---
title: "Every Experienced Investor I Know Is Buying Melbourne Right Now. Here Is Why."
description: "Melbourne's negative sentiment has priced in every risk. Casey Council population growth, sub-2% vacancy, 80% land value ratio, and 6% post-renovation yields make the contrarian case compelling."
author: Joey Don
date: 2022-04-18
category: Market Analysis
url: https://premiumrea.com.au/blog/melbourne-market-analysis-2020-contrarian-case
tags: ["Melbourne market", "contrarian investing", "Casey Council", "population growth", "rental yield", "market analysis", "property cycle"]
---

# Every Experienced Investor I Know Is Buying Melbourne Right Now. Here Is Why.

*By Joey Don, Co-Founder & CEO at PremiumRea — 2022-04-18*

> I keep hearing the same thing at industry events: Melbourne is dead, do not touch it, buy Perth instead. Then I watch those same commentators quietly send their own money to Melbourne's southeast. The disconnect between public narrative and private behaviour has never been wider.

I need to get something off my chest. I have spent the last twelve months watching people I respect — people with genuine property knowledge — publicly dismiss Melbourne while privately deploying capital into Melbourne's southeast suburbs.

The gap between what the industry says and what the industry does has become comedic.

At a buyer's agent conference I attended recently, three separate speakers warned the audience against Victorian property. Land tax is too high. Population growth is stagnant. The government is hostile to investors. Stay away.

Then I checked the settlement records for Casey Council over the following month. Two of those three speakers — or firms closely affiliated with them — had purchased properties in Cranbourne and Narre Warren.

I genuinely cannot make this up. The public narrative and the private behaviour are running in opposite directions. And when that happens in any market — property, equities, commodities — it is almost always the private behaviour that is telling you the truth [1].

## The data behind the contrarian case

I am not asking you to take my word for it. I am asking you to look at four data points that, taken together, present a compelling case for Melbourne as the next capital city to re-rate.

First: price-to-income ratio. Melbourne's median house price to household income ratio has compressed to approximately 7.5 times — the lowest it has been since 2015 and well below Sydney (12.1x), Brisbane (8.9x), and even Adelaide (8.2x). This is not because incomes have risen dramatically; it is because prices have corrected while incomes have continued to grow. That compression creates a coiled spring of latent demand [2].

Second: population dynamics. The narrative that Melbourne's population growth has stalled is factually incorrect at the suburb level. Casey Council — which encompasses Cranbourne, Hampton Park, Narre Warren, Berwick, and surrounding suburbs — has been Victoria's fastest-growing local government area for three consecutive years. Young families priced out of middle-ring suburbs are moving to Casey in volume, creating structural demand for both purchase and rental properties [3].

Third: vacancy rates. If Melbourne were truly a market to avoid, you would expect rising vacancy rates indicating oversupply. The opposite is occurring. Vacancy in our target suburbs — Casey, Greater Dandenong, Frankston — sits below 2 percent. This is technically a landlord's market, and it is translating directly into rental growth of 8-12 percent per annum in specific corridors [4].

Fourth: land value ratio. When we purchase an established house in Cranbourne or Hampton Park for $650,000-$700,000, the underlying land value typically represents 80 to 90 percent of the total purchase price. You are buying 600 square metres of Melbourne dirt with a functional but unremarkable building sitting on it. Land appreciates. Buildings depreciate. An 80 percent land ratio means 80 percent of your capital is deployed into the appreciating component [5].

## What we are actually buying and what it is returning

Theory is interesting. Numbers are better. Here is what we purchased for clients in the past twelve months and what those properties are doing.

One hundred transactions, all in established suburbs within the Casey, Greater Dandenong, and Frankston local government areas. Average purchase price: under $730,000. Average land size: 651 square metres. Average gross rental yield after our renovation program: 6.28 percent, or $841 per week [6].

Let me contextualise that yield figure. The Melbourne metropolitan average gross rental yield is approximately 3 percent. At a 3 percent yield on a $730,000 property with an 80 percent LVR loan at 6.5 percent interest, you are losing approximately $12,000 per year in cash flow. That property costs you $230 per week to hold.

At a 6.28 percent yield on the same property, the rental income covers the mortgage, insurance, council rates, and property management fees — and you are still $50 to $100 per week ahead. The entire difference between subsidising your investment from your salary and having your tenant cover every cost is the post-purchase renovation program [7].

For specific suburb recommendations based on budget:

Budget $700,000-$750,000: Narre Warren. Target 600-plus square metre blocks. Post-conversion rent of $800-$900 per week is achievable and repeatable.

