If you’re looking to invest in Melbourne, you need to think long-term, and the main factor to consider is capital appreciation. Ideally, you’ll be getting double-digit capital growth. However, this changes depending on the initial value of the property. Some homes have such a high property value that even a 5% gain can be substantial.
There are other factors to look out for, such as objective market indicators which will be used heavily in the analysis of each Melbourne suburb. While numbers are crucial in making an investment commitment, genuinely liking the property yourself is a close second.
No investment can ever guarantee a profit. This is not unique to the real estate industry either. With that disclaimer out of the way, there are still a few key strategies and indicators that can guide you on which Melbourne suburbs to invest in.
When making a decision you can use these indicators in combination with your personal investment goals. These indicators cater to long-term ownership and favour houses over units/apartments.
The impartial indicators:
- A historical trend of positive growth in the area.
- Projected improvement in the surrounding infrastructure.
- The number of residents in scarce skilled jobs (whose income is statistically above average).
- The median rental yield in these areas, which is linked to the point above. This affects passive income from investment properties.
- Demand for property outweighs the supply.
Read on to see how the following 6 suburbs fare against the above criteria. Please note that the rental yields stipulated are for houses and not units.
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Sixth best to invest in
- Median 3 bedroom house price: $1,526,000 1
- Year-on-year change in the median sale price: 20.84% 2
- Rental yield: 1.5% 1
Box Hill is located 20km from the Melbourne CBD and has a population of 11,391. The area experiences a vacancy rate of around 5.21% with 48.80% of the population living in rental accommodation. 3
Box hill has a combination of Deco and Contemporary design homes and apartment complexes. Box Hill TAFE is its most prominent feature. The educational institute is also undergoing substantial development, which could lead to growth for the entire suburb. Renters may also appreciate the trams, bus network and train station.
Box hill has drawn the interest of East Asian investors and as a result, has a wonderful selection of restaurants and markets that cater to this demographic. It also hosts exciting festivals and events that celebrate East Asian culture.
This suburb is observing accelerated growth in new and high-density apartment buildings. This often indicates a general demand from the public for more accommodation in the area. It also indicates overall growth in the value of the suburb and the properties in it.
- A high percentage of residents are renters.
- Great public transport networks.
- Indications of wide-scale growth in the suburb.
- Above average price point for most investors.
- Rental yield for the year is relatively low.
Fifth best to invest in
- Median house price 3 bedroom: $1,452,500 4
- Year-on-year change in the median sale price: 6.23% 5
- Rental yield: 1.8% 4
Glen Waverley has a lot to offer in the entertainment department. There are many places to dine out, go shopping and partake in sporting and recreational activities.
The suburb boasts a larger than average population of 40,325 people. However, only 22.60% of residents are renters. This is still a significant amount as the population is higher than most entries on the list. 6
Glen Waverley is just 19km from the CBD and has a railway line of its own. There’s also a network of buses to add to the excellent public transport facilities.
The suburb attracts young families and independent youth, both for the educational opportunities. It has an excellent public school with a reputation for bringing families to the area solely for access to it. Young people also appreciate the proximity to Holmesglen TAFE.
The vacancy rate in the area is 1.38% which indicates high demand due to most properties being maintained by renters/owners. Most people appear satisfied with living in Glen Waverley as there are so few available places. 6
- Great public transport links.
- Highly reputable schooling district and educational facilities.
- Low vacancy rate coupled with a large suburb population.
- Year-on-year increase in the median sale price is relatively low.
- The main demographic is young independents, which some might view as less reliable tenants.
Fourth best to invest in
- Median 3 bedroom house price: $422,500 7
- Year-on-year change in the median sale price: 6.79% 8
- Rental yield: 3.9% 7
This suburb is a great option if you’re trying to enter the property market. It has a very affordable price point. The suburb has a mixture of urban and rural houses. The region has also observed Victoria’s fastest-growing economy in the past decade!
The population for all of Melton is forecast to increase from 185,471 to 448,053 over the next 30 years 9 indicating huge future demand for property in the area.
It’s 35km from the Melbourne CBD, however, it does form part of the major road network allowing for convenient travel to and from the CBD.
