Jarrod McCabe on Melbourne's Three Very Different Markets in 2026

Melbourne is being described as undervalued so frequently that the word has almost lost its meaning. After years of underperformance relative to every other major capital, the narrative has flipped. The city is suddenly the smart contrarian play, the patient investor's reward, the market that Sydney, Brisbane and Perth money is now moving into.

But that framing obscures something more interesting. Melbourne in 2026 isn't one market that's been sleeping and is now waking up. It's three or maybe more distinct markets operating under very different conditions, driven by very different motivations. And the confidence level amongst these groups are nowhere near as uniform as the headlines suggest.

Jared McCabe is a director at Wakeland Property Advisory, a firm that has been operating exclusively in Melbourne's inner suburban market since 1995. And he's here to join us today and discuss this. He originally came up through property valuations, which gives him a discipline around asset assessment that sits underneath his advisory work.

And he's seen this market through multiple cycles and Wakeland's proprietary inquiry data puts him in a position to see where serious capital is actually moving before it shows up in price indices.

In this conversation, we're going to get into why first home buyers are buying apartments with a confidence that local investors simply don't share, what interstate investors are getting right about Melbourne's value proposition and what they may be getting badly wrong about Victoria's tax environment, and what it will actually take for local investor sentiment to recover in a market that still carries real reputational damage from the land tax and rental reform shocks of the last few years.

Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about.

I'm Veronica Morgan, real estate agent, buyer's agent and buyer's agent mentor, co-host of Foxtel's Location, Location, Location Australia, author of Auction Ready and co-host of Your First Home Buyer Guide.

Hi, I'm Chris Bates, ex-financial planner and mortgage broker, currently ranked number three in the annual MPA Top 100 Mortgage Broker Awards. Before we get started, everything we talk about today is not personal advice, and we recommend you engage the services of a licensed and experienced professional.

Our guest today is Jared McCabe. We always appreciate the way he thinks about property. So welcome back today, Jared. It's very good to see you again, and I think we're going to have a very meaty conversation.

Thank you, Veronica. Thanks, Chris. It's always good to join you both.

Yeah, I mean, Melbourne is on the tip of everyone's tongue. I mean, it's basically a daily conversation with our clients. It's sort of the one that pops up. I mean, I don't know how deep people have thought about it besides just it's a countess. Everywhere else has gone up.

Melbourne's got to go up. But You know, it does feel like, you know, that because of the 5% deposit schemes, because a lot of investors are spending a lot less for lots of different reasons. It's not really the stereotypical style of investing in Melbourne.

And I mean, you sort of view that maybe potentially interstate investors and local Melbourne investors are sort of unaligned. I mean, where does that sort of thought come from?

Particularly from an interstate investment perspective, they've had a very different experience with property over the past, particularly the past five to six years over the COVID basically till now.

And they probably haven't had the negative experiences around influences like the tax and things that you mentioned, but also from the growth that they've experienced themselves. And that doesn't... necessarily have to have been investor growth. It can just be their family home that's performed quite well for them, built up some equity.

And now they're looking at alternatives and what else they could do with their money. Whereas in Victoria, local investors, particularly those that have purchased in the past 10 years, really haven't experienced a hell of a lot of growth. And then on top of that,

they start to get these extra expenses thrown on top, particularly from an apartment buyer's perspective. So those that have purchased apartments for investment purposes, a lot of them may not have actually experienced having to pay land tax before because of where the threshold's at.

Now, all of a sudden, they're having to pay land tax. And then there's extra minimum standards from a rental perspective that gets thrown on top. And so there's just these extra layers.

And a lot of the time on their own, they may not have been big issues, but it feels like death by a thousand cuts in a lot of circumstances.

Well, I'll add that to the fact that a lot of those Melbourne apartment investors who bought in the last 10 years probably still haven't recouped what they paid for the property.

Particularly if it was off the plan, it's probably gone backwards. The established ones have still, in a lot of circumstances, at least held value, but certainly not a lot of equity has been built unless you've done some significant changes to the property.

