Melbourne as an investment.
We got budget of around 450k.
What would you recommend, house/apartment?
Suburbs in our budget?
September 19, 2020 Michael Yardney
Sam – you’re about 10 years too late. You can’t buy a house in an investment grade location in that price range and you will have difficulty finding an investment grade apartment in Melbourne in that price range
September 17, 2020 Ben
Hi Michael,
Thanks for a great blog. We are looking at buying an apartment to live in northern (Brunswick, Thornbury) or eastern suburbs (Kew, Hawthorn). Budget is 600-700k. Would you still advise to buy established rather than new build? Does homebuilder make any difference to this equation?
Cheers
September 17, 2020 Michael Yardney
Ben – are you looking for a home or investment?
September 28, 2020 Ben
Thanks for your reply. We are looking for a first home.
September 28, 2020 Michael Yardney
You are unlikely to get a new property in your budget in the suburbs you mentioned. By the way Homebuilder isn’t for to help home buyers – it’s a grant that helps builders. Don’t get lulled into a false sense of security
September 28, 2020 Ben
Thanks, Michael. We will probably look for an established 2 bed apartment or unit in eastern Suburbs for
Under 750 then. Cheers
August 20, 2020 Freddy
This is a very helpful and insightful article. Thank you
August 14, 2020 Dave
Hi Michael,
Thank you for the informative content.
For some time we have been planning to buy a weekender on the Bellarine Peninsula. Property market aside, this is a non-negotiable for us, for family reasons.
The issue is – this has become financially possible only recently, between the two lockdowns.
We are not in a supreme rush, and are aware that there is currently no way for us to inspect any property until stage 4 restrictions are lifted. This said, we would like to go ahead with the purchase. There are a number of properties we’d be putting offer for (if we could inspect them!) so it seems like options are there.
The question is – when should we buy? Right after restrictions are lifted or wait a few weeks / months in the hope for a better price? I do hate the idea of feasting on someone else’s misfortune. However, a 5% drop in the market would mean -$30-40k on the purchase price, and that’s significant.
What’s your advice?
Thanks
Dave
August 14, 2020 Michael Yardney
If you are buying for your personal, family reasons, rather than as an investment and you find the right property, don’t ry and time the market. If this is a long-term holding,snf you find the right property then buy it – up will be helping ghe vendor rather than hurting them.
July 24, 2020 Mirza
I have a budget of $250,000 from a Line of credit release from my house in Brisbane. Would you suggest buying and leveraging 1 high value Melbourne townhouse/apartment in a inner east, east or bayside suburb. Or 2 apartments (1 bedroom) in an area such as Kew or other blue-chip suburbs. I would leverage high by paying 2 lender’s mortgage insurance for the 2 apartments. I would pay the LMI on the 1 property as well because you are higher leveraged so bigger return. I haven’t bought anything and this is hypothetical for now. LMI is tax deductible for investment properties as I understand.
In your expert opinion is it better to buy 2 properties at once or just the 1 in the right area. 2 properties would give you double capital growth.
I heard that having more properties reduces your risk because you have more streams of income in case you lose your job.
Our income is $170,000 per year before tax.
July 4, 2020 Vish
Great article Michael
Me and my daughter are thinking of buying an investment property and we both can take a loan of around 500k, would you recommend buying one investment property or two properties?
Also does areas like Noble Park and Dandenong have good potential for growth over next 5-10 years?
Thanks for your help
July 5, 2020 Michael Yardney
Firstly avoid Noble Park in Dandenong – they’re both areas that are going to underperform in the medium to long term – they always have because of the local demographics.
In general it’s better to buy one better property and it may not be possible in your budget to buy two separate “investment grade properties” in Melbourne But there are many other factors to take into account including your medium to long term plans. It may be difficult to unravel things if you plan to go separate ways moving forward
July 2, 2020 Leonard
Hi Michael, your site is awesome and the information you have listed here is very enlightining. My partner and I are searching for land in the Epping and South Morang area with a total budget of $750K and hoping to build a single story dwelling. As this will be our first home the idea is to stick around for a few years then sell and move on. Reaching out for your thoughts/forecast on performance for these areas (lets say) for the next 5 years compared to other suburbs where land can be purchased for roughly the same budget.
Cheers,
Leo.
June 28, 2020 Taro
Hi Michael what a great site! Thank you in advance for all the information on here. My husband and I are looking at various options to invest in our first investment property. We stumbled upon the Defense Housing Investment option and would love to get your thoughts.
June 28, 2020 Michael Yardney
Defence housing has always been a severe underperformer.
While initially it may look good, because they sell it with the concept of deal take care of everything, you get very poor capital growth, no secondary market no one wants to buy them, and and rental return that isn’t worth all the problems.
It’s a terrible way to start your investment journey.
June 27, 2020 Annette
Hi Michael,
I stumbled across your website and your article which has great information. I am looking to buy my first investment property with a budget of $500k. I’d like to buy something I can renovate and either sell or rent. I’ve been looking at units in suburbs such as West Footscray, Ascot Vale and Airport West. What’s your thoughts on these suburbs and whether to rent or flip?
June 27, 2020 Michael Yardney
Anette, unfortunately you can’t make money in flipping properties – no matter what other people tell you. Otherwise everyone would be a property multimillionaire.
Similarly you’ve got a very low budget for the Melbourne property market, so my first ask you some questions before I respond?
You may not be prepared to answer these online in the public forum and I can understand why, but these are the sort of questions our team would be asking you with Metropole before we make any recommendations.
1. How old are you?
2. What is your income?
3. Do you have the financial capacity and serviceability to purchase a property?
4. What is your “end game” – what are you trying to achieve
5. How well do you understand and apply the 5 to 7 fundamental disciplines of investment to your decisions?
6. How many local markets do you know intimately?
7. Where do you get your market research from when making a property purchasing decision?
8. How well do you understand the three essential requirements of ownership structures?
9 . What criteria do you use to buy properties that outperform the averages and deliver wealth producing rates of return?
Sorry for so many questions, I was going to initially ask you one or two and then realise to be able to answer your query which way to head, I need to know little bit more about you.
You may want to respond to [email protected]
June 21, 2020 Sam
Hi Michael, great article! What are your thoughts on buying land and building new homes in Berwick? Do they have great capital growth in the future? I hear it has good yield and demographics are quite good as well. Many schools are there, train station and has a hospital there too.
June 21, 2020 Michael Yardney
Berwick has a different demographic to many other outer new suburban areas and great infrastructure – hospital, uni etc- the trouble in the new land on the outskirts of Berwick are not Berwick proper and has very different capital growth prospects to the more established affluent parts of the city of Casey.
The lack of scarcity, the fact that the demographic buying this sort of property won’t have strong income growth moving forward, and the very poor track record of capital growth of house and land suggests you really should NOT buy this type of property for an investment. If it’s for you to live there, that’s a different story however why are fight the big trends if you’re getting involved in property investment or using this is a stepping stone for your next property
May 30, 2020 Adrian
Hi Michael,
Thanks very much for providing such helpful information. I would appreciate if you could let me know your opinion.
I am a First Home Buyer looking for a suitable property to live and maximize growth in the future (my budget is about $485) and I work in CBD.
I have been told that houses and townhouses have better future due to the capital growth compared to apartments. Therefore, I need to search in suburbs far from city (Pakenham and Clyde in east, Point Cook, Caroline Springs in west). I have to move to these suburbs and live there for at least 1 year to meet the scheme requirement, then I can lease the property and rent a place for myself somewhere near city.
The other solution (easier) is to buy an apartment (not in CBD as you advised) and live there.
Which one do you think is a better idea?
Thanks in advance for your help!
Adrian
May 31, 2020 Michael Yardney
I’d buy the established – NOT CBD apartment – there will only be a wider gap between the inner/middle ring suburbs and the outer suburbs moving forward
May 31, 2020 Adrian
Thanks for your response Michael. Which part of Middle Ring is more on your radar? West (e.g. Moonee Valley, Maribyrnong), North (e.g. Darebin, Banyule) or East (e.g. Boroondara, Glen Eira).
I understand this is a general question and depends on many factors, even inside a suburb there are some areas performing better than others. But generally which side would be your preference to have better growth in the future?
Thanks Adrian
May 31, 2020 Michael Yardney
Adrian
That’s what our research team spends a lot of time money and effort working on. And clearly that’s the information we give our clients to help them out perform the averages.
