Is Melbourne CBD the sleeping giant of Australian property investment?

by Mike Wood20 Aug 2021

The biggest secret in Australian property investment could be in the heart of one of our biggest cities, according to a report published by a major Big Four bank.

A study by NAB has singled out where it might be better to buy than to rent, and suggested that the inner Melbourne suburbs of Carlton, Docklands and the CBD could be among the best places to buy property in Australia, both for owner-occupiers and investors.

CBDs have been emptying in Australia since the pandemic, as workers are no longer required to go into a physical office, while vacancy rates in Sydney and Melbourne have soared due to a lack of international students.

However, as the nature of work changes and CBDs become more multi-use, and international student inevitably return after the pandemic, it is likely that inner city rental markets will recover from their current slump and become highly profitable again.

Currently, there are houses are available in Carlton for less than $1m, unthinkable in Sydney.

“I would recommend for people to buy in the CBD, but not a brand new apartment,” said Peter Koulizos, CEO of the Property Investment Professionals of Australia (PIPA).

“There are still a number of small, character, period-style cottages in the CBD. But even an inner city suburbs like Carlton is a great spot, because there is a much higher concentration of lovely homes, walking distance to the city and plenty of demand from the university students that attend the campuses there.”

“In the city or close to the city, provided you’re buying the right type of property, can be a very good investment strategy.”

In Sydney, NAB recommended that those looking to buy units in Sydney buy further out. Koulizos put that down to the differing geographies of Sydney and Melbourne.

“West and Southwest Sydney are big employment hubs. It’s the engine for the Australian economy, not just the New South Wales economy. Living further out in Sydney is not such a bad strategy because there are such large employment hubs.”

“In Melbourne, that’s not the case to the same extent. You don’t have the large expanse of metropolitan area in Melbourne as you do in Sydney.”

“Also, Sydney being the largest metropolis in Australia, and having the Harbour, makes property prices much more expensive than they are in Melbourne.”

“Therefore, relatively, it’s more affordable to live close to the city in Melbourne than it is in Sydney. I wouldn’t be buying high rise apartments, but the opportunity to buy something on its own block of land.”

“Not only are you in a location that is highly sought after in terms of real estate, but the rezoning opportunities are far greater in the CBD than in the suburbs. What used to be zoned double story at most, as there is more pressure for housing and commerce, can easily change to multistory.”

“That can be huge, so far as the investor is concerned, because it goes from two story to maybe ten story. I wouldn’t be discouraging people from buying character or period-style homes in the CBDs of Australia’s capital cities.”