Melbourne Apartment Market – Is it worth the investment?

Melbourne’s Apartment Market Analysis

PropTrack’s latest rental market insights reveal that the vacancy rate in May for Victoria’s capital stands at 1.34%. Prior to the pandemic, the national rental vacancy rate typically averaged 2.5%, highlighting the current tight rental market in Melbourne.

Thanks to its liveability and strong economy, Melbourne continues to attract a high number of interstate and international migrants, resulting in strong demand for rental properties.

In recent years, the nation’s rental markets have been gripped by crisis conditions, making affordable rentals increasingly scarce. This scarcity has led to an increase in rental prices, with Melbourne’s median rent for apartments now at a record $550 per week. Melbourne apartments witnessed a staggering rent jump of 5.8% over the past quarter. This quarterly increase marks a reversal from the previous quarter’s stable results.

With more renters finding it challenging, there has been a noticeable shift in rental preferences. More and more renters are opting for apartments on the city’s outskirts or in neighbouring suburbs where rental prices are more affordable. This shift has created an opportunity for investors to purchase apartments in these areas or to invest in build-to-rent developments that cater to this growing demand for affordable rentals.

Investment Opportunities in Melbourne Apartments

Melbourne real estate has proven resilient in recent years, with key market fundamentals supporting continued growth. With a tight rental market and rising demand for affordable rentals, investing in Melbourne apartments presents an attractive opportunity for investors looking to enter the property market or expand their portfolio.

Emerging suburbs and considerations for investors

Caulfield

Located approximately 10 kilometres from the CBD, Caulfield has emerged as an attractive investment opportunity for apartments. With a median apartment price of $736,000, Caulfield offers relatively affordable options compared to the inner city. This suburb also boasts excellent transport links, proximity to Monash University, and a growing number of cafes and restaurants.

Currently, the median apartment rental price in Caulfield sits at $550 per week, and with a rental yield of 4.5%, investors can expect to see healthy returns on their investment in this well-established suburb.

Find out more about our projects in Caulfied today!

McKinnon

Situated 16 kilometres from the CBD, McKinnon is another emerging suburb that presents a promising opportunity for apartment investors. With a median apartment price of $803,500, McKinnon offers a more affordable option compared to neighbouring suburbs Brighton and Elwood.

Apartments are currently renting for $620 per week on average in this suburb, with a rental yield of 4.3%. McKinnon has also experienced an annual compound growth rate of 1.7% for units.

Key considerations for investors

When considering an investment in Melbourne apartments, it’s essential to research the potential growth areas and emerging suburbs. It’s also crucial to consider factors such as median apartment prices, rental yields, and vacancy rates in these suburbs.

Understanding apartment market trends in Melbourne can assist you in identifying potential investment hotspots. There is no one, single Melbourne real estate market, but rather several different markets that offer varying opportunities for investors. That’s why it is important to do thorough research and consult with experts to make informed investment decisions.

Are Melbourne apartments a good investment?

Oxford Economics is predicting a 21% increase in the median Melbourne house price over the next three years, outpacing Sydney’s anticipated 18% growth.

With plenty of value on offer, the potential for strong returns and capital growth makes Melbourne apartments an attractive investment option. And with interest rates likely to decrease in 2025, Melbourne could be set for an apartment price boom.

Investors interested in Melbourne apartments need to ensure they are well-positioned, with the right investment-grade property in a high-demand location before the market heats up.

Summary

As highlighted in our recent 2024 My Market Melbourne Update, a straightforward supply and demand analysis reveals a significant undersupply of dwellings in inner Melbourne, particularly apartments. Based on Federal Budget population projections, there will be a shortfall of at least 33,208 houses over the next three years.

Considering the city’s growing population, high livability, and robust economy, Melbourne’s apartment market offers a great opportunity for savvy investors to capitalise on under-priced properties and secure strong returns.

At Ironfish, we equip our investors with the knowledge and expertise to identify the right investment-grade property in Melbourne’s thriving apartment market. With over 18 years’ experience, we have a proven track record of helping our clients build successful property portfolios. Contact us today to learn more about investing in Melbourne apartments.