An overview of the financial year 2024

Firstly, we just wanted to thank all our external stakeholders for all the hard work they have put in over this last financial year. It certainly hasn’t been the easiest of financial years for anyone working in the property sector…perhaps unless you live in Brisbane or Perth!

Victoria’s property market:
Time to buy before prices take off

Victoria has sat in property purgatory for the better part of the last couple years; but we are noticing growing positive sentiment around Victoria and we expect that momentum to continue.

Property investment is cyclical

Investors must look to markets that will perform for future capital growth rather than buying in those that have already taken off. Overheated markets such as Brisbane are going to cool off as affordability becomes a key issue along with declining rental yields.

Unlike Perth, Victoria is currently positioned at the bottom end of the cycle, but is perfectly positioned to have a big bounce back this financial year. Investors should seriously consider buying now before the next wave of growth takes off.

8 Reasons why we think Victoria is a compelling investment proposition

1. Affordability
Affordability is a key driver for investment in Victoria. With median house prices in Brisbane, Canberra, and Sydney surpassing those in Melbourne, Victoria offers a more affordable alternative for investors¹. The availability of reasonably priced titled land and a competitive building market provides investors with opportunities to secure properties at attractive prices. Builders and developers, facing slower sales, are offering significant incentives to buyers, further enhancing the affordability and appeal of investing in Victoria.

2. Population Growth
One of the key factors as to why Victoria is a certain bet is because the state is set to experience significant population growth, making it a strong investment destination. The state anticipates a population increase of 430,000 people from both interstate and overseas migration in the next 5 years. By 2036, Victoria’s population is projected to grow by 1.4 million, reaching 8.4 million people². This rapid population rise will increase the demand for housing in the state.

3. Sales Volumes
Sales volumes in Melbourne witnessed a revival in transactions in late 2023 and early 2024, for example sales volumes grew by 8% in Q1 2024 compared to the same period in 2023, signaling a resilient market recovery. In the same direction, according to the Price Predictor Index (Winter edition 2024), 40% of locations in Regional Victoria are now classified as rising, recovering, or consistent markets.

4. Housing Shortage
As Victoria’s population surges, the demand for housing is expected to increase, which is already in short supply due to a decline in building approvals. In the past 12 months, building approvals have dipped to just 51,000, falling nearly 30,000 homes short of state and federal government targets³.

5. Vacancy Rates
The housing shortage has driven vacancy rates to low levels, with Melbourne’s vacancy rate at1.5%, well below the 3% considered a balanced rental market. This tight market is driving rental prices higher, making it an attractive proposition for investors.

6. Rising Rental Yields
The shortage of housing stock, combined with the sell-off of investment properties in recent years, is driving rental yields up in Victoria. Recent figures show an 11% rise last year, making it the fastest-growing rental market in Australia. As demand for rental properties continues to outstrip supply, rental yields are expected to keep rising, providing solid returns for investors.

7. Economic Stability
Victoria has always been a major economic powerhouse, driving approximately 23% of Australia’s economic activity⁴. This significant contribution underscores the state’s role in the national economy. Victoria’s diverse economic landscape, which includes key sectors such as finance, manufacturing, technology, and services, fuels its substantial economic output. The state’s vibrant business environment and robust infrastructure support a wide range of industries, further enhancing its economic influence. With a strong economy that contributes nearly a quarter of the nation’s economic activity, Victoria provides a solid foundation for investment and growth, making it a crucial player in Australia’s economic success.

8. Job Opportunities
Unemployment rates in Australia are at the lowest in 10 years, and Victoria continues to lead the nation in jobs growth since the September 2020 pandemic peak, with more than 530,000 new jobs created across the state⁵. This strong job growth has contributed to Victoria’s economy, which represents 23% of Australia’s total economy. With a growing population and a thriving job market, Victoria is set to continue its economic success.

Source: ABS

Simply stated, Victoria is well positioned to see more growth than any other major capital city over the coming years. There are still some factors that are making its bounce back difficult such rates and taxes, however, there is genuine belief there will be some rollback here and when that does happen, investors should be ready to get back in because Melbourne house and apartment prices look like they’ll have a lot of catching up to do!

Sources:
1. Hedonic Home Value Index by CoreLogic (Jul 2024)
https://www.corelogic.com.au/news-research/news/2024/three-capital-cities-record-a-fall-in-home-values-as-momentum-leaves-the-cycle

2. Victoria in Future (Planning Victoria)
https://www.planning.vic.gov.au/guides-and-resources/Data-spatial-and-insights/discover-and-access-planning-open-data/urban-development-program/victoria-in-future

3. Victorian new apartment approvals plunge to 17-year low(realestate.com.au)
https://www.realestate.com.au/news/victorian-new-apartment-approvals-plunge-to-17year-low-as-house-approvals-stuck-in-doldrums-abs/#:~:text=Australian%20Bureau%20of%20Statistics%20figures%20released%20Thursday%20show%20that%20across%20the%20past%2012%20months%20the%20state%20gave%20the%20nod%20to%20just%20over%2051%2C000%20new%20homes

4. Invest Victoria website (seen on 27thof August 2024)
https://www.invest.vic.gov.au/why-melbourne/growing-low-risk-transparent-economy

5. Victoria Leading The Nation In Jobs Creation
https://www.premier.vic.gov.au/victoria-leading-nation-jobs-creation