Having said that, the region is seen as very car-dependent. Around 28,3% 10 of residents currently rent their properties, and 89% 11 of the properties are standalone houses.
Older and established couples and families dominate the local demographic, which may explain the lower percentage of apartment units in the area. The demand is currently deemed average, but as mentioned above, this will most likely change in the years to come.
The property type most in demand is 3 and 4 bedroom houses. 12 This option is best if you’d like to enter the property market and are aiming to invest in the long term. It’s also a good option for those wanting to diversify their investment portfolio.
- Access to major arterial roads.
- Much lower price point for 3 and 4 bedroom houses.
- Very high projected population growth.
- Fastest growing economy in the state.
- Low Y-O-Y increase in property value.
- Low current demand.
Third best to invest in
- Median 3 bedroom house price: $1,350,000 13
- Year-on-year change in the median sale price: 23.4% 14
- Rental yield: 2.5% 13
This is another bayside location that’s always in high demand. The area combines bushland and beaches. Some properties will be nestled closer to the natural terrain while others are along the bayside.
There are options to invest in properties that have a decent entry-level price or the more outstanding mansions with ocean views. Both types will experience impressive yearly growth in value and benefit from the excellent location.
At 68km from the CBD, on the Mornington Peninsula, the suburb is a bit further out. Many regard this as part of the exclusivity of the area, but the long commute could deter those who work in the CBD.
Mount Martha has a population of 18,551 15 people with 11.74% 15 of the occupants being renters/tenants. There is a substantially low vacancy rate of 0.27% 15. This is an indication of stability and long-term, satisfied tenants.
The largest demographic in the area is mature and established couples with adult children. This influences the local lifestyle greatly. Activities centre on the outdoors, including the scenic bushland and the seaside.
The median weekly household income is $1,707 16 while the median monthly loan repayment is $2,000. 16 These values show that the demographic living in the area has a lot of disposable income, which also indicates reliable tenant behavior.
- Bayside location featuring wetlands, bushland and beaches.
- High Y-O-Y increase in the median sale price.
- The local demographic earns enough to sustain the local lifestyle and rental/mortgage payments.
- Higher than average rental yield.
- Quite far away from the CBD.
- A smaller percentage of residents are tenants.
- Might be a difficult market to break into due to the very low vacancy rate.
Second best to invest in
- Median 3 bedroom house price: $1,400,000 17
- Year-on-year change in the median sale price: 16.1% 18
- Rental yield: 2.6% 17
In the past 12 months, property owners in Brunswick East saw a capital gain increase of a massive 30.89%. 19 The suburb is home to 11,504 20 people with 46.84% 20 being tenants. The average time to sell a house is around 60 days 20 even with a slightly higher than average price point.
The suburb is about 5km from the CBD with great public transport facilities. This is ideal for the people that live in the area, which is predominantly an independent young demographic. In terms of tenant reliability, the second-largest demographic is mature and established individuals.
Brunswick East features a wide variety of property types, including cottages, standalone houses, apartment blocks, units, townhouses, and semi-detached properties. Houses enjoy a much higher growth rate than units.
- A high percentage of residents are tenants.
- Very close to the CBD.
- Very high capital gain increases in the last 12 months.
- Higher than average yearly rental yield.
- Relatively low Y-O-Y increase in the median house price (compared to other entries on the list).
- The main demographic is made of young people, who might be viewed as less reliable tenants.
The best to invest in
- Median 3 bedroom house price: $1,000,000 21
- Year-on-year change in the median sale price: 30.53% 18
- Rental yield: 2.1% 21
Topping our list for investment potential is another suburb on the Mornington Peninsula - McCrae. Despite being being 88km from the Melbourne CBD, McCrae has a massive yearly growth of 24.3%. 22 This high growth rate is partially due to the affordability of the properties and is in turn the second benefit of investing in this suburb.
For a long-term investment that will yield a massive ROI from capital gains, this suburb is your best choice. The rental yield is also at a decent 2,1% 21 for houses, although only 10.71% 23 of the residents are renters. The rental yield is also obviously proportional to the value of the house.