It’s based on research and more importantly the perspective to interpret this research.
Why not have a chat with our team consider taking advantage of this knowledge. just click here
May 20, 2020 John Toogood
Michael, I can’t recommend your blog more highly!
I have a single 30 year old daughter who is now able to buy her first property thanks to a recent inheritance – she has her heart set on a 5 year old 90sqm 2br apartment in 3065. My first response was to tell her to read your blog and avoid apartments in the inner suburbs entirely, especially in that area! However, this one has a very impressive north facing outdoor terrace nearly half the size of the apartment itself, which made me wonder if this might be the sort of x-factor that might help it perform better than other apartments? She has a busy corporate job and tells us she doesn’t have the time or inclination for maintaining a house despite our strong suggestions!
May 20, 2020 Michael Yardney
John – sure the terrace will make it unique and special – but remember…location does 80% of the heavy lifting.
The right apartment in the wrong location is still unlikely to get strong capital growth.
May 31, 2020 Dani
Fitzroy is a lively and thriving suburb (pandemic aside) – what makes you classify it as being in the wrong location?
June 1, 2020 Michael Yardney
The stats show underperforming capital growth in the 5 km ring from the CBD over the last decade – in general because of the over supply of new poorly built apartments.
Of course these locations have had significant revitalisation and offer great life style, but that’s another matter
February 27, 2020 sunbay park ninh thuan
It was helpful when you mentioned that we can use Google Earth to better view the terrain and measure property boundaries accurately. My husband and I want to buy some acreage of land within the next month or so so we can start building a custom vacation home. Your article provided some great resources we can use to evaluate potential plots of land, so thanks for sharing!
February 25, 2020 Shivish
Hi
I am searching for my first home , and considering my budget and commute shortlisted Craigieburn, Mickleham, Wollert or Epping. My budget is $500k to $550k, what’s your pick looking for a fair capital gain in 5 years time and want well established community in place to live in.
Thanks
February 25, 2020 Michael Yardney
I can understand why your budget will only allow you to buy in certain suburbs and all the ones you’ve chosen are likely to underperform the averages.
However, it’s great that you’re planning to get into the property market and all those suburbs will probably have similar capital growth over the next decade, so it really comes down to the subway with the amenity that you desire.
February 18, 2020 Roger
Hi Michael
We have a budget of around 500-600k to buy an investment property ( our first investment). What are some of suburbs you would recommend to start doin our research . Initially we looking towards western suburbs due to commentary about new infrastructure and population growth . Keen to get some thought about some suburbs that are on your radar.
Thanks Roger
February 18, 2020 Roger
Hi Michael
We have a budget of around 500-600k to buy an investment property ( our first investment). What are some of suburbs you would recommend to start doin our research . Initially we looking towards western suburbs due to commentary about new infrastructure and population growth . Keen to get some thought about some suburbs that are on your radar.
Thanks
February 18, 2020 Michael Yardney
I’m really glad you asked because these are exactly the suburbs to avoid – population growth and all the new estates in the western suburbs create physical growth – but supply is the enemy of capital growth. In other words you will underperform if you invest in these new locations.
Please don’t fall into the trap that so many beginning investors do – that’s why they never get past their 1st investment.
Why try and do it alone – you only end up paying the market a huge learning fee?
Why not use my team at Metropole to help you – we have no properties for sale and we have access to more than the Melbourne market – I’d consider Brisbane with your budget – please leave your details here
February 15, 2020 Asiri
Hi Michael Grate Article. I am novice to property investment. But have read about property investment through your books and articles. I have a budget of A$750000 and looking at investing in strathmore close to the school zone. Would you recommend investing in strathmore ?
February 15, 2020 Michael Yardney
Asiri
While Strathmore is a good suburb,less than 5% of the properties on the market are investment grade. And you say “close to the school zone” – well if you’re not in it, it doesn’t matter how close you are to the school zone – that’s irrelevant.
You’ve got a good budget, but not for an investment grade house there.
If you’ll like some more specific advice, why not have a chat with my team at Metropole. Click here and leave us your details
February 15, 2020 Asiri
Hi Michael, Thank you for your advice. Would a villa unit in the school zone be a viable option to invest in Strathmore ? Were would you recommend me to invest based on my budget to get the best return.
February 15, 2020 Michael Yardney
Asiri – I’m not going to give you specific advice over the internet – that would be very wrong and not in your best interests. When we put together a personalised strategic portfolio plan for our clients we take over 50 variables into account before we make a recommendation – that’s why we get the great results for our clients that we do
February 12, 2020 Jesse Duffield
Hi Michael,
I’m currently looking to buy my first home with a budget of 600k. I’m going to be working in or close to the city for the forseeable future, and I want to have a short commute. I’m currently torn between buying an apartment with a good land share in the inner east e.g. hawthorn, camberwell, burnley, kew, surrey hills, or getting a unit in somewhere like ringwood or croydon. Ringwood/Croydon has seen strong growth in the last decade and if I buy there I’ll have more land. What are your thoughts?
February 13, 2020 Michael Yardney
Jesse an established (not new) apartment in those great eastern suburbs you mention should make a good home in the short term and fantastic investment in the long term
February 13, 2020 Jesse Duffield
Thanks!
February 10, 2020 Aditya Dhar
Hi Michael,
Great and helpful article. My partner and I are first home buyers and were looking at Derrimut as a suburb to buy a house. Our budget is around $600,000 – $650,000. The houses are quite nice with decent land size of around 490 m2 average. Would you recommend Derrimut? Also what about Altona Meadows, Laverton and Caroline Springs?
February 10, 2020 Michael Yardney
Aditaya These are all first home buyer suburbs so they are likely to suit you, but because the local demographic is mainly young families these suburbs will not deliver superior capital growth. However if they suit your family needs it’s better to be in the market than out of it
February 3, 2020 Ben
Hi Michael,
I have a property(investment) in Heidelberg Heights and am thinking of subdividng the land at the back of the block to pay down the mortgage. Would you recommend this at the moment or wait until the growth cycle has kicked in to maximise profit?
Thanks.
February 3, 2020 Michael Yardney
Ben – I can’t advise as I don’t know the property or your circumstances – but I’ve found it is very difficult to subdivide a saleable portion of land at the back of a typical suburban block unless it is a corner site
February 2, 2020 Angie
Hi Michael, I’m looking to buy an investment property (house with land) and have a budget of around $600k. Interested in getting your thoughts about the following suburbs – St Albans, Dallas, Thomastown, Lalor and Epping. Planning on holding on for the long-term. Thanks in advance.
February 2, 2020 Michael Yardney
Angie. None of those suburbs are in my radar. All underperformed. How did you choose those?
February 9, 2020 Angie
Hi Michael, I was looking at those suburbs as they are within 25km of the city and you can still get a decent land size of over 500m within my purchase price. Some of those areas are also tagged to become Major Activity Centers in Melbourne’s growth plan. Do you have any recommendations on what regions we should be looking in metropolitan Melbourne (i.e. North, East, West, South)? Thanks.
February 10, 2020 Michael Yardney
Angie – as I said none of these suburbs are on my radar – if you’re looking to outperform the averages I would chose better (much better) locations. Just because they may become activity centres doesn’t mean above average growth – there are plenty of past examples of this.
Moving forward suburb demographics will be more critical than ever as working class suburbs will underperform as they will not have the wages growth to support higher prices?
You have a good budget but not for a “house and land” – you’re 10 years too late. Would you like my team to advise you – find out more here http://www.Metropole.com.au
January 30, 2020 peter
hi Michael looking to buy in bulleen , templestowe. lower templestowe area. What do you think this to live in as i am selling up my home in watsonia north
January 30, 2020 Michael Yardney
Peter. When you’re buying a home to live in there are many factors to take into account – those suburbs will have better capital growth than Watsonia south, but like allareas, there are many different nieghbourhoods and some will do better than others. What’s your budget?
