Melbourne is it

By Graeme Salt

This is NOT advice – but I am buying an investment property in Melbourne.

Median house prices in Melbourne are approximately 41 per cent cheaper than in Sydney. This gap represents a more than $600,000 difference in median house prices in August 2024.

This is the cheapest that houses in Melbourne have been relative to Sydney at any point in the past 20 years.

And it’s hard to imagine Melbourne being so cheap forever.

One of our greatest cities, Melbourne is often competing against global icons like Vienna and Copenhagen as the World’s most liveable city.

But Melbourne underperformed through the pandemic and has underperformed in the period since, making Melbourne the weakest performing capital city since March 2020.

During the pandemic, the price increases in Melbourne were less significant compared to other cities as Melbourne recorded large net losses of people. Subsequently following the decline in prices in 2022, the recovery has also been much slower in Melbourne and values remain 4.7 per cent below their 2022 peak.

Part of this could be an overhang from the underperformance experienced through the pandemic.

Plus land tax increases for investment properties in Victoria have further discouraged investment and made owning an investment property less attractive. As a result, more investors have been selling properties in Melbourne

Melbourne has been the second most expensive market for over a decade but this recent underperformance in Melbourne has led to the city dropping back to fourth place in the rankings of Australia’s most expensive capital cities, with both Brisbane and Canberra now ahead.

But, looking at historic swings in price performance and comparative affordability, a time will likely arrive when Melbourne is viewed as undervalued given house prices are at their cheapest relative to Sydney in a decade.

Once-upon-a-time, Melbournians moved to Brisbane due to Queensland’s cheaper prices.  Its now more likely that the trend will be reversed – thus boosting demand for Victorian properties.

But buying a Victorian investment property may not be for you.  I really encourage you to do your own due diligence and consult your trusted advisor.

Graeme Salt is an award-winning mortgage broker.  For a no-obligations consultation on your home loan needs, please contact him on 02 99922 5055.