As the Melbourne market continues to stagnate, with growth lagging far behind other major cities, investors are increasingly capitalising on the opportunity by investing in the Melbourne property market.
We’re seeing more and more investors from Queensland, New South Wales and beyond enlisting us to find their Melbourne property investment. And it makes sense: Melbourne property price growth is lowest of all capital cities. Investors willing to spend their money interstate stand to get the best value out of Melbourne.
Source: https://www.abc.net.au/news/2026-01-19/melbourne-house-prices-affordable-capital-city/106210992
In Melbourne, investors have been hit with new land taxes, introduced in response to government debts amassed during the covid era. In addition, new legislation for landlords make it harder to evict difficult tenants and have higher living standards, forcing some landlords considerable investment to ensure compliance. Some landlords are telling us ‘It’s all too hard, I’d rather avoid the hassle.’
And of course, the increasing interest rates and high cost of living is making it harder for homeowners to service their mortgages. So for some they feel it makes sense to sell that asset and invest elsewhere for the time being.
The combination of new land taxes, new rental rules and higher cost of living plus the comparative high prices in other capital cities have made investing in Melbourne property an appealing proposition to many non-Victorians.
But while there are considerable chances to snap up a bargain, it pays to be cautious and strategic.
What non-locals need to know about investing in the Melbourne property market
It can be difficult to invest in a city where you don’t live. Not only do particular suburbs in Melbourne have varying reputations, but each individual suburb has its pockets of good and less-than-good buying potential.
If you’re not familiar with those intricacies, it can be difficult to know how to spot a wise investment.
I know this is self-serving, but a Melbourne buyers’ advocate really can ensure you make a sensible investment with real potential for future growth.
Don’t listen to your Melbourne friends
Your Melbourne friends may not be able to advise you about investing in the Melbourne property market, as it’s such a sprawling city. Your friends in the south east probably rarely travel to the north or outer west and vice versa. (Exceptions may apply, of course.) So while they know the city and its suburbs well as residents, unless they’re property experts, they probably don’t know which areas represent a solid investment. They can probably tell you a little bit about which suburbs are popular, and which are not-so popular. But unless they know the ins and outs of that particular suburb, they are not much further help.
Do they know what the ceiling price for a 3-bed unit in that area is? Do they know which suburbs have the best rental returns? Perhaps they can, but more than likely they can’t.
Forget about so-called hotspots
I see lots of property “gurus” talking about suburbs that are ‘on the up.’ And while that can be true, it’s important to consider each individual property. Just because someone on YouTube said Frankston North is a great investment, doesn’t mean every property in Frankston North is worth buying. Every suburb has great buys and duds. You are far better off assessing each property on its individual merits than focusing on so-called trends.
Agents will tell you what you want to hear
Real estate agents are experts in selling homes to interested buyers. That’s their focus—not in finding you the very best investment. Maybe they’ll tell you that the property is a great deal, you’ll make great returns or that the home is compliant to be rented out immediately. But that may not be the case. So when investing in Melbourne property you can’t expect expert guidance from the real estate agent selling the home.
Agents are savvy and they know exactly what to say to interstate investors to get them over the line. I’ve spoken with agents who’ve spruiked properties for my clients. After I refused to inspect a property, one agent laughed and told me, ‘I guess I’ll have to pitch it to an interstate investor then.’ Some agents see interstate investors as easy targets—don’t let that be you!
Some Melbourne areas have been flooded with investors and no longer represent value
This is where interstate investors often trip up—they come late to the party and a property surges in popularity, and what’s left over is not a great investment. If you are not familiar with the area, you can easily risk overpaying for a low-quality investment that you’ll struggle to sell later.
Some suburbs are overdeveloped, for example, Docklands, the CBD and Southbank . The glut of apartments means there’s oversupply and it can be difficult to see returns on these properties, let alone attract quality tenants.
Most interstate buyers will not be aware of these concerns and risk making major financial decisions that don’t bring the yields they’re expecting.
“I don’t care where it is, I’m not living in it”
Because you’re investing, and not living in the home yourself, some investors don’t worry about the quality of the carpet, the view of the garden or access to local amenities. So investors can overlook less than desirable qualities in the home. But this is often a mistake.
If you purchase quality, you’re likely to enjoy three major benefits:
- quality tenants
- less tenant turnover
- more growth over time
- more competition and demand when you sell
Imagine this: you purchase a run-down property in an undesirable pocket of an undesirable suburb. You struggle to attract tenants and it remains empty for months. You finally do secure a tenant, but they leave after 12 months to rent something nicer. You’re back to the drawing board. Every time a tenant leaves you’re up for repairs, a new rental campaign and marketing costs. If the property stays empty for months, you cover the mortgage with no rental income. After ten years, you decide to sell. But it’s a rundown rental that is still in a bad pocket of a bad suburb. Buyers aren’t exactly lining up to purchase.