January 30, 2020 Tony Fanfulla
Hi Michael, great article, love your podcasts. I agree with your strategies and have 5 investments properties (8 tenants) Do you have any information on what is always the last couple of steps in your big picture…”Lower the LVR & live off your property” I understand that time naturally lowers LVR (provided your property values increase) but th e living off the portfolio is what I’d like to hear more about. Thanks, Tony
January 30, 2020 Michael Yardney
Well done Tony. Congratulations, you’re in the minority of investors who have built a portfolio that large. You’re right the strategy for the next stage is very different – I discussed this in a podcast at the end of last year with Pete Wargent where we discussed – you can listen here or wait for the upgraded edition of my book How to Grow a Multi Million Dollar property portfolio – I have a new chapter on this
January 29, 2020 Wayne
Hey Michael, would you consider Mt Eliza an investment suburb or is it too far from the CBD to get above average capital growth?
January 30, 2020 Michael Yardney
Wayne -Mt Eliza is a great place to live, but definitely not on my radar as an investment grade suburb – much too far out and poor public transport
January 18, 2020 Anna-Marie
Hi Michael,
We purchased a 2 bedroom apartment 70 square metres plus balcony in a block of 9 in elwood 5 years ago for $676,000. It is rented for $580 per week and we never have trouble getting tenants however we have regular maintenance problems and are considering selling to buy a house further away from the sea in the hope that this will reduce the maintenance costs and closer to home (which will allow us easier access to do the work ourselves). We live in Coburg and the capital growth would have been bigger if we had bought a house locally 5 years ago instead of the apartment which supports our thoughts. What are your thoughts about this plan?
January 18, 2020 Michael Yardney
Anna Marie – unfortunately apartments in Elwood have not performed as well as I would have expected over the last 5 years.
I know as I own 2 blocks of apartments in Elwood, but the location is irreplaceable and with little competition of new stock coming on the market movng forward, established Elwood apartments should perform better moving forward.
I would not use the criteria that you can perform maintenance as a reason buy an investment in a particular location
DO your sums carefully before selling up. I’ not selling mine
January 19, 2020 Anna-Marie Innes
Thanks for the response Michael,I agree that buying close to home so that we can perform maintenance isn’t a good reason to invest close to home, however that isn’t the only reason we are considering it. The house next to us sold for $715,000 at the same time that we purchased the apartment in Elwood for $676,000. The same house is now worth $1,000,000 unlike the apartment which is worth approximately $800,000. And we are beginning to suspect that the maintenance costs will always be higher in Elwood due to the sea air and consequent corrosion so the holding costs are high. To reduce the impact of this we do what we can ourselves and this would also be easier to do if the property was closer. Someone in the block sold an apartment which is a mirror image of the one we own for $762,500 in December 2018. They had purchased it for $535,000 in March 2006, over 12 years prior. With maintenance costs of about $5,000 per year (not including body Corp fees, agent fees, rates, water etc) and a continued growth rate along the same level, we are wondering if keeping it is a good investment?
January 19, 2020 Michael Yardney
Anna-Marie to answer this question for our clients at Metropole we run all the numbers through a special calculator we’ve devised so that it is not an emotional decision.
Sorry I can’t give you a specific answer
November 28, 2019 salah khan
Hi Micheal:
think of buying a town house at woodlea.
do you think its a good idea?
November 28, 2019 Michael Yardney
Salah
I don’t know your circumstances so can’t give specific advice – but please DO NOT buy a property there. it definitely is NOT an investment grade location
November 6, 2019 Valerie Korn
Hi Michael, Thank you for article. I found it to be very useful and informative for someone who wants to invest in South Eastern suburbs. With the budget under 2million I am looking at investing in Elwood, Armadale, Brighton , StKilda, Ripponlea or McKinnon. House or Townhouse . What’s your professional opinion on these suburbs , please ? Thank you
November 6, 2019 Michael Yardney
Valerie
They are all great suburbs, but with the budget you have outlined there are only 2 of those suburbs I would consider. We’ve done a lot of very detailed research on all these suburbs and know them backwards – if you’d like to get access to this please email me [email protected]
October 7, 2019 Shirley
Hi Michael,
Thank you very much for your insight!
I am looking for an apartment near Monash University for renting in Clayton with a budget of $550,000. Do you think it’s a good investment?
Please advise!
Shirley
October 7, 2019 Michael Yardney
Shirley – Clayton is not on my radar and students are not the best tenants – that’s a good budget – you could do a lot better
August 30, 2019 Jacob Mann
Hi Michael, great resource you have compiled here, in your assessment of Melbournes Inner City being in oversupply and not a great investment option does Inner City extend to Richmond, North Carlton, Fitzroy, Brunswick etc? For practical reasons my partner and I are wanting to have our first home close to the city, but we want to have the property in a good position for growth as we plan to buy again within a few years and move further away from the city. Regards
August 30, 2019 Michael Yardney
The inner city and inner suburbs apartment market is oversupplied with the wrong types of apartments that are now 2nd tier properties becuase of structural and fire concerns. Houses in these suburbs still have strong growth potential as do the older style apartments
July 29, 2019 Jack
Hi Michael,
Thank you so much for your amazing article!
I am looking to purchase our first unit.
I did some research and interested in the unit near Prahran station and North Melbourne near Vic market. Which one is in your radar? Please advice which one is better?
July 29, 2019 Michael Yardney
Jack – I would be very wary of both these areas as they are plagued by oversupply which will depress capital & rental growth for some time.
What is your budget?
July 22, 2019 Mitchell
Great Article Michael. Helpful information provide. i think Frankston is also a growing property market for investment what you think?
July 22, 2019 Michael Yardney
Mitchell – I know you’re a Frankston agent and understand your enthusiasm, but Frankston has underperformed over the long term and I see no reason why that should change in the future. Frankston is NOT on my radar
July 16, 2019 Alicia
Hi Michael,
Thank you so much for your insight!
My partner and I are looking to purchase our first investment and really think that Brisbane could be promising option but everyone that we speak to advises us otherwise. Would you consider Brisbane to be a good investment?
July 16, 2019 Michael Yardney
Alicia – who are you speaking to? What experience do they have? Remember – we seem to have 25 million property experts in Australia.
The answer depends a lot upon your budget and your strategy. Also there is not ONE Brisbane property market nor ONE Melbourne property market.
Why not get independent advice from my team at Metropole – we have no properties for sale but offices in both Brisbane and Melbourne – so we understand those markets Click here and organise a chat
July 16, 2019 Cliff
Hello Michael,
I have friends from China who have to buy off the plan as they are not citizens. They like Southbank and are thinking 3 bed 2 bath 1 park. Central Equity usually ask around $10,000m2, however there are high quality apartments around $13,000 to $15,000m2 for floors above level 50 (hence sun and views). Is it worth the extra for them to get something special? Kind regards, Cliff
July 16, 2019 Michael Yardney
It’s always best to purchase the best property you can afford
July 15, 2019 Nevin
Hi Michael,
me and my partner are currently looking to invest with a budget of around $420k, it is not a huge budget and we have been looking at areas around Geelong such as belmont and corio but seem to be struggling at our price point, there are properties available but most need some immediate work. Is it worth sticking to those areas and just being patient or are there other areas you might suggest? property types so far have been 2-3 bedroom houses on 500+ sqm of land.
Regards
Nevin
July 15, 2019 Michael Yardney
Nevin – what you have is a very tight budget for an investment grade property and while Geelong has performed strongly in the past, it’s not on my radar from long term outperformance.
Remember – the location will do around 80% of the heavy lifting of your investment’s performance – so don’t compromise on location. I would rather own an apartment in the right location -not new or off the plan but an established department with a high land to asset ratio – than a house in the more secondary location
January 16, 2020 Ken
Hi Michael,
I think I regret to buy a house with 63k in Narre Warren as it seems to be an nonperformance zone. The reason I bought is because I am a big fan of land value and limited budget.
January 16, 2020 Michael Yardney
The problem is not all land is created equal. It’s not how much land but where that land is located
July 13, 2019 Cories
Thanks MIchael. Great article!
I am looking at buying an investment property maybe in Sunshine. I think the recent news on the airport rail link may bring a lot of growth. But I also agree with you that this area has a lot of blue collar residents and may limit the growth of property price. Any thoughts?
Also if I buy a 2 stories townhouse, what do you think should be a good land to asset ratio? I guess it’d be different from a single level structure.
Thanks
Cories
July 13, 2019 Michael Yardney
Cories – as the location of your property will do 80% of the heavy lifting – this is the most important factor – we have both agreed that wages growth will be poor in Sunshine – it’s not even on my radar – look elsewhere
May 26, 2019 abigail chia
Hi Michael,
I really find your article very useful and informative. My hubby and I bought an investment 4 bedroom house in Brunswick on union street… very near the university of Melbourne. The location is fantastic and its an old victorian house. However it has no garage space and only has one toilet. Do you advise to keep it for capital growth or sell it perhaps next year or so ?
May 26, 2019 Michael Yardney
Abigail
It would be impossible to advise you without knowing your circumstances, your aims, your borrowing capacity, your tax position, your cashflow etc, etc, etc
But we can definitely runt he numbers through our calculators and give you the right advice. We call this service a Strategic Property Plan – please click here and find out more and book in for one
May 6, 2019 Seke Baugh
Hi Michael,
Thanks for your article. My wife and I are looking to purchase an off the plan 2 bed apartment in Werribee in a new development called http://www.riversedge.com.au
It costs around 402K and there are no other high rise apartments in that area. Do you think this is a good investment?
May 6, 2019 Michael Yardney
While I don’t know your personal circumstances I can tell you that more than 50% of off the plan developments value in at less than the contract cost when they are completed.
Please AVOID off the plan properties – you pay way too much of a premium when you should be getting a discount
April 13, 2019 Ruth
Hi Michael
I am a First Home Buyer with $500-515K budget. What are your thoughts on buying a post war 2 bed apartment (one of 8 in block) in Brunswick East, VIC? It is fairly small <60 sqm and East/West facing. Should I go further out?
Any advice appreciated. Thanks
April 14, 2019 Michael Yardney
Ruth – your budget will allow yo to buy a good property – and I like the area you’re suggesting but you’ll have to be very, very careful in selecting he right property.
With so many apartments in Brunswick you need one that stands out – the one you mentioned is TOO small – don’t buy that one!
1
April 17, 2019 Ruth
Hi Michael, what is the minimum internal space for 2 bedroom apartment I should settle for within my budget in Melbourne? Its actually 64 sqm plus balcony.Still no good? Thank you
April 17, 2019 Michael Yardney
Ruth internal area is one of the least important factors Ruth – yet you’re obsessing over it. I’ve seen some well designed and laid out smaller apartments work better than bigger but poorly laid out apartments.
I would be very, very careful about buying an apartment in Melbourne at present
April 19, 2019 Ruth
Noted with thanks. Unfortunately, I need somewhere to live and my budget only permits me to purchase an apartment within an acceptable distance from the CBD/work. Thanks again
April 20, 2019 Michael Yardney
Then that’s a different story Ruth – have you considered rentvesting?
March 27, 2019 Sabrina
Thanks for your feedback Michael.
It’s interesting, I saw the same trend occur in London. When Melbourne is growing exponentially, it’ll follow the same trend as any metropolitan city. Some will expand out but the professional migration will attract close-to-CBD living.
I guess it’s a long game for me and my growing family living close to work and schools, especially with the sluggish infrastructure development to accommodate the number of people.
It’s a gamble.
I played the game when I purchased (owner-occupier not investment) in London’s Brompton Road/Hyde Park, sitting tight paid off.
Thanks for the regular content and up to date info, it’s hard to find such an insightful resource online.
March 25, 2019 Sabrina
Hi Michael, you’re blog is fantastic.
I’d love to hear your thoughts.
I’ve just purchased a 3 bed apartment on Queens Road that over looks Albert Park Lake and the Park.
It will be for owner-occupancy for a few years and waiting to see what the market will do in a few years.
I know you’ve mentioned that properties close to the CBD may not be a good investment long term.
The property is 172m sq.
Do you think this would be a bad investment in the long term?
I hear mixed opinions about Melbourne 3004 properties.
Thanks!
Sab
March 25, 2019 Michael Yardney
Sabrina – congratulations on your purchase. You now have what’s called buyer’s remorse.
It’s a lovely location, but you’ll understand my views on 3004’s capital growth in the article
March 16, 2019 Tiana
Hi Michael,
I’m a first home buyer wanting to buy two properties; one an investment property and the other our first home in inner Melbourne and surrounding suburbs. I’ve done a lot of research on the housing market and potential growth areas, but feel unsure where to invest and if buying a house and land package in a potential growth area would be wiser or an existing property. What are your thoughts on this and the current market and what criteria do you base your investment decisions on?
March 16, 2019 Michael Yardney
Tiana – we base our recommendations to our clients on significant research and years of data – but most importantly the experience and perspective to interpret it correctly.
Steer clear of the house and land packages – reports suggest over 20% of these purchasers are likely to default because of finance issues – and that will create chaos.
If you’re now sure where or how to start whey not get my teal at Metropole on your side to help direct you. As we have NO properties for sale we’re unbiased – click here and leave your details and we’ll be in contact
February 19, 2019 Tarryn
Hi Michael,
What are your thoughts on Windsor as a suburb? I’m looking to potentially buy my first apartment off the plan. It’s a 1 bedroom, 1 bath, 1 car park for approx $500k, what are your thoughts on the area?
February 19, 2019 Michael Yardney
Windsor is a great sububr – fantastic location But DO NOT – I REPEAT DO NOT buy a 1 bedroom off the plan apartment – at that price you will have NO GROWTH for a decade
February 20, 2019 Tarryn
Thanks Michael,
Really appreciate your insight.
Would you recommend flatly not buying off the plan or think a severe price reduction is in more in line?
February 21, 2019 Michael Yardney
There have been times when buying the right properties off the plan worked – – but not today. If you can only own 3 or 4 proeprties in your life – buy the best ones -so avoid off the plan which tend to be in large complexes
February 4, 2019 Alex
Hi Michael,
What do you think of Frankston and Frankston South houses market over next 2 to 3 years? Thanks for your great insights.
February 5, 2019 Michael Yardney
Alex – those suburbs are definitely NOT on my radar.
For the 40+ years I’ve been investing in Melbourne these suburbs have underperformed, despite the significant local infrastructure.
They just don’t have the demographic growth drivers – they’re basically blue collar and young family suburbs – this is not a comment on the people, but more about their ability to afford to pay more
February 11, 2019 Kitty
Hi Michael
Your 29 property investment tips are rich food for thought when considering buying a property for investment. I am presently thinking of buying a 1 bedroom apartment (around $400k) in South Melbourne. It is one of many apartments in a block built in the 1970s – in a garden setting. Seems to have the X-factor. It has the advantages of city life but without the feeling of city crowdedness. Would this property be on your shortlist?
February 11, 2019 Michael Yardney
Kitty – I can’t give specific advice about that property without knowing it – but I would NOT buy a 1 bedroom established apartment in South Melbourne – there are too many new apartments in the vicinity and more to come.
The only established 1 bedroom apartments we’ve bought in Melbourne in the last few years have had there own private courtyards – now that’s an X factor
November 3, 2018 Isabelle Scharp
Hi Michael,
I just found this website and it’s fantastic!
I am looking at buying my first property for around $840k.
I have seen a beautiful 2 bedroom art deco apartment in Thackeray Street in Elwood. It is one of four, has a tiny study and a beautiful courtyard. The apartment itself is 78sqm, and the courtyard is around 30sqm. In your opinion is this a sound investment for under $840k? Or am I better off to go a bit further out and try and buy a house in.. say Hampton?
Appreciate your help,
Isabelle
November 3, 2018 Michael Yardney
Isabelle – that’s a great budget, and I really love Elwood, I own two apartment buildings there.
Of courseI can’t give you specific advice online. It would be wrong to do so not knowing your strategy, needs, Cash flows,Timeframes and risk profile.
Property investing is as much about you as it is the property.
However with your budget, that is not the type of property I would be buying.If you want to understand why,please email me- Michael at metropole.com.au and I’ll explain off-line
October 30, 2018 tam
Hey,
Recently just bought a new little 2 bed 2 bath unit in abbotsford $550.
Boutique block of 16 units. Total of 72 m2. On the small side but is their potential for future growth in this area and for a smaller unit?
October 30, 2018 Michael Yardney
Tam
Sorry you asked so I’ll answer honestly.
These are the questions you should have asked before you bought.
I know Abbotsford is close to the CBD but it has exhibited minimal growth due to the large oversupply and is likely to continue to underperform.
Abbotsford is not on our radar.
As for the property itself, to be an investment grade property it needs to be unique or have a level of scarcity. 72 sm mts is on the small side, but I’ve seen worse.
