Melbourne property market analysts are forcasting a much slower market in 2021 as result of economic and financial difficulties brought on by COVID-19. Property investment analysts last year where even predicting Melbourne’s median house price to reach $1 million mark by the second half of 2021.
Melbourne’s unit prices are still expected to increase in the first half of 2021, before price growth slows. Median unit prices could grow by around 3 per cent in 2021.
Strong population growth will continue to underpin demand for housing in Melbourne and support prices. Melbourne’s population is projected to grow by more than 120,000 per year in the next few years. In addition, apartment construction activity will slow in 2021 and interest rates will remain low, both factors which will drive prices higher.
Long term Melbourne property is forecast to record stronger metropolitan capital growth than its capital city rivals because the net number of new residents arriving from interstate and overseas is higher than anywhere in the nation. While Melbourne’s property prices are likely to fall by a little further, they will be underpinned by a strong economy, employment growth and Australia’s strongest population growth and the yearly influx of 35% of all overseas migrants.
Housing supply – and as a consequence, rental stock – is expected to stay lower than demand in Melbourne’s inner- to middle-ring suburbs and parts of regional centres Geelong and Ballarat. Property experts warned against investing in Melbourne’s oversupplied CBD apartments market if seeking short- to medium-term returns.
Prices are at a premium and a higher peak in many blue-chip inner suburbs, up to eight kilometres from the CBD, so investors should aim to benefit from the ripple effect by looking to buy in some of the more affordable middle-ring suburbs, 10 to 15 kilometres from the CBD, which offers much better value for money and affordability.
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.
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.
Pent up demand
High consumer confidence
Improved immigration numbers
Property Market Overview 2021 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 2021 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.