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Competition heats up: Victoria sees investor and first home buyer showdown
Victoria is booming with both investors and first home buyers, as regional and metropolitan suburbs are tipped for strong price growth while offering affordable alternatives.
Investors and first home buyers have started seizing on opportunities in Victoria, with the state offering both strong capital growth and affordability.
A recent Hotspotting report showed that the Victorian property market is poised for strong growth and recovery, driven by affordability, demand, and key infrastructure investments.
Hotspotting director Terry Ryder said that there are clear signs of recovery and positive growth in Victoria’s regional and metropolitan areas, with Frankston, Greater Geelong and Yarra being in the top 10 National Best Buys.
“There’s no doubt that a significant recovery is underway in Melbourne and also in regional Victoria. There has been a strong uplift in sales activity in both jurisdictions since the start of the year,” Ryder told REB, SPI’s sister brand.
“Melbourne’s rise is largely driven by a major program of infrastructure development, high population growth from overseas migrants, and relative affordability.”
As the state continues its recovery, investors who had left the market after the pandemic have started to steadily return, with annual investor loans rising 12 per cent compared to 8 per cent for owner-occupiers, the first time since June 2023.
Money.com.au’s mortgage expert, Alex Dore, said Victoria had seen a surge in investor confidence driven by high expectations of capital gain.
According to Dore, the uptick in investor loans is linked to a 17 per cent growth in construction loans and a 13 per cent rise in loans for existing properties, despite other investment assets declining.
“The only markets I rate as stronger than Melbourne at the moment are Darwin and Brisbane,” Dore said
“By the end of 2025, Melbourne is likely to be a national leader on price growth.”
While investors have been returning to the Victorian market, first home buyers have chosen Melbourne as their preferred city.
A recent PropTrack and Commonwealth Bank First Home Buyer Report found that Melbourne has become a highly sought-after city for first home buyers, ranking fourth among the top five nationwide first home buyer hotspots.
The favourite suburbs include Maroondah, Brimbank, Casey’s north, and Knox.
Furthermore, of the 20 top first home buyer hotspots across the country, nearly half are in Melbourne’s outer suburbs.
The report also revealed that Victoria’s capital recorded almost twice as many first-time buyers compared to the rest of Australia.
The preference for Melbourne has also been seen in lending data from the Australian Bureau of Statistics, as Victoria recorded the largest share of new loans going to first home buyers.
The report said the overrepresentation of first home buyers in Melbourne is consistent with the city’s relative affordability compared to other capital cities.
“A median-priced home in Melbourne is now cheaper than in Adelaide, Brisbane, or Perth, following very strong growth in those cities over the past five years,” it said.
“While this in part reflects differences in the types of homes across these cities, even just comparing detached houses in Melbourne to those in Brisbane, the median price is lower.”
However, despite the increased competition with the influx of investors and first home buyers, Melbourne’s price growth is lower than that of most capital cities.
According to Cotality, Melbourne’s house prices rose 1.5 per cent in the July quarter to $952,339.
Out of the other capitals, Darwin saw the largest growth with a rise of 6.5 per cent to $641,997 in the July quarter.
Meanwhile, Sydney’s house prices rose 1.9 per cent in the July quarter to $1,525,956, Brisbane’s house prices saw an increase of 2.1 per cent to $1,019,865 in the same quarter, and house prices in Perth rose 2.6 per cent in the July quarter to $869,689.