Or how about this scenario? You purchase a high-value property in a decent suburb, paying attention to features that renters demand — style, quality, and access to local amenities. You easily attract valuable tenants and have the privilege of choosing your ideal applicant. They stay over the long term, meaning you have consistent rental income to cover your mortgage payments without unwanted vacancies. You’re willing to invest in the upkeep of the property. When you sell this after ten years, you have a desirable asset that buyers are looking for and it’s easy to sell at your desired reserve.
While these are two fictional scenarios, and I can’t make any guarantees about the future, my goal is definitely to secure you the second option, not the first. And it should be yours too.
Even if you are an investor, we always search for homes that have owner/occupier appeal—a rarity and scarcity factor as well as great growth potential. If you purchase a property that only appeals to investors, you will only have investors competing when you come to sell. Whereas if you purchase with broader appeal, you will have more competition come auction day. That may be many years into the future, but it gives you peace of mind that you’re holding a valuable asset.
Most investors are looking to purchase below $1,000,000
If that’s you, I recommend following the train lines to the fringe suburbs. Get as close to the city as you can with as much land as you can for your budget. Be mindful of the growth corridors of Melbourne, think housing estates that are releasing house and land packages and they all look the same. In 2025, the government introduced HCTZ zones to increase medium and high density housing in key areas. These include Broadmeadows, Camberwell, Chadstone, Epping, Frankston, Moorabbin, Niddrie, North Essendon, Preston and Ringwood, with many more suburbs on the list, and others targeted and in draft form.
These areas are prime for development, so there is expected to be a glut of properties available in the coming years. However this does present risks for these suburbs if they become oversaturated with poor quality housing. If you buy here, you may risk a larger development springing up next door in coming years. This not only adds to your tenants’ inconvenience as they live in a busy construction zone, the final development can impact the value of your property. It could impact the views and sunlight in your windows or perhaps it’s the newer version of your property, meaning you struggle to compete. The higher density means annoyances like busier roads, parking headaches and traffic congestion. So generally we tend to avoid purchasing in the HCTZ Zones as we’re not assured of the future growth potential at this early stage.
Avoid outer Melbourne suburbs and development estates
Another area we recommend you avoid is far outer suburbs with cookie-cutter property developments. Think of suburbs well beyond the train lines like Tarneit, Rockbank, Mickelham, Woolert or Clyde. There’s even brand-new suburbs such as Wallan East, Kalkallo Basin, Pakenham East, and Aviators Field.
These areas look lovely and modern, but they lack scarcity and are all very similar. The facilities in these areas are often yet to appear, so you might have lovely homes and nice wide streets, but the public transport, schools, government facilities and shopping centres are missing (at the moment).
In these areas, growth will likely be stagnant. If you need to sell in five or ten years, you may struggle to find a buyer. From your buyer’s perspective they can purchase:
- a slightly dated house that has been lived in by renters with wear and tear
- a brand new property, built to their exact specifications
Most buyers choose the latter, making your property harder to sell.
Your Melbourne investment property must meet standards
New legislation means your investment property must meet certain standards in order to be rented out to tenants. This includes
- water efficiency
- energy efficiency
- electrical safety including a modern switchboard with circuit breakers and safety switches
- energy efficient heating and air conditioning
- lighting
- security and locks, including latches on windows
- freedom from mould and damp (which can be expensive to remedy)
- structural soundness
- ventilation
If your purchase doesn’t meet the standards, you may be up for costly refitting expenses. Some agents will reassure you that the home is compliant. But do they really know the fine print of the legislation? The agent may say they ‘believe’ it’s compliant, but it’s not a guarantee. You don’t want to purchase a noncompliant home and be slugged with surprise costs later.
Don’t underestimate renovation and ongoing maintenance costs
You might think a quick bathroom or kitchen refresh won’t cost much, but these kinds of renovations invariably cost more than you realise. I’m sure you have met someone who has incurred structural or plumbing problems amid renovating that add thousands to the bill.
And be prepared to invest in the ongoing maintenance of your property. Tenants can be rough on rental properties so you need to be willing to fix damage promptly and maintain the property to a high standard.
Investing in Melbourne property: A summary for interstate investors
- Interstate investors are increasingly looking to Melbourne as a city that is a more affordable option with excellent growth potential
- Be wary of well-meaning advice from your Melbourne friends
- Don’t listen to the agent! They know exactly what to say to interstate investors
- Don’t compromise on quality just because you will not be living in the home yourself
- Buy the home as with as much land as possible and closest to the city as possible
- Avoid high density and HTCZ zones that may be at risk of oversupply
- Avoid property developments on the far outers suburbs – the growth potential is limited
- Don’t underestimate the required renovation or compliance costs
- Be prepared to invest in the ongoing maintenance of your investment property
If you would like a free consultation on investing in Melbourne property, we are happy to advise you. Get in touch to arrange your no obligation discussion today.
