As October wraps up, the property market is shifting gears — and for savvy investors, the spotlight is turning to Melbourne. A recent Australian Financial Review (AFR) article highlights renewed interest from Sydney-based investors who are backing Melbourne’s growth potential by targeting well-positioned inner-suburban properties. At Sound Property, we believe this is a moment worth watching closely. Here, we unpack the AFR piece, add our insights, and outline how to evaluate the Melbourne opportunity smartly.
Why Investors Are Looking to Melbourne
- Discounted Pricing
Melbourne underperformed during the pandemic due to migration slowdowns and investor-unfriendly policy settings. This underperformance now presents a value opportunity, especially compared to most other Capitals.
- Demand Tailwinds
Rental vacancy rates are below 1%, and new dwelling supply is 14% below the 10-year average. Migration trends are also turning positive, with Melbourne receiving around 30% of Australia’s total migration — a strong support for underlying housing demand.
- Sentiment Shift
Investor sentiment is strengthening, with many now recognising Melbourne as a market poised for growth. As one AFR investor noted: “I see solid growth potential over the next few years.”
This growing confidence is backed by forecasts: KPMG projects Melbourne to lead all capital cities in 2026, with house prices expected to grow by 6.6%.
Sound Property’s Investor Lens
Structural Opportunity
– Affordability gap vs Sydney remains wide
– Rental demand is strong in well-located areas and rents are rising
– Infrastructure and urban amenity investments support long-term growth
Timing & Risk
– Longer hold periods (3–5+ years) likely needed
– Higher holding costs in Victoria (land tax, rental compliance)
– Interest rate dependency could affect momentum
– Not all suburbs will perform — precision is key
Tactical Playbook
– Target inner to middle-ring suburbs with strong fundamentals
– Model cash flow carefully, accounting for all costs
– Prefer houses over units in low-supply, high owner occupier areas
– Align investment horizon with expected recovery timeline
October Market Wrap-Up
– Melbourne is shifting from a “laggard” to a value opportunity
– Investors are acting ahead of the upswing
– A selective, strategy-first approach is crucial
Our Verdict
We’re positive on Melbourne’s rebound potential but cautious on execution. We recommend:
– Considering Melbourne as part of a diversified 2026 strategy
– Factoring in costs, interest rates, and timing risks
– Targeting specific growth suburbs, not the whole city
– Sticking to a disciplined acquisition model utilising our 15 Key Investment Driver approach
Interested in a shortlist of Melbourne suburbs that match this “value + growth” profile? Let us know — we’re happy to tailor a list for you.