What’s the lowdown on Melbourne’s rental market?

While acknowledging that the city did have low housing inventory in January, he said the sales market was already red hot months prior, which spurred house price growth. 

However, Mr Waters flagged that growth was not seen in Melbourne’s rental market in comparison to other cities like Brisbane, some areas of Perth, Adelaide, and Hobart.

“There’s been a pretty big exodus from Melbourne and it[s] surrounds,” the director reasoned, adding oversupply as another factor that could have contributed to the rental market’s underperformance.

But Mr Waters was also quick to point out: “To be fair though, traditionally, Melbourne’s not a strong yielding area.”

For investors, he underscored two questions they need to ask:

“If the rates rise, at what point is that tipping scale where Melbourne then doesn’t become as attractive as it has been or as it is because the yields are starting to compress?”

And also, “will we see Melbourne state government and Sydney state government start to jockey for the line share of immigration to boost the bottom line?”

With Mr Tarrant and Mr Waters seeing eye to eye when it comes to the city, they together acknowledged that it all depends on the investor’s current stage of the investing style.

According to Mr Tarrant, “if you are new to it and you are young, you’re probably going to be looking for capital growth with an eye towards cash flow. 

“Whereas at the other end of your investing journey, you’re probably more thinking about cash money.”

Mr Waters agreed, before remarking: “Are you a growth investor? Are you a cash flow investor? Or are you a combination of both? Because that will have some bearing on the outcome.”

All in all, by knowing where they stand in the investing cycle, investors can determine how and where to focus in order to grow their rental property portfolio.

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