What’s Going On With Melbourne?

Reading Time: 2 Minutes

Hey everyone!

Hope we are having a great week, I was just perusing the headlines when something caught my eye:

“Perth, Adelaide property now pricier than Melbourne”

Yes that Melbourne – Australia’s 2nd biggest city and the little sibling of Sydney.

It seems that in recent years, growth in Melbourne property has trundled along while other cities such as Perth and Adelaide have been zooming past.

Given Canberra and Brisbane have already overtaken Melbourne’s median property value – it’s now ranked 3rd last out of all capital cities.

WTF!

Apparently only Darwin and Hobart are “cheaper” than Melbourne.

Darwin and Hobart!

Landlords are fleeing in droves and jumping onto the Perth, Brisvegas and Radelaide trains.

Digging deeper, the reason for Melbourne’s malaise would seem to be the recent government regulations and increased landlord compliance post-COVID.

And I found this cool site, which starts to explain some of the 130 (130!) reforms and taxation changes which came into effect in the last couple of years.

Digging even deeper, it seems that the raft of changes probably increases the hit to the hip pocket of the average Victorian landlord by around $1300 (for land tax) and about $800 (for the property reforms).

Hmmm, so about $2100 or thereabouts each year.

Ouch.

Though for landlords, given these expenses are incurred through investing i.e. deductible expenses, the taxman should hand you back a few dollars based on your tax rate.

So the net result is poor but I wouldn’t say THAT bad.

No, I’d argue people are selling more because of the rising cost of mortgages and interest expenses. Those are the big killers.

In fact, I’d opinion that as Melbourne property values has traditionally been quite high, mortgages against these properties tend to be quite high also – hence sensitivity to rates is probably felt more than the secondary cities like Brisbane, Perth or Adelaide – who are all coming off low bases (Brisbane post 2011 floods and YEARS of stagnation, Perth post mining boom and YEARS of declines, Adelaide… well Adelaide values were just low).

But Melbourne still has solid fundamentals – it’s the 2nd largest city in Australia, has a strong immigration intake, and as far as I can see – a ton of jobs.

So from a counter-cyclical perspective, I think it kinda makes sense to have a sniff around the edges.

Not a big pervo sniff mind you, probably a tentative flaring of the nostrils at this stage.

But TheFrugalSamurai sir, what about all the holding costs and interest expenses et al?

Well, I’ve always said that property is a game of numbers on a screen, just factor them in when you are doing your feasibility calculations and away you go.

It’s still very, very early stages yet, the market isn’t going to change anytime soon.

Which is why, if you are thinking of buying another investment property – I honestly think maybe, just maybe, have a gander at Melbourne.

There’s a certain smell about it.

Did you enjoy this post? If yes, put your email in and click on the little “subscribe” button at the top right. You’ll also receive a free copy of the Complete Aussie FIRE e-book – The Ultimate Guide to Financial Independence for Australians.

Or you can follow me here:

Twitter

Facebook

Pinterest

Instagram

P.S. Every post is the personal opinion of yours truly, please seek your own personal financial advice regarding your own personal circumstances.