Melbourne’s property market is seeing a significant exodus of investors, even as prices continue to fall, according to Adviseable.
While it’s generally not advisable to sell in a declining market, many investors are opting to offload their properties in Melbourne. The question is, why are they selling when market conditions aren’t ideal, and what is driving this trend?
A few years ago, investors in Melbourne and across Victoria were relatively content. While property prices didn’t soar as high during the pandemic as in other parts of Australia, most investors stayed put, Adviseable said.
According to the 2022 PIPA Investor Sentiment Survey, only 19.1% of investors had sold a property in Victoria in the two years to August of that year. In contrast, 45% of investors sold in Queensland, and 24% sold in New South Wales.
Fast forward to 2024, and the situation has changed drastically. The most recent PIPA survey found that 31% of investors who sold a property in the past year had sold at least one investment in Victoria, with nearly 22% of those sales occurring in Melbourne.
According to Adviseable, there are several factors that have contributed to Melbourne’s declining property market.
One of the major reasons is the Victorian government’s announcement of a new land tax regime in May 2023.
The new tax, which took effect in January 2024, adds a flat-rate levy for property investors, alongside additional taxes on landholdings. The government expects this tax to affect around 860,000 investors, including 380,000 first-time taxpayers.
In addition to the land tax, recent rental reforms introduced by the Victorian government have also been perceived as anti-investment.
Investors make up about 28% of property owners in Victoria, so changes targeting this group are having a profound effect on the market. As a result, many investors feel pushed out, leading to a high number of properties being sold.
Interestingly, Melbourne’s median dwelling value has now become more affordable than cities like Brisbane, Perth, and Adelaide.
According to CoreLogic, Melbourne’s median property value fell by 1.4% over the past year, marking the worst performance of any capital city.
Meanwhile, Adelaide and Brisbane have posted double-digit price growth. However, while Melbourne may appear affordable, the ongoing impact of the land tax and other investor-targeted policies could continue to weigh down the market for years to come.
For investors looking to purchase property strategically, Melbourne might not be the best option despite its lower prices.
The decade-long land tax regime is expected to act as a drag on the market, meaning better investment opportunities could be found elsewhere.
Southeast Queensland, Adelaide, and even regional Victoria are offering more favourable investment-grade locations without the same tax burdens or market challenges.
Investors are now looking beyond Melbourne for properties with stronger growth potential, making strategic choices in more favorable regions, Adviseable said.
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