The population in the suburb is a modest 2,824, 23 which makes the number of potential tenants much smaller than average. The vacancy rate is as low as it gets, at 0.14%. 23 This very low availability of property may explain the very high demand in the area. McCrae averages 2,749 21 visits per property listing per month. The average for VIC is 1,709 21 visits per property listing.
The largest demographic in the suburb are mature and established couples that own their residence. A massive 93% 24 of the properties are standalone houses, most of which are holiday homes. This may explain the demographic. It is mostly well-established adults that are able to purchase or rent such properties.
Coastal suburbs usually perform very well with regards to year-on-year growth, simply due to the location and lifestyle it offers. The amenities are influenced by the main demographic and are mainly places to dine out and relax. One of the major pastimes in the area is sailing, and there is a local yacht club.
- Lower than average price point for 3 bedroom houses.
- Massive YOY growth.
- Relatively high rental yield.
- High demand in the area.
- Exclusive community with a small population. This market may be difficult to break into.
- A small population and a low percentage of tenants in the suburb.
While being aware of the numbers and stats is the best way to narrow down your options, it’s also important to find a property you connect with or believe has great potential. It is always advised to view the property through the eyes of the potential tenant or future owner.
If you can view the house from their perspective, it can really help in your decision-making. Become familiar with the suburbs you are thinking about investing in. Try out the public transport and speak with the local residents. Is it a place you believe is worth living in?
It will always be easier to find tenants or even sell a property you personally believe has a lot of value. Continuously educate yourself on the market and the stages that it might be in for each suburb. You can never be too educated when it comes to property investment.
1 Realestate.com.au. "Box Hill, https://www.realestate.com.au/neighbourhoods/box-hill-3128-vic”. 31st July 2021.
2 Property value. ”Box Hill, https://www.propertyvalue.com.au/suburb/box%20hill-3128-vic”. 17th August 2021.
3 Real Estate Investar. "Investment Property Box Hill, VIC, 3128, https://www.realestateinvestar.com.au/Property/box+hill”. 17th August 2021.
4 Realestate.com.au. "Glen Waverley, Victoria 3150, https://www.realestate.com.au/neighbourhoods/glen-waverley-3150-vic”. 31st July 2021.
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12 Higher Than Average Growth. ”Property Market Outlook for Melton City, VIC, https://www.htag.com.au/property-market-outlook-for-melton-city-vic/”. 7th April 2020.
13 Realestate.com.au. ”Mount Martha, Victoria 3934, https://www.realestate.com.au/neighbourhoods/mount-martha-3934-vic”. 17th August 2021.
14 Domain. ”Mornington Peninsula suburbs lead house price rises across Melbourne, https://www.domain.com.au/news/mornington-peninsula-suburbs-lead-house-price-rises-across-melbournes-suburbs-1049009/”. 2nd May 2021.
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16 Smart Property Investment. ”MOUNT MARTHA - SUBURB PROFILE REPORT, https://www.smartpropertyinvestment.com.au/data/vic/3934/mount-martha”. 17th August 2021.
17 Realestate.com.au. ”Brunswick East, Victoria 3057, https://www.realestate.com.au/neighbourhoods/brunswick-east-3057-vic”. 17th August 2021.
18 Domain, ”Mornington Peninsula suburbs lead house price rises across Melbourne, https://www.domain.com.au/news/mornington-peninsula-suburbs-lead-house-price-rises-across-melbournes-suburbs-1049009/”. 2nd May 2021.
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20 Real Estate Investar. ”Investment Property Brunswick East, Victoria 3057, https://www.realestateinvestar.com.au/Property/brunswick+east”. 17th August 2021.
21 Realestate.com.au. ”McCrae, Victoria 3938, https://www.realestate.com.au/neighbourhoods/mccrae-3938-vic”. 17th August 2021.
22 Realestate.com.au. ”The Melbourne suburbs with the biggest rises and falls in house prices, https://www.realestate.com.au/neighbourhoods/mccrae-3938-vic”. 30th January 2021.
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24 Land Checker. ”McCrae Victoria 3938, https://landchecker.com.au/suburb/mccrae-vic-3938/”. 17th August 2021.