16.12.2024Melbourne narrative highlights market resilience 

A recent report by JLL, a Committee for Melbourne member, reveals that Victoria has maintained its resilience amid challenging market conditions and remains an attractive investment destination.

The ‘Real’ Melbourne Real Estate Narrative confirms that Melbourne still stands tall as one of the world’s most liveable cities, boasting strong population and GDP growth, along with transparent real estate markets.

While acknowledging the complexities introduced by geopolitical and economic uncertainties, supply cycles in certain sectors, shifting occupier patterns, and a challenging investor landscape – including state tax changes – the report emphasises several key findings:

• Melbourne is still one of the most liveable cities in the world. Supported by a world-class health system, globally ranked hospitals and universities, Melbourne is renowned as Australia’s cultural and sporting capital.
• Melbourne’s real estate is affordable relative to other capital city markets. Melbourne has lower dwelling prices than Sydney, Brisbane, Canberra, Perth and Adelaide. Office rents are more competitive than Sydney and Brisbane, while Industrial rents are the most affordable in Australia.
• Melbourne has one of the strongest combinations of population and GDP growth projections among cities in top 15 global economies. Greater Melbourne’s population is expected to increase by over half a million people over the next five years, positioning it to become Australia’s largest city later this decade.
• Victoria, alongside NSW and ACT, is decarbonising rapidly. Victoria has made rapid emissions reductions, increasing to 40 per cent renewable electricity generation by combining both emission reduction in non-renewable fuels and increases in renewable fuel production.

Victoria’s post-COVID-19 labour market recovery has also outpaced most other states in Australia, with Australian Bureau of Statistics (ABS) data showing Victoria’s labour force growth has been one of the strongest nationally over the past three-and-a-half years. The workforce is one of the most educated in Australia and competitive across other Asia Pacific jurisdictions.

Transaction volumes have increased compared to 2023, with strong foreign investment in the first half of 2024. Recent purchasers of Melbourne’s CBD office assets indicate an anticipated rebound in CBD office returns from 2025 as markets stabilise and confidence returns.

Melbourne’s hotel market has also recovered ahead of expectations, surpassing pre-COVID levels. More than 5,000 new hotel rooms have been added since 2020, representing a 24 per cent increase in hotel stock during the pandemic period.

The ongoing economic recovery has been supported by improved visitation, recovering corporate and ‘MICE’ (meetings, incentives, conferences, and exhibitions) demand, and a significant major events calendar.

The report notes, “The Victorian state government tax changes have added increasing complexity to an already challenging investor landscape, but early movers believe the market is bottoming out and are positioning to catch the cyclical upswing.”

JLL Managing Director & Joint Head of Tenant Representation – Victoria, Kate Pilgrim, said: “Market conditions have been tough, but opportunities and value are emerging. Melbourne’s underlying fundamentals are strong with liveability, affordability and population growth supporting demand.”

JLL Head of Strategic Research – Australia, Annabel McFarlane, said: “The outlook for Melbourne is increasingly positive, and as the capital market value through approaches, investors are looking to market growth fundamentals.”

The full report can be accessed via The REAL Melbourne.