Top 3 growth areas in Melbourne
Melbourne is on the rebound.
All signs point to Australia’s second most populous capital city’s strong recovery from the impact of lockdowns.
Massive investment boost to revive the economy
Under the city government’s plans, Melbourne can grow to become a thriving $150 billion economy over the next decade.
The ambitious plan aims to deliver a $150 billion Gross Local Product by 2031, a massive increase from $104 billion in 2019.
Melbourne forecasts around 600,000 jobs by 2031, an increase of more than 100,000 from 2019.
In a recent meeting with Melbourne’s business community, Lord Mayor Sally Capp announced a number of investments to revitalise the economy.
Capp said the city government has successfully negotiated a $300 million joint recovery and revitalisation initiative with the Victorian state government.
To re-invigorate the business community and other segments affected by the lockdowns, Melbourne will invest $21.5 million on major events to reinforce its status as the nation’s events and cultural capital.
Another $2.6 million will be spent on transforming vacant shopfronts and support entrepreneurs and artisans.
With the business, arts and culture, education and tourism sectors getting some much needed support, Melbourne’s property sector is also showing strong signs of recovery.
While it suffered one of the biggest interstate migrations during the lockdowns, Melbourne is now seeing the return of domestic and overseas population. For example, people who temporarily moved to Queensland are now coming back to Melbourne. International students are gradually filling up rental accommodations close to universities.
Incentives for new property buyers and investors
Melbourne has also launched an incentive program for buyers of new properties. This is a great initiative that will have a massive impact on encouraging investments in new builds. At the same time it will also boost the stock of new properties which may help alleviate the rising rent.
“Investors who want to enter the Victoria and Melbourne markets would do well to consider investing in land and house packages that are very affordable and offer good value at the moment. House and land packages about 30 KM out of Melbourne present top value for investors.” Sam Assaad - Senior Property Investment Specialist at Wealthi
Massive stamp duty savings
The city of Melbourne is rolling out a stamp duty concession on new properties.
Under this program, if you purchase a new property up to $1 million, you get a 50 per cent concession on your stamp duty fees for contracts signed from 1 July 2021 to 30 June 2022.
Though there’s a small window of opportunity to avail of this incentive, there is still time for serious property investors.
This temporary stamp duty concession is available to owner occupiers and investors.
Improving property sector sentiment
According to the most recent property market data, Melbourne hosted its busiest auction week of the year to date, with 1,606 homes taken to auction across the city during the first week of April 2022.
Volumes were up 5.3% compared to the previous week (1,525) and are up 2.0% from the previous busiest week of the year, when 1,574 auctions occurred (week ending 27 February).
Melbourne's preliminary clearance rate rose, with 69.7% of the 1,360 results collected so far recording a successful result.
All these point to the return of property investors and home buyers eager to get back into the property market.
Melbourne leads rising rent values
Similar to the national results, the combined capitals unit rents outperformed house rents over the first quarter, increasing 3.1% compared to a 2.2% rise in house rents.
The pace of capital city rental growth has accelerated compared to the previous quarter, up 30 basis points for houses and two percentage points for units. This has seen the annual performance gap between capital city houses and units fall to the smallest gap since the onset of COVID, at just 80 basis points.
CoreLogic Head of Research, Eliza Owen, says the rental market has re-accelerated with capital cities leading the march.
“Much of this momentum could be stemming from a recovery in Melbourne rent values, which saw a peak-to-trough decline of -4.0% between March and December of 2020, but have since recovered to pre-COVID levels and hit new record highs.”
How do property investors ride this Melbourne rebound
Look for growth areas and invest in quality properties that will be highly sought. Those that will deliver growth in the medium to long-term.
We’ve identified some strong pockets of opportunities with quality projects in areas where we expect growth and ramping up of activities in the near future.
This is an emerging area allocated with approximately $1.2 billion in commercial and industrial investment. This spot is expected to create around 25,000 jobs with key industry players already operating there.
Considered as a gateway to the north of Melbourne, Epping has easy access to transport including buses and trains which promote mobility.
While only about 20 kilometres away from the Melbourne CBD, Epping is also benefiting from the spill-over of growth from surrounding areas like Reservoir.
Investment properties in Epping are decently priced at the moment and will be attractive to those who want to invest while not wanting to go too far away from the CBD.
Epping’s diverse ethnic communities are the strong drivers of economic growth in this part of the greater Melbourne region.
About 12-13 kilometres North of Melbourne CBD, Reservoir is going through its gentification phase as it attracts younger generation of people and families.
A $232 million train station upgrade has been earmarked for the area, which is a sign of further growth to come.
Reservoir is experiencing the ripple effect of the urban sprawl, which means lots of people are trying to buy and invest in the area before property prices rise further.
With redevelopment in full swing and more infrastructure build planned for the area, investment properties priced at about $500,000 in 2015 are now selling at around $850-$900K.
Reservoir is also close to La Trobe university which hosts thousands of students and one of the most recognised universities in Australia.
If you would like to discuss the Australian property market in more detail, please reach out to the Wealthi team. We’re happy to have a chat and show you how we can help you build a successful property portfolio.