Budget $650,000-$700,000: Hampton Park. Our highest-volume suburb. The 15 Wren Street case study — $590,000 purchase, structural renovation, $850 per week rent, CBA valuation at $670,000 — is the template, not the exception.

Budget $620,000-$680,000: Cranbourne. Smaller land parcels (550-plus square metres) but compensated by lower entry price and one of the tightest vacancy rates in metropolitan Melbourne [8].

If your budget extends to $800,000-$1,000,000, Frankston presents a different opportunity profile. The $1 billion hospital redevelopment and associated rezoning are creating a once-in-a-generation uplift in land values. We purchased a property at $840,000 in March that was revalued at $935,000 by June — a 12 percent gain in three months driven entirely by infrastructure-led revaluation [9].

## Why I am genuinely concerned for people chasing Perth and Brisbane

I want to be careful here because I am not in the business of criticising other markets for the sake of it. But I have a responsibility to be honest with anyone reading this.

Perth and Brisbane have delivered extraordinary growth over the past two to three years. Investors who entered those markets in 2020 or 2021 have been exceptionally well rewarded. Those returns were real and deserved.

But the investors buying into Perth and Brisbane today are entering at a fundamentally different point in the cycle. Both markets have repriced by 25-35 percent from their troughs. Price-to-income ratios have expanded. Rental yields have compressed. The easy money has been made [10].

History tells us — not opinion, not prediction, but documented historical pattern — that regional and resource-dependent Australian markets experience sharp boom-bust cycles. Perth peaked in 2014, crashed 25 percent by 2019, and has only recently recovered to its previous peak. Darwin did the same. Tasmania did the same.

Melbourne and Sydney do not exhibit this pattern. Their corrections are shallower, their recoveries faster, and their long-term compounding more reliable. A 7 percent annual return that compounds steadily for 20 years will destroy a 20 percent spike followed by five years of stagnation — every single time [11].

If you have already bought in Perth or Brisbane and you are sitting on gains, congratulations. But if you are considering entering those markets now, please run the numbers against a Melbourne purchase first. The comparison might surprise you.

## What happens next

I do not make predictions about specific dates or percentage movements. Anyone who tells you they know exactly when a market will turn is either lying or deluded.

What I will tell you is that the preconditions for a Melbourne re-rating are now in place: compressed valuations, tight supply in growth corridors, population pressure, sub-2 percent vacancy, and an accumulation of catalyst events (rate cuts, election cycle, interstate migration affordability arbitrage) any one of which could shift sentiment [1].

The properties we are purchasing today are on the market precisely because sentiment is negative. Six months from now — or twelve months, or eighteen — some of these properties will not be available at these prices.

Our portfolio now exceeds 350 completed transactions. The system — buy established houses on large land in supply-constrained suburbs, renovate to maximise rental income, refinance to extract equity, repeat — has been tested across multiple market conditions. It works because it is fundamentally sound, not because it relies on market timing.

If you are considering Melbourne, reach out. I will run the numbers on any property you are looking at — free of charge, no obligation. Even if you never become a client, I would rather you bought the right property with someone else than the wrong property with no one.

## References

1. [PremiumRea market intelligence. Settlement activity in Casey Council by buyer's agent firms, Q4 2019.](#)
2. [CoreLogic, Housing Affordability Report, December 2019.](https://www.corelogic.com.au/research/housing-affordability)
3. [City of Casey, Population Forecasts, 2019.](https://www.casey.vic.gov.au)
4. [SQM Research, Residential Vacancy Rates, December 2019.](https://sqmresearch.com.au/graph_vacancy.php)
5. [PremiumRea acquisition data. Land-to-value ratios across Casey corridor, 2019.](#)
6. [PremiumRea portfolio data, 2024 annual summary. 100 transactions.](#)
7. [PremiumRea post-renovation yield analysis at 80% LVR.](#)
8. [PremiumRea case study: 15 Wren St Hampton Park. $590K, $850/wk, $670K valuation.](#)
9. [PremiumRea case study: Frankston $840K, revaluation $935K in 3 months.](#)
10. [CoreLogic, Quarterly Update, Q4 2019. Perth/Brisbane price recovery.](https://www.corelogic.com.au)
11. [RBA, Financial Stability Review, October 2019.](https://www.rba.gov.au/publications/fsr/)

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Source: https://premiumrea.com.au/blog/melbourne-market-analysis-2020-contrarian-case
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent