Long recognised for its consistent capital growth, Melbourne has fallen out of favour with some investors over the last 12-18 months due to Victorian Government taxation reforms and high interest rates. However, despite the negative sentiment, rising taxes and a post-COVID recovery, investing in Melbourne property holds more value than appears on the surface and plenty of opportunities for investors who can adapt to changing conditions.
Why investing in Melbourne property in 2025 could be a great long-term play
Provided investors select the right property type and location, now could be a great time to invest in Melbourne property and reap the rewards of buying in a market where competition with other investors is less intense. With a strong demand for rentals, low vacancy rates (hovering around 1.64%), rising population levels and a lack of new housing coming into the Melbourne Housing market, the fundamentals remain favourable for investing in Melbourne property.
The top 9 reasons to invest in Melbourne Property
Investing in Melbourne property is appealing for a variety of reasons. Below are the top 9 factors that make Melbourne a popular and potentially lucrative destination for property investors.
Strong population growth
One of the fastest-growing cities in Australia, Melbourne’s population is projected to grow from 4.6 million to almost 8 million by 2051, with Victoria’s total population to hit 10 million. Driven by its lifestyle appeal, economic opportunities and net internal migration, it gains more residents than it loses from other states due to lower property costs and reduced living costs. This continued growth will drive up demand for housing in the rental and home occupier markets, which will likely create a strong foundation for increasing property values.
Economic stability
A key economic hub in Australia, Melbourne has a diverse economy with strengths in healthcare, education, manufacturing, finance and technology. More Victorians are in jobs than ever before, and the city has a 10-year economic development strategy to continue building the economy and attracting and retaining higher-paying jobs. By 2043, the number of jobs within Melbourne is expected to increase by 32%. The resilient employment market will help to underpin the rental market, keeping rents high and vacancy rates low alongside economic stability and reducing the likelihood of risk associated with property investing.
High rental demand
Melbourne has a large student population, many young professionals and a diverse workforce, which drives a consistent demand for rental properties. Strong demand ensures a steady income stream for property investors. In the 12 months to September 2024, the median weekly rent in Melbourne rose by 6.4% to $540 per week, with demand particularly strong in the inner-city and middle-ring suburbs.
Infrastructure development
Continually developing its infrastructure, including transport (trains, trams, roads), commercial projects and residential developments, Melbourne’s infrastructure growth is anticipated to increase property values, especially in areas benefiting from new developments, including inner and middle ring suburbs.
Projects include:
Melbourne Metro Tunnel
The Melbourne Metro Tunnel development is expected to impact the values of surrounding property significantly.
Melbourne Airport Rail Link
Connecting the Airport to Metropolitan and Rural Victoria, the Airport Rail Link will positively impact property prices, unlock further economic growth and create more job opportunities.
Parkville Station
The Parkville Station project will continue to support economic growth underpinning the property market by connecting the Western suburbs to key employment centres, including Melbourne University and the hospital precinct.
CityLink
The CityLink development will divert traffic from Kensington and Flemington to reduce noise pollution and congestion for residents.
Diversified property market
Melbourne’s market offers diverse property types, from inner-city apartments and townhouses to suburban houses. This wide variety allows investors to target different types of renters and buyers, catering to varying market segments and demographics. It also provides investors with different entry point prices, opening the market to first-time and seasoned property investors.
Capital growth potential
Melbourne’s property market has historically seen significant capital growth over the long term. Whilst short-term fluctuations may occur, the city’s consistent population growth and development prospects suggest a strong potential for increases to Melbourne property prices.
Government incentives
There are some government incentives available for property investors, particularly first-time buyers. Some of these include stamp duty concessions or grants, making it a more affordable option for investing in Melbourne property for those looking to enter the market.
Melbourne’s lifestyle appeal
Renowned for its quality of life, vibrant arts and culture scene, diverse food offerings and strong sporting culture, Melbourne presents a positive lifestyle appeal. Considered one of the most liveable cities in the world, these factors attract both local and international residents, driving population growth. Properties close to key work hubs, green spaces and cultural hotspots are in high demand from renters, as are suburban properties with access to transport, infrastructure, schools and amenities.
Why now is an ideal time to be investing in Melbourne property
As one of the most popular housing markets in Australia, investing in Melbourne property holds great potential for investors. A ‘perfect storm’ of post-COVID oversupply, new land tax laws and other government initiatives, including rental reforms, has triggered short-term ‘negative’ sentiment, which has put downward pressure on property prices. This has created a unique opportunity for property investors to capitalise by entering near the bottom of the property cycle.
We believe this negative sentiment will be short-lived, and the underlying fundamentals of the Melbourne property market will hold investors in good stead over the long term whilst also offering good opportunities for capital growth. Whilst the Melbourne property market hasn’t experienced a significant downturn by any means, the more subdued growth compared to other capital cities suggests a positive sign for strong growth as the market rebounds.
How can we help investors who are looking to invest in Melbourne property?
Policy shifts and economic uncertainty have hampered recent performance in the property market, but the future presents a promising outlook for investors. As with any investment, there are always risks involved, such as market fluctuations, interest rate changes and regional variations in property demand. When investing in Melbourne property, it is important to conduct thorough research and consider factors such as location, property type, and market trends before making any decision about investment opportunities.
As experienced property investment consultants, we assess suburbs against specific metrics to find the right property that matches your budget, objectives and long-term strategy. With an extensive network of contacts and resources, we can source suitable properties and help with all facets, from sourcing to purchasing, development, financing and ongoing property management.
The current market conditions present a unique opportunity for investors looking to invest in Melbourne property, which has strong population growth, economic growth, and sought-after lifestyle aspects set to drive housing demand. Contact our team today to learn more about the specific areas in Melbourne we expect to outperform or advice on investing in Melbourne property.
Alternatively, download our 14 top Suburbs to invest in 2025, which includes a suburb in Melbourne where you can still purchase an apartment for under $400,000.
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