The price seems reasonable – so on balance I wouldn’t have bought it for a client – but you could have done worse
October 5, 2018 Rana
My young daughter wants to purchase an apartment in a good Melbourne suburb close to the city for around $300,000 is that possible? The apartment will be an investment property due to her living in Sydney. Is it possible to get in with around 5% deposit after stamp duty and associated costs? She has no debt except a student loan.
October 5, 2018 Michael Yardney
Rana – you will not get an investment grade property in Melbourne at that price – not even a 1 bedroom apartment – you’re 5 years too late.
It would be better for her to wait and save up
September 4, 2018 Aydan
Hey Michael,
Found this article very useful and informative as someone that is new to this area and is wanting to get a better grasp of property investment. With today’s current issues around banks being tighter with lending, it now adds to the already problem that young investors face with trying to buy a property, let alone an investment property.
Due to the laws around first home buyers, if I was to buy an investment property I would lose out on all the bonuses which the government offer as I would be looking to rent out the property as soon as possible and not moving in. Is it worth buying a property with the grant and paying the mortgage for the first 6 months and then renting it out, but that would be expensive and require buyers to have even greater income.
The next issue as borrowing power is reduced for young investors, our buying power takes quite a considerable hit. Is it worth buying out in further suburbs where we could afford but will face the issues you discussed. Compared to waiting and building up greater deposit/ earn a higher level of income to then buy into a better area?
So my question is what would your recommendation be to a young investor that is trying to get into this market but faces these challenges?
September 4, 2018 Michael Yardney
Aydan – at present the grant is a First Home Buyer’s grant – and if you buy an investment first, the grant is still available in the future for your “home.”
Wealth is the transfer of money from the impatient to the patient – don’t rush in and buy in a secondary location as the location will do a huge part of the heavy lifting of the performance of your property
September 1, 2018 Saavin
Great read Michael.
I wish I would had read this article 6 months before I took the decision to invest in one of the land and house package sort of venture in Melton South and my decision would had been different.
I am a first time investor with 50K to 60K funds in handy and I had entered into land and house package at Melton South where the total value comes to 460K plus applicable stamp duty etc., The land is coming for settlement during second quarter of 2019. Now after reading your article, am wondering whether I had made the right decision to invest in Melton South, especially after reading your article that capital growth would be less in this area.
However I observed that for each phase of land release in this land estate they are increasing the price by 10000 to 15000 ad am not sure does it represent a genuine growth. I booked in 8th release and they have still another 6 to 7 releases planned till 2020, so am wondering can I be assured of this 10000 per each release growth at a minimum assured and wondering in real terms what kind of equity I can build over next two years.
Am from Sydney and in order to fulfil my dream of buying a decent 750k to 800K worth of home, I am trying to build some equity and as a first step I invested in Melton South. So wondering, whether this property gives me decent equity in 2 years from now.
Also am aware Melton South increased by 35% in the last 12 months[I observed in CBA’s Property insights for suburbs] and worrying I booked this property at the peak of the growth cycle.
Appreciate your advise in this regard, so perhaps before land settlement I can exit this property[Assuming I could find a buyer].
Thanks
Saavin
September 1, 2018 Michael Yardney
Saavin
The developer is selling the land to first home buyers and pushing up the price for young and inexperienced invetsors. look at the long term hisory of growth in Melton and the resale value of properties, rather than what a dveeloper can sell them for. That will inform you of what happens to Melton real estate
May 6, 2018 ken
Hi Micheal,
I have 2 investment Properties in Footscray ang Thornbury for 2 years.Most of the investment grade properties are more than 1 million easily ,what do you think which area ideal for a novice investor like me ?should I stick to Eastern and South Eastern suburbs?
May 6, 2018 Michael Yardney
Ken
They are both good suburbs, but not every property in the better suburbs makes a good investment.
And you’re wrong that “investment grade properties cost over $1million. In the last months we’ve bought some great villa units with a significant land component for $700,000+ And we’ve en bought 3 different 1 bedroom apartments each with their own courtyards for around $400,000 – all in good south eastern suburbs.
Your budget will be set by the banks, so concentrate on buying in the best suburb you can afford and then get the right property in that suburb.
What is your budget?
March 12, 2018 Yann Le Barz
Hi Michael,
Great article that is enlightening!
My wife and I are seriously considering to buy in Melbourne our second investment property.
We have been advised and proposed by an investment managers, an of the plans apartment in Heidelberg. As you mentioned, there is a premium for brand new flats and I am a little put off by it. Also the fact that this will be rented only in 10 month….
What would you recommend?
Thanks
Yann
March 12, 2018 Michael Yardney
Yann
I’m so glad you asked – because an “investment manager” is really a salesman for a developer – otherwise the would give you choices.
May I please suggest that you speak with someone independent and unbiased and who has no proeprties for sale and no vested interests? Why not chat with my team at Metropole – click here and organise a time
January 11, 2018 Chieraq
Hi Michael
Wish all in property market a prosperous 2018.
What’s your thoughts on Clayton suburb compared to other SE suburbs. Being close to Monash Uni and Medical centre, do you see an uptake and increase in capital growth. Is the vacancy rate high in their?
Thanks
January 11, 2018 Michael Yardney
Thanks for your kind wished Chieraq
In my mind Clayton will underperform many other SE suburbs because of the demographics – sure there will be lots of potential tenants there, but they don’t buy dwellings to push up prices – I’d rather buy where the local residents are more affluent, or at least gentrifying – that’s what makes property values increase
September 4, 2018 Crazy Clayton
The developers in Clayton are driving the prices up like crazy. Check out some of the recent sales and you’ll change your mind. Things are moving high and fast.
September 5, 2018 Michael Yardney
Yes some areas of Melbourne are still prerforming well – no doubt about it
October 26, 2017 VINH
Hi Michael,
It is so great to read your blog. I am an Aussie currently working oversea for some years. At the moment, I and my wife are planning to invest to the Australian property market.
Our budget is nearly $1.000.000. Our plan is to invest in either an old detached house, terraced house or a new townhouse, which are popular in our major cities. The desired location is within 5km from the CBD with close distance to public transport and amenities.
We feel that with this budget and requirements, Sydney is out of our catch and it may be possible for us to invest in Brisbane or hopefully Melbourne. Our target is to get about $700 per week (after all taxes and fees) and a capital growth of minimum 5% annually.
How feasible do you think our plan is? Do you think we should pay attention to both cities or just stick to Brisbane or Melbourne? I know you suggest the South Eastern, Eastern and bay side areas in Melbourne, but what about Brisbane suburbs (like New Farm, Spring Hill, Highgate Hill, East Brisbane, etc…?
It would be so great to hear from you. Thank you very much.
All the best.
Vinh,
October 27, 2017 Michael Yardney
Vinh
You’ve got a great budget which will give you a heap of options – but my thoughts about where you should invest and in what type of property will depend on your cashflow requirements and your strategy and end goals.
The decision is too important to leave a simple answer in this forum. Your question implies you’ll need to first fine tune your strategy a little and then choose the right property
In today’s competitive market, you are up against professional buyers who do this day in and day out. Make sure you have done your due diligence carefully and then get someone on the ground to help you, because if you fail to prepare then you are most likely preparing yourself for failure.
Why not get my team to help you – there is no one better that I know of – just click here and you’ll feel comfortable you’ve got us on your side
November 3, 2017 VINH
Thank you Michael,
We are preparing the budget as well as the investment plan in more detail. We hope to have Metropole on our side soon.
All the best,
Vinh,
July 29, 2017 Sanjay
Hi Michael,
I have been following your blog and also recently podcasts. I must say in the last 10 years of my interest in Real Estate, the facts and strategies you are sharing are mind boggling (I say that by comparing the quality with other high fliers!). I have been relatively ok by following your strategies. Please continue this forever!
I have a question on the factors which are evolving in and around Melbourne. What is your view about the six new employment clusters planned under Melbourne 2050 plan? Why wouldn’t the suburbs around these clusters grow such as South Dandenong and Werribee. I am aware that these areas are not in your preferred list. However, the demographics are changing now. There are opportunities in these areas to develop (buy and subdivide) and manufacture capital growth. Wouldn’t these suit an investor like me with a 10-15 year view and a limited budget of 500k for Melbourne?
Thanks
July 29, 2017 Michael Yardney
Sajay
Thanks for the kind words. No doubt we are going to have to decentralise to a degree and their will be employment nodes around the periphery.
However if you look at how other large global cities have evolved, and Melbourne is a global city which will have 5 million residents sooner than we all expected, the highest priced land and the best long term growth is in the inner and middle ring suburbs where the affluent people want to live and where the can afford to and are prepared to pay to live.
Why fight this trend?
July 29, 2017 Sanjay
Hi Michael,
Thanks for the quick response!
Would there be anything available for less than 500k and manufacture capital growth in the inner and middle ring suburbs? Frankly, the inner and middle ring suburbs were my first preference. However, at this stage of market cycle, I couldn’t find opportunities where I could manufacture capital growth with reasonable negative gearing. I am at stage one of the property investing building my asset base. Would be great to hear your comments and guidance on this.
Regards,
July 29, 2017 Michael Yardney
Sanjay
We bought 8 of them last month for our clients – that’s what we specialise in – in fact 6 were off market – you would have never known about them.
Why not speak to the team at Metropole and let us help you rather than trying to do it on your own. Thta’s rather dangerous at this stage of the cycle/
Please leave your details here:
January 7, 2017 Morgan
Hi,
My husband and I are interested in purchasing an investment property in either Footsgrey of West Melbourne. We were looking at buying off the plan but now i’m hesitant. What are your thoughts on a 1 bedroom new unit in Footsgrey for around $350,000 (off the plan)?
Also, what suburb would you recommend for around the $350,000 price range. A friend recommended Epping, what are your thoughts. This is an investment only, we will not be living in the property.
January 8, 2017 Michael Yardney
I’m so glad you asked Morgan. Hopefully my reply will save you heaps of money and stress. AVOID off the plan!! Its a sure way of losing money in this market. Check out this site for off the plan and learn why. And definitely steer clear of Epping.
August 11, 2017 ferry
Hi my name is ferry I bought my apartment in melbourne CBD in elizabeth street in 2014 and now the settelement is coming in 2018, Do you think I should keep my property or I sell it. thanks
August 11, 2017 Michael Yardney
Ferry – As I don’t know your specific circumstances I can’t give you advice – but here’s a general comment: Almost all Melbourne CBD off the plan apartments are being valued at substantially less than contract price on completion and the banks are lending lower LVR’s against them – so expect to fork out a large sum of money on completion. Those purchasers who are trying to sell the brand new Melbourne apartment on completion have to accept a significant loss to find a buyer – if they can find one at all but there are so many new projects being marketed off the plan in Melbourne at present
November 8, 2016 Patrick
Glad I saw your blog. I was so close to buying an apartment in the Platinum just finished
November 8, 2016 Michael Yardney
Im glad you didn’t buy it Patrick
November 2, 2016 Dave Cooper
Working out of South Yarra, I couldn’t agree more with Point 22 – There is so much oversupply in these areas and over the next couple of years there are going to be dozens of 100+ apartment complexes shooting up. My focus is on Point 21 – Every second street in these inner and middle ring suburbs has one or two townhouses replacing an old home. The profits these property developers are making is unreal! Home owners need to educate themselves and take a slice of that pie!
October 23, 2016 Tej
Hi Michael,
Looking to purchase a townhouse (3 beds) in Reservoir, on Purinuan RD (close to Cheddar road). Initially to live in and then to make it an investment property. Would you be able to advise on the area and its growth?
Thanks,
Teejay
October 23, 2016 Michael Yardney
Tej
I’m sorry but I don’t give advice on the internet about specific properties or suburbs – that would be dangerous without knowing your circumstances.
However that’s what the team at Metropole specialise in. They help not only investors but also home buyers.
September 27, 2016 Trina
Hi Michael! Great read .. Been wanting to upgrade to a house and debating between West Footscray and Deer Park/Derrimut area. West Footscray u get an average size house for almost a million while in the latter u get a massive house for around 600k. Which do you think is a better place to purchase?
September 28, 2016 Michael Yardney
Trina
It sounds like you’re talking about upgrading your home, rather than buying an investment. If so where you buy will be dictated by your budget and lifestyle and family needs. Deer Park / Derrimut will always be cheaper than West Footscray – it won’t catch up – the gap will always remain. In both suburbs there are good parts, better locations and some places where you wouldn’t buy, so its not as simple as saying one is better than the other and then in each location there are some proeprties that will grow in value better than others – yes property decisions are difficult aren’t they?
August 1, 2016 Andrew
Micheal, interesting information, thanks for the read! We are in the process of purchasing a two bed, ground floor apartment with outdoor living space in Brunswick East as a long term investment for 610K, are we mad? The apartment is developed by the caydon property group and on face value appears to have the x factor. Our apartment will front Barkly St.
August 1, 2016 Michael Yardney
If you’re considering buying a new or off the plan apartment in Melbourne and esp in Brunswick – STOP and read all the info about the huge looimng oversupply and minimal or no capital and rental growth for a decade or more.
The ” x factor” won’t help. It’s too hard to swim against the tide
July 17, 2016 Michelle
Thanks for the commentary Michael. I am trying to educate myself about the pros and cons of certain types of investments. In your expert opinion, in the long term, would a stand-alone town house in South Yarra be better than an attached newly renovated and landscaped townhouse in Malvern? While I will live in the property, I am willing to choose the location/property that will appreciate more over time. Both walking distance from shops, public transport and off street parking.
July 17, 2016 Michael Yardney
Michelle they are both great locations and should give you long term capital growth for townhouses, but I’d avoid apartments in South Yarra.
So which would be better – it really depends upon the features of the individual properties and the location within the suburb – there’s more to a good investment than suburb – that’s probably only 75% of the equation
July 1, 2016 Dave Cooper
Working out of South Yarra, I couldn’t agree more with Point 22 – There is so much oversupply in these areas and over the next couple of years there are going to be dozens of 100+ apartment complexes shooting up. My focus is on Point 21 – Every second street in these inner and middle ring suburbs has one or two townhouses replacing an old home. The profits these property developers are making is unreal! Homeowners need to educate themselves and take a slice of that pie!
June 5, 2016 Shane
Hi, I’m looking at more spacious apartments in St Kilda with something unique about them such as a roof top terrace. My concern is that in 10 years, many of these don’t seem to have grown more than 15-20% outside of inflation while miniature houses in the same area have gone up more than 50% outside inflation. I am having difficulty understanding why more spacious, better quality apartments would still have poor growth? Could this be because of the constant supply of new comparable apartments in St Kilda? Do you think their prices would only start to rise when most houses have been converted, and there is no more space for conversions to townhouses / apartments? Your thoughts are greatly appreciated.
June 5, 2016 Michael Yardney
Shane
St Kilda is a great area, but there are some segments of St Kilda that have outperformed others, and some apartments are more popular than others and have stronger capital growth.
A roof terrace would not be high on my list of characteristics of an investment grade apartment.
Over the last few years, houses of outperformed apartments in St Kilda, because they are in short supply,and they are is highly sought after by owner occupiers – but they are out of the budget range of most investors.
If your budget can afford it, I’d go for a house in that area, if not I’d buy an apartment there rather than a house in an outer suburb
May 15, 2016 Charu
Hi Michael,
Thanks these are valuable insights to someone like myself trying to get into the property market.I’m currently looking at a 3year old 2BR apartment in Hughesdale on Kangaroo Rd close to Warrigal Rd and opposite a secondary college.I’m looking at a price between $450000 to $ 480000. Could you provide some insights as to the prospects for capital growth for Hughesdale aptt market given there is a likelihood of more developments in future ? Thanks,Charu
May 15, 2016 Michael Yardney
Charu
I often get asked about specific properties or locations and I don’t like responding as I don’t know enough about you and wouldn’t want to mislead you. I don’t know your plans, your risk profile, what else you own etc.
Hughesdale is a good area but not all streets in the suburb are “A” class streets and many proeprties are not investment grade.
Before we recommend a property to a client we do heaps of due diligence – I hope you are doing the same
April 13, 2016 john sipple
gidday michael,
have owned a 2 b’room flat in a block of 10,(2 story building) in glen iris,overlooking Gardiner park and near the new Burke Rd train station since 2011.have noticed in that time that the house market has been going really well, however unit market hasn’t had much movement at all.it is surrounded by all the old cal bungs etc, and i was expecting more growth than what has occurred.Am interested on your thoughts of the area,as i have been pondering on maybe selling out of the area and heading down the beach bay side area that you are keen on.
thank you for your time,
cheers john
April 13, 2016 Michael Yardney
John
I agree that house prices have risen more than apartment prices in Melbourne over the last few years,
I have no issue with Glen Iris – but of course that is too broad – there’s areas there I would avoid. but in general Glen Iris is a good location and your apartment should have increased in value.
