Melbourne is undervalued vs Sydney, but poised for HUGE growth. Could this be the perfect time to invest?


Melbourne is undervalued vs Sydney, but poised for HUGE growth. Could this be the perfect time to invest?

If you are a global or Singaporean investor looking for a property investment that ticks all the boxes - migration, education, own use, retirement, and high returns—then this article is for you.

As of May 2024, Melbourne's property market presents a unique opportunity for savvy investors. While the city's home values have underperformed compared to other Australian capitals over the past year, a strong bounce-back in the next two years is expected. 

This creates a window of opportunity for strategic property investors as Melbourne property values have significant upside potential.

Undervalued and Underperforming

By many measures, Melbourne's housing market is currently the weakest among Australian capitals. Home values are stuck as other cities surge ahead, while investors have fled the market due to expanding property taxes. However, this underperformance presents a silver lining for investors.

The average price of a Melbourne standalone house is the lowest it has been against its Sydney equivalent in around twenty years. This means there is significant "inbuilt equity" in the undervalued Melbourne housing market at present. 

Clearly, the Melbourne housing market has not performed as strongly as some other capitals over the last year, but Melbourne's property values are expected to gain ground as we move through Q2 2024.

Fragmented Markets and Pockets of Growth

While the overall Melbourne market has underperformed, it's important to note that the city's housing markets are fragmented. More than 50 Victorian suburbs saw house price growth exceed the average national average house price growth in 2023. 

This means that by carefully selecting the right properties in the right suburbs, investors can still find pockets of growth and capitalize on the market's undervaluation.

Strong Rental Demand and Yields

One of the most compelling reasons to invest in Melbourne's property market is the strong rental demand and yields. With vacancy rates at historic lows, rentals are skyrocketing in Melbourne. This creates an attractive proposition for investors looking for high returns on their investment.

Melbourne house rents have increased by 10.9% in the 12 months to March 2024, while unit rents have risen by 9.4%. Rental yields in Melbourne currently stand at 3.6%, providing a solid return on investment for property owners.

Diverse Economy and Population Growth

Melbourne is known for its diverse economy, which shields investors from one-sector downturns. The city is a close second in almost every sector, providing good insulation for residents and a steady stream of skilled workers and other new residents.

Population growth has been a key driver of Melbourne's property market in the past decade, with the city taking in an average of 1,500 new residents every week, mostly from overseas but also from interstate and regional Victoria. 

This influx of professionals and younger residents not only provides demand for rental properties but also adds to Melbourne's vibrant cultural life.

Improving Affordability and Long-Term Outlook

Another major drawcard for investors is Melbourne's improving affordability compared to other major cities. While the city offers the same economic and educational opportunities as Sydney, it is more affordable for both residents and investors.

Looking ahead, Oxford Economics Australia forecasts that Melbourne's median house price will increase by 5.5% to $1.157 million by mid-2026, driven by an expected resurgence in migration from both interstate and overseas. 

The report also anticipates that Melbourne's median unit price will reach a new record high of $726,900, representing a 6.5% increase.

Seize the Opportunity

In conclusion, Melbourne's property market presents a compelling opportunity for global and Singaporean investors looking for a safe and lucrative investment destination. With undervalued properties, strong rental demand, a diverse economy, and a positive long-term outlook, now is the time to consider investing in Melbourne's real estate.

Don't miss out on this chance to secure your financial future and take advantage of Melbourne's property market potential. Contact me today to discuss your investment goals and let's explore the best opportunities in this exciting market together.