Despite Melburnians packing up in droves and heading to the calmer waters of the Sunshine State during 2021, with increasing consumer confidence, an economy poised for growth and abundant job creation, all signs are pointing to a strong housing market for Melbourne in 2022. And while the world-renowned café culture, nightlife, live music, sporting, and foodie scenes may have been forced into hibernation for much of 2021, we’ve already seen this capital city bounce back full of life. Iconic events kicking off Melbourne’s social calendar for the year – the Australian Open and the Fashion Festival – make this one thriving and fashionable city for investors.
What makes Melbourne a great place to invest?
Fashion and foodie dreams aside, as a capital city, Melbourne is a proven and dependable addition to a property investment portfolio. Despite the significant interstate movements of 2021 and talk of a cooling market, experts are still estimating the Melbourne property market to grow between 5-8% in 2022. So, what makes Melbourne such a solid investment?
- World-class infrastructure – with phenomenal investment in mobility and connectivity, not only is the population growth supported for years to come but so is streamlined and efficient global trading. The Victorian Government is committed to ongoing investment through a 30-year infrastructure strategy.
- A diverse economy – with numerous industry-leading global companies headquartered in Melbourne, the city has a diverse portfolio. Almost a third of all Australian businesses are located in Victoria, providing substantial employment opportunities across a wide range of sectors.
- One of the world’s most liveable cities – sadly, Melbourne slipped down the ranks of The Economist Intelligence Unit’s Global Liveability Index (having previously ranked first place for seven consecutive years). However, it still ranks within the top ten and boasts the rights of the sports capital of the world thanks to its impressive stadiums and a packed calendar of high profile sporting events. Large scale events such as the Australian Open and the Melbourne Cup Carnival lure huge crowds – driving spending across accommodation, retail, hospitality, and food and beverage – and providing employment opportunities for many.
- Growth mode is set to continue – according to the Australian Government’s Population Statement, “Melbourne is projected to be the fastest-growing capital city from 2023–24 onwards, overtaking Sydney to become the nation’s largest city in 2029–30 at just over 5.9 million people.”
Where are Melbourne’s investment hot spots?
With the pandemic taking its toll on Melbourne (with more lockdowns than any other capital city in Australia throughout 2020), solid and stable suburbs with thriving neighbourhoods are the standout for investors. According to the CANSTAR Rising Stars Australian Property Market Report, these are the 5 best suburbs in Melbourne to invest in in 2022:
1. Ashwood – the City of Monash sits approximately 20km southeast of Melbourne’s CBD and is home to world-renowned education (Monash University), CSIRO (The Commonwealth Scientific and Industrial Research Organisation), the Victorian Police Academy, Monash Children’s Hospital and the under-construction $1 billion Victorian Heart Hospital. The attractive suburb of Ashwood within the City of Monash has a vast green space corridor running through it and is well-positioned in terms of access to infrastructure and amenities. With a median price of just over $1.3 million, the suburb is experiencing huge buyer demand.
2. Cranbourne – also on the south-eastern outskirts of the city, Cranbourne is located in the City of Casey, which is a hot target for both first home buyers and those on a budget. Located within the City of Casey (which is Victoria’s largest and fastest-growing municipality, and the third fastest-growing council in Australia), Cranbourne is a hub for services and infrastructure, and growth in the median price to $550,000 suggests the suburb is one to watch.
3. Crib Point – the Mornington Peninsula located on Melbourne’s southern fringe has been reaping the benefits of the COVID-driven sea change while still affording easy access to central Melbourne. With several Mornington suburbs recording a median price growth above 25% in the last year, Crib Point remains relatively affordable at a median price of $620,000. Rents are rising, and vacancies are sitting at zero – making this a stable long-term addition to a rental portfolio.
4. Heidelberg Heights – with numerous suburbs clustered around La Trobe University, the City of Banyule offers middle-ranged investment properties and fantastic local amenities. Heidelberg Heights is a suburb standout within Heidelberg Heights at just 11km from Melbourne’s CBD. It has a median house price of $865,000, rising sales activity, and strong rental demand.
5. Knoxfield – the City of Knox features ample green space, affordable homes, and employment opportunities across stable healthcare, manufacturing, and retail sectors. Knoxfield (with a median house price of $885,000) boasts low vacancy rates, rising rents and increasing buyer demand – all positioning it as a solid investment opportunity.
Think you’re ready to invest?
Before signing on the dotted line, it’s essential to be clued up on the local market intricacies and have a good understanding of your position as an investor. Here’s what you need to consider:
- Identify your goals and stick with them – while it can be easy to get swept up in the appeal of a potentially lucrative do-up or a home you might like to live in for retirement, keep your end goal in mind. With rental properties, ongoing maintenance, tenant demand, and potential for capital gains should be at the forefront of decision making.
- Explore equity in your existing home – in short, equity is the difference between the market value of your current home and the balance of your mortgage. If you’re in the fortunate position to have built up equity (by paying down your mortgage, through capital gains, or a bit of both), your lender can advise you how much usable equity you have available to invest. While you’ll need to speak to your lender to get a bank valuation on your property, your local First National Real Estate office can provide an indicative market valuation to get the ball rolling.
- Local market knowledge – if you’re looking to rent your investment property out, you’ll need to be across the changes to The Residential Tenancies Act, which came into force from 29 March 2021. This includes things like information that must be disclosed to prospective renters (such as any intentional to sell the property), new minimum standards that need to be met for rental properties and modifications tenants can make to the property without your consent. Legalities aside, lifestyle is a big factor for those who want to live in Melbourne, meaning proximity to amenities like trams, train stations, cafes, and restaurants can be deal-breakers for tenants looking for a rental property.
With interest rates at record lows, and experts predicting these to rise in the back half of 2022, it’s a great time to act. If it’s your first time investing, this Guide for First Time Investors is packed with plenty of practical tips, and First National Real Estate is always on hand to share our local knowledge and expertise.