April 13, 2016 jay
Hi Michael,
Thanks for the great insights.
You had mentioned to stay clear of oversupply apartments in Southbank and referred to them as slums. My question is – why are the developers focusing on these areas knowing that these will not be good investment vehicles? Are these houses built for buyers to stay only?
I remembered during the period before the housing bubble burst in US, developers just need to find another fool bigger than themselves to sell off their stocks. Is this a similar situation here?
Thanks again
Jay
April 13, 2016 Michael Yardney
Jay
You’re right – the developers are after short term – one off – trading profits. They try and fit as many apartments as they can on the block and make money – that’s their job and that’s OK.
But if you buy from them you lose out
April 5, 2016 Bree
Hi Michael,
Great article. I was just wondering what areas you would recommend buying in… My partner and I are first home buys, looking to spend around 450,000-500,000 for a 3 bedroom home, planning to starting a family so will be living there potentially the next 10+ years. We both are in the northern suburbs currently and are unsure what areas to start looking at. Any help or recommendation would be greatly appreciated.
Thanks
Bree
April 6, 2016 Michael Yardney
Bree – good with this house hunting, it’s not easy finding your first home and clearly it is a substantial investment for you.
This is important to put investor cap and not let your emotions rule too much.
When looking for a home you’ll use different criteria like proximity to your work, schools interest, and be wary in some of the northern suburbs where unemployment is high the demographics suggests wages won’t grow holding back capital growth.
However there are some good opportunities in the northern suburbs
March 24, 2016 Jem
Hello Michael,
I’m planning to buy 2 bedroom apartment as an investment in Melbourne CBD for under $300k and rental return is slightly higher than repayments. Its not one of those self serviced, non owner occupying apartments. I’m also a first home buyer. Would like to hear your thoughts on this?
Thank you
March 24, 2016 Michael Yardney
Jem
I don’t know your circumstances or the apartment, but with a huge undersupply looming most commentators agree that there will be no capital or rental growth in the Melbourne CBD for years and years – possibly a decade or 2 – steer clear
February 29, 2016 frankie
Hi Michael,
Have been following your daily commentary for a few months and find it very useful . I have invested in a 2 bedder apartment in south melbourne. It is a small development about 45 units and I bought it of the plan. I bought it because it is a small development and is near CBD. I also heard there is a lot going in in that area – fisherman bend. A lot of jobs going to be created. Do you see any potential in this area? I know you are not in favour of buying of the plan .
February 29, 2016 Michael Yardney
Frankie
I don’t know your property, it’s location or the price you paid, so I can’t really give you an opinion about your specific property.
It’s good that you’re in a smaller block, but the location is one I’m concerned about. Too much oversupply and I don’t see Fisherman’s Bend as a positive – the huge supply will limit you capital growth for years.
February 25, 2016 Aki
Hi Michael,
Excellent analysis. I recently bought a house (1 of 2 on the block) in Ringwood East in outer East Melbourne for 551,000. It’s close to the station & in Ringwood secondary zone. It is one of the better schools where you can still buy under a million. Good buy? What are your thoughts?
February 25, 2016 Michael Yardney
Aki
I don’t really know Ringwood is a good area, but a bit far out for my strategy. having said that it’s performed extremely well lately.
Having said that not every proeprty in a good suburb is an “investment grade” property and not every street is a good street. So without further details I can’t help – however it sounds like you’ve done your homework
February 21, 2016 Amy
Hi Michael,
I am considering to buy an 1 bedroom luxurious apartment (off plan) for $498000 in Brunswick/ Victoria street with 6% rental guarantee for 3 years. How much growth in the next 10 years can I expect for this property according to the previous market growth in Melbourne? The vendor said it would be double in price after 10 years but would that be applicable for a 1 bedroom luxurious apartment ?
February 21, 2016 Michael Yardney
Amy – please don’t do that – have you read my blogs about off the plan purchases? And those of almost every other independent advisor.
How much growth will you get int he next 10 years – possibly NONE in that location where you over pay and then there is an abundance of new stock
February 3, 2016 Dan Mannix
Michael, thanks for the interesting read.
We have just recently been looking at upmarket apartments in St Kilda Rd., off the plan.
Seems like not your recommended course of action on two counts. However, these don’t seem the types of places ever to become slums but will all apartments be tarred with the same brush come the time of oversupply?
Also, this would be our ppor and not an investment property and wondering if that makes it any less a dumb idea to pursue?
February 4, 2016 Michael Yardney
Dan – obviously the criteria are different for your own residence as opposed to an investment property.
Having said that apartments in the 3004 postcode have had minimal capital growth missing out on the last boom. Just be careful you don’t overpay
February 5, 2016 Dan Mannix
Thank you, Michael.
Think I might give your office a ring.
February 1, 2016 JayJay Bedi
Hi Michael,
Thanks for sharing.
Do you think it’s good investment around Point cook, Sea meadows and Altona Meadows ?
Thanks.
February 1, 2016 Michael Yardney
JayJay
None of these suburbs would be on my areas to invest list – they are new home buyer areas that will underperform
February 1, 2016 JayJay Bedi
Hi Michael,
Where would you recommend to invest? Which area or suburb?
I am from Sydney so i don’t have much idea about Melb.
Thanks
February 1, 2016 Michael Yardney
I can’t advise you without knowing your budget, your strategy, your aims etc. it would be very wrong to do so. Why don’t you have a chat with our Sydney Metropole team. They can help you with Melbourne info. 1300 203030
January 28, 2016 connor
I am a first home buyer looking at apartments around the footscray area. Would you recommend off the plan or older apartments im looking at something with city views and 2 beds. Roughly around 400-500
January 29, 2016 Michael Yardney
Connor I would definitely avoid of the plan and I explain why.
January 31, 2016 connor
I definitely know what you mean in these articles. Lets say 3 bed apartment in footacray with perfect city views 2 baths 2 carparks 100m2 is currently selling for 670k by developer but i can buy from nomination sale for 610k even though original purchaser bought for 580k at first release. So i am buying the property less than what developer is asking now so even if they place comes in a little under valued i only payed just over 600k so i think im in a safe position unless the apartments are 100k over priced feom the beginning but i cant see this with a good m2 value for size and un interrupted city views.
Also i have been looking at caufiled village as a second choice
January 31, 2016 connor
Also i am very lucky as my mother will come in as a guarantee on my loan meaning i can avoid Lmi but will be borrowing 100% of loan to get in on the market sooner. So with this property i could potential make equity of valued at what developer is asking now but i do know thats not the case always . But i beleive in footscray booming its too close to city and so much interest. Everyone i talk to loves the place and wants to move there. I ca see it getting better quickly
January 31, 2016 Michael Yardney
Connor
Footscray has underperformed the Melbourne averages fot the last 50 years – why should things change now?
February 1, 2016 connor
Since living in Sydney for years i cant not see this suburb booming because of its proximity to the city and more and more young people wanting to live close to the city in an affordable and upcoming suburb. I already speak to friends of friends and they all want to move to footscray its becoming a suburb of younger independent people wanting that place close to city. Look at property this close to sydney cbd. I like port melbourne too but may be too expensive already
January 22, 2016 Rebecca
Hi Michael,
Thanks for sharing. Do you think it’s good investment in Williams Landing? Thanks.
January 22, 2016 Michael Yardney
I don’t know your circumstances and I don’t know the property you have in mind – but the simple answer is William’s landing would definitely NOT be on my list of places to invest.
It has none of the growth drivers required to make a good location
January 14, 2016 lakshmi nallan
Hi Michael,
I have recently bought a lot of size 448sqmts at woodlea suburb in stage 11 for 200k near rockbank in the land release. Looking at the news about melbourne property market I am little hesitant on whether I did a right decission.
Could you please review and would be thankful if you can advise me on my property purchase.
