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Best kept secret in Australian property

Could Melbourne’s property market be the best-kept secret in the country? Here's why I think it could be.

Melbourne went through the pandemic wringer. It bled more than any other Australian city, with more infections, more deaths and far harsher lockdowns.

But the city has found its feet again. The city is alive in every way - except the price of property.

A home in Melbourne is by no means cheap, but compared to Sydney, Brisbane and Canberra, it might almost be good value.

Australia has seen a lot of inflation in the last few years. And in most places, the fastest-growing price has been property. That’s not the case in Melbourne as the next chart shows.

The ratio of the price of a home to the price of a bag of groceries is looking better now in Melbourne than anywhere else. The city has seen the slowest total house price growth since the beginning of 2020, up just 11 per cent.

Property price changes in a chart, showing change since pandemic.
Property prices are on the rise, but there's an outlier that could prove a smart investment. (Jason Murphy)

Do you have a story to tell? Contact yahoo.finance.au@yahooinc.com

And it is worth remembering that in 2019 house prices were not doing anything special. In fact, prices slid a lot throughout 2017 and 2018 and had only begun to recover at the start of the pandemic.

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Market observers expect property prices to rise in Australia this year. There’s a chance interest rate cuts will come before Christmas and the booming population has made rents very high.

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Housing lending in Victoria is running at about $7 billion a month, well above its 2019 nadir of $5 billion a month.

But unlike 2019, Victoria’s population is exploding. The state population grew by 2.9 per cent over the year to September 2023.

That’s the second fastest rate of population growth in the country, bringing in 190,000 new people who need somewhere to live. Dwelling approvals aren’t keeping up. That suggests that Melbourne could make sense as an investment proposition.

Property chart showing median house price and the unemployment statistics that show which regions could be best to live.
Property prices could be low, but if you can't get work, life wouldn't be easy. (Jason Murphy)

But the southern capital is also a decent choice as a place to live and work. It’s not just about trams, or even the coffee, which is surely an aspect in which the rest of the world has caught up by now.

Melbourne offers a nice combination of house prices and unemployment rates. Although as the next chart shows, Adelaide and Perth also look like good trade-offs.

Melbourne’s unemployment rate is 3.9 per cent in seasonally adjusted terms, around the same as Queensland and historically low.

But to live in Brisbane now costs more than to live in Melbourne. For homebuyers facing an increasingly expensive Australian housing market, the Melbourne option could be the best of a bunch of tough choices.

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