Melbourne Property Investment
Melbourne property investment levels have had an exceptional couple of years for price growth, and with the ever increasing population growth rate of the Victorian capital 2015 appears to be a good time to invest in the Melbourne property market. However, property investors need to be selective as some areas of Melbourne have been increasing in value with good returns and other locations with issues of oversupply have not done so over the past 12 months.
The Melbourne property market for the first quarter 2015 on average has the lowest investment property rental yields of any capital city - just 3.3 per cent for houses and 4.2 per cent for units according to RP Data. Rental growth is also subdued, with house rents in the last quarter falling by 1.3 per cent and units up by just 1.4 per cent. Across metropolitan Melbourne, the vacancy rate is a healthy 2.7 per cent, according to SQM research. However, in Docklands and the CBD, availability is around 5.6 per cent. By contrast, the vacancy rate in popular middle-ring suburbs is as low as 1.9 per cent on average.
Overall, Victoria continues to deliver strong returns for property investors, despite concerns about the future stability of the Melbourne property market due to oversupply in some areas. A key factor is Melbourne's continuing strong population growth. The latest population figures for Australia show that Melbourne had the largest population growth of all capital cities, increasing by 95,700 people. That growth has seen Melbourne's population grow to 4.4 million. Melbourne is also gradually closing in on Sydney (4.8 million) as the nation's biggest city.
Factors influencing Melbourne's investment property market in 2015:
The Melbourne investment property market has performed very well in recent years. Melbourne continues to experience strong population growth from overseas. Victoria's population has significantly increased above the national average and it is expected to continue doing so in 2015 and beyond. This, along with the gradual rebalance of the marginal oversupply of property for investment, ensures that pressure remains on residential investment property prices in the long term.
Stick to property investing fundamentals and ignore opinions as to where the market is going, whether good or bad. Buying strong investment properties is more about asset selection rather than timing. Timing is impossible to consistently get right. Don't wait for the right time to buy. Wait for the right property to buy.
Like any real estate investment, locating and purchasing the right investment property in the right suburb requires careful consideration and research. Buyers should look for suburbs that have strong positive attributes (more details in our info pack). For example overall appeal, good public transport, good schools, shops, close to arterials and above all, invest in areas that are consistently showing a growth in population.
Affordability. Melbourne residential and investment property sector is performing well and many analysts predict it to continue doing so. Melbourne also continues to show value when considered with the price levels in Sydney.
Pent up demand. Caution required in the short term, many leading economic forecasters believe there is an oversupply of new housing in Victoria especially in the inner city areas of Docklands and the CBD.
High consumer confidence motivates people to make more long term decisions such as purchasing a new home.
Improved immigration numbers. Melbourne's population is now increasing at a faster rate than most other capital cities, with the exception of Perth and Brisbane, which will ultimately leading to an increase in the demand for housing and investment. Population growth is around 2% - well above the national average of 1.8%.
Overview 2015 and beyond
Remember, that when you select a unit as an investment, succumbing to the lure of tax savings is a fundamental mistake for investors. You do not attain financial independence through saving tax - you gain financial independence through the ongoing capital growth of your assets. So, get the location and returns right and the capital growth should follow.
The Annual Return Index measures the capital growth of an investment property together with net rental income, to give an accurate comparison between Australia's cities. Melbourne's investment property market is making another steady start in 2015 and seems set to continue to do so in the long term. Property investors should be very selective in terms of suburbs they consider for investment property. As always, look at the level of infrastructure and population growth of any property location and market in Melbourne including vacancy rates. Comparisons between the Capital cities are best considered over 7 to 10 year periods with Melbourne, Sydney and Brisbane continuing to be good options for property investment in the future.
Contact us for more information on recommended suburbs and locations in these cities.