January 14, 2016 Michael Yardney
Lakshmi
I don’t know your circumstances nor the specific property you purchased, but in general the area you’ve bought in is unlikley to grow strongly. please read this blog https://propertyupdate.com.au/not-all-land-is-created-equal-so-buy-in-the-inner-suburbs/
December 19, 2015 dave
Thanks for the great read Michael. I’m just a bit worried now, as i have just invested in a new house and land package in Melton South. I knew it had a slow growth but thought it was still a good investment because it was way under $300,000. Do you think it was a bad idea?
Your opinion would help a lot!
Thanks
Dave.
December 19, 2015 Michael Yardney
Dave
I’ve just been updating one of my books, so looked at the performance of Melton over the last 40 years.
It was the worst performing suburb in that time and I’m sorry to say is likley to remain so
November 29, 2015 Corene
Hi Michael,
I love your articles and I had met with your strategist a few years ago but I regretted not taking action to purchase another property at that time due to fear.
I sold my apartment in Southbank early this year as I don’t think the long term growth is there as you said. I have been looking to buy a house or townhouse but the prices have gone up ridiculously high. You mentioned that you bought great houses when the market was high. I spotted a townhouse that I like in Kew but it’s on Barkers Road which can be noisy during peak hours. However the location is great and it is close to the CBD where I work. This townhouse needs substantial refurbishment and it was built in the 70s. Land size around 300sqm. The quoted price range is lower than other streets in Kew. Do you think I should go for it if the price is right or I should bite the bullet and pay more on better streets ? Thanks
November 29, 2015 Michael Yardney
Corene
I know the exact property you’re looking it becuase an owner occupier asked us to look at it for them as a home.
Steer clear:
* Terrible main road location
*The property has some structural issues
DON’T MAKE THE SAME MISTAKE AGAIN – while not call our office and have a chat with our senior proeprty strategists Kate Cull – 03 9591 8888
October 29, 2015 edward cerantonio
Hi Michael
Interesting comments and thank you for sharing.
What do you expect annual market price for the Melbourne market for units, houses to be over the next 5 years.
One expert believes that property market will continue to boom for the next 13 years .
October 29, 2015 Michael Yardney
Edward
Sorry to say – it won’t boom for 13 years – the proeprty market cycles.
I think Louis Christopher gave a great assessment of what’s ahead here https://propertyupdate.com.au/2016-will-see-melbourne-shine-slowing-property-market/ There are some good times ahead and then things will slow down – they always do
October 10, 2015 suny
Hi Michael
I am looking to buy investment property in Melbourne. My budget is 450k at 90% LVR. The suburb you recommend seems to be pricey for my budget. Can you help me or will I be better off with someone who is used to work in that type of budget (probably working in outer north or western suburb).I would also like to know your fees(charge)? it seems finding right buyers agent is more difficult then finding right property…….
October 10, 2015 Michael Yardney
Suny
When you purachse an investment property there are 3 major variables:
1. Your budget – that’s fixed for you, but still doable
2. The location of your property – you can’t compromise on this
3. The type of property you buy – this means you may need to buy an esatblished apartment – still evry doable in your budget.
You ask how much our fees would cost you, a better question could be – can you afford to pay a “learning fee” to the market by getting it worng like many beginning invetsors do? Especially at this more mature stage of the proeprty cycle.
By the way…we’re much, much more than buyers agents. We don’t just take orders like many other buyers agents. As property investment strategists, we formaulate a long term strategy and tehn help you implement it, then reguallry review your progress. We build relationships.
Why not come in and have a chat Just click here
September 18, 2015 Lee
Hi Michael,
Thanks for your sharing, I am interested in the following Melbourne Inner City market:-
“Many, in fact most, of these are being bought by overseas investors and as these are likely to become the slums of the future.
I would avoid this segment of the Melbourne property market”.
As I already have an unit of Nova (Elizabeth Street) since 2001 and Art On the Park (Williams) since 2013, do you suggest I sell them on keep it for further observation.
Your advice is greatly appreciated, thanks.
September 18, 2015 Michael Yardney
Lee
As I do not kno your personal circumstances I cannot give you advice, however with the huge looming oversupply of apartments in the CBD it’s been suggested it could be up to a generation before you see some significant capital or rental growth
November 29, 2015 Corene
Hi Lee,
I’m a real estate agent based in the melbourne CBD. Would you like a free market appraisal for your Nova and Ark on the Park apartments?
Agreed with what Michael said about the city apartments.
September 17, 2015 Krista
This was a wonderful overview and thankfully confirms a lot of my research so far. Thank you!
September 17, 2015 Michael Yardney
Krista
Thanks for the kind words
August 28, 2015 Penelope
Michael thank you for this interesting and informative article. I note that you talk about Inner Eastern Suburbs and South Eastern Suburbs and Bayside as being the best places to invest at this time. I would like to buy a property in one of these areas, as an investment. How do I find out more about what those suburbs names actually are? Also what do you think about using finders for properties as I live a long way from Melbourne, it would be preferable to narrow down before I fly to look before I buy? Thanks Penelope
August 28, 2015 Michael Yardney
Penelope
It’s hard enough for locals to get property selection right, so I believe you should get a property strategist on your side – but of course I’m biased – however my team at Metropole would love to help you. click here and organise an obligation free chat.
August 26, 2015 Dave
Thanks Michael
Will you been doing a similar article on Brisbane?
Cheers,
Dave
August 27, 2015 Michael Yardney
Yes I’m planning to
August 2, 2015 Eric
Thanks Michael,
I am keen on investing in Melbourne but the buying frenzy is putting me off at the moment. Just waiting for the buyer’s market to take place..
August 2, 2015 Michael Yardney
Eric
I understand how you feel, but while you’re waiting for the market to slow down I know I’ve bought some great properties as have 2 of my children. They’ve added value through renovations, so that even if the market slows down they’re ahead. Don’t wait for the timing to be “perfect” – it never will be
August 2, 2015 Eric
Thanks for your reply Michael,
It’s just I don’t want to get caught with the forces we’re waiting to happen. Firstly, the downturn on the market which I’m sure will eventually come so as the interest rate rise. And then theres a talk about abolishing the negative gearing in which slowly will take place.. Correct me if I’m wrong but those forces favour the buyers. At the moment, I think, a $100k down payment will still be a negative geared property in a desirable areas in Melbourne even at this low interest rate environment.
August 2, 2015 Michael Yardney
Eric You’re right – with $100,000 you’ll probably only be able to buy a $400,000 property plus costs and all high growth properties are negatively geared at 80% LVR
August 3, 2015 Eric
Thanks For reaffirming that Michael,
Buy now or not is a risk. I might as well not and go for the debt reduction process and wait for that right moment…
June 10, 2017 Chelsea
Hi Michael,
Thank you for such great information. I have an investment property just outside of the CBD, on St Kilda Rd and opposite the Shrine (Royal Domain Plaza). I’m concerned about all the new apartments going up and what effect it will haven it. Also the new train line is going in and there will be a new Domain underground station in close proximity. We have had the same tenant for a few years now and hopefully she would intend to stay on during the station works. However with increased supply in apartments would your advice be to keep or sell? I’d appreciate your professional feedback! Thank you
June 10, 2017 Michael Yardney
Chelsea
In the long term the underground station will be a big plus for your location, but you’re right that in the short term it will be a nuisance.
However more important to the performance of your investment will be the oversupply of apartments, not only in your immediate vicinity. but in the CBD.
I can’t advise you whether you should keep or sell your property because I don’t know your financial situation. However in my mind your property is not what I consider and investment-grade property due to its location
July 28, 2015 Albert
Thank you for this article. Found it comprehensive & helpful. I’m a foreigner looking to invest in Melbourne.
Once again, thanks
July 28, 2015 Fred
Great read Michael. Have you, or will you do a similar article on the Sydney market
July 28, 2015 Michael Yardney
Thanks Fred – yes I will be doing a similar research piece on Sydney
July 21, 2017 Novin
Hi Michael, thanks for the article.
I’m a foreigner and planning to invest 4 bedroom house in West Werribee close to Riverwalk estate, really appreciate if you could give me some inside thought in that area.
Thank you
July 21, 2017 Michael Yardney
Novin
Thanks for leaving your question. I understand as a non resident your options are restricted but Werribee is definitely not on my radar. It is definietley not an investment grade area, having always underperformed the averages.
I’m glad you asked, because as a foreign resident it’s really hard to get a perspective