I guess if you had a house in Perth, Brisbane, Adelaide, like rising tide has basically lifted all ships, right?

Like everything's gone up, you know, and massively gone up and you're just basically throwing, you know, throwing a dart at the board and didn't really matter where you hit, you know, you saw a lot of growth.

And so it has given a lot of people a lot of confidence in, you know, they can, they were smart. They just bought a property, you know, what they worked in that city, but Where are they getting it wrong when they're applying it to the Melbourne market?

Like, do they just not understand the issues, I guess, in the apartment market? Are they going, you know, to where there's issues with supply and house and land packages and on the fringes where a lot of the locals potentially don't want to live? You know, they're really sort of starter places.

What are some of the common mistakes you can see that these You know, these not only interstate investors, but interstate buyers, agents that are probably flooding the Melbourne market are starting to, which worries you because you've got this sort of longstanding history in the Melbourne market.

You just sort of worry that in a few years time, they're going to go, oh, I bought Melbourne, but I just bought the wrong thing.

Yeah and look that all ships rise on a rising tide is very much something that you need to be very cautious of and those that have done well in some of those areas that perhaps Adelaide's another one as well where there's been significant growth and that's it's probably needed to be Adelaide for a long period of time didn't perform as well as it should have good value propositions within reasonable proximity to the city but there's other areas that have done extremely well as well and

to try and apply that and expect that that same sort of thing, it'll happen to a degree in Melbourne eventually, but you can still do so much better if you select the right property in the right areas.

And the fundamentals that I'm sure particularly you, Veronica, talk about with your clients still applies very much in Melbourne. And it's the buying the property that's got that strong underlying land value to it. It's got a property that's scarce, that's not going to be replicated.

But I think the other one that sometimes people let go is that multifaceted demand and not relying on just one buyer profile.

People think that all houses are a good option to buy or just the lowest, that boutique type apartment blocks are a good option or villa units or regional cities in close proximity.

you've still got to pick the right one that's then going to have not just buyer profile from other investors, but first home buyers will be interested in if you're picking the right one. Downsizers will be picking it if you're buying the right one.

Upsizers coming out of apartments or villas looking for a slightly larger home. If you've got the right option in those regards, that's where you'll clean up well when the market starts to shift.

I think that's an important thing, that multifaceted buyer appeal. Here we go. It's very, very important. And the one fundamental driver of capital growth, in my view, is the fact that somebody and lots of people, hopefully, are going to want to buy it off you at some future point.

And that's as simple as it is. So you want to have multiple buyers that want to buy it off you and will fight for you. And sometimes you can manufacture that if you're buying a property that's sort of under-presented or under-optimized.

But I think the whole of Melbourne gets tarred with a brush, right? And it has been tarred with a negative brush now for years and is underperforming, as we've used that word in the introduction as well. But it's not necessarily true that every property is underperformed in Melbourne. No, it's definitely not.

No, and I think that – can we sort of lift the covers a little bit and show some nuance here? Because particularly at the moment, too, the latest quartality data shows that certainly the lowest quartile is performing very strongly.

The middle half is, I don't know, pretty modest, and the top quartile is in negative territory. But even then, I would imagine that the upper end of the market, there'd be some high-performing properties in amongst all that. So can you sort of lift a little bit and –

Carve it up for us and explain what's going on.

So the first home buyer market's probably the strongest at the moment, being driven, as you said before, by that 5% deposit scheme with the federal government. That's really supporting that. And that's 950 in Melbourne. So sub 950 is quite active.

And from an apartment perspective, that's actually been quite a positive thing because a lot of the older style apartments are coming back into vogue. For a long time there, previous generations were focused more probably on wanting houses and were perhaps prepared to go a little bit further out.

Whereas Gen Z seems to, from a first home buyer's perspective, valuing their lifestyle and wanting to still be in inner city locations. So having those older style apartments is quite positive.

They probably haven't also, they still do like to have properties that are ready to move in, but they don't necessarily have the requirement that previous millennials and things may have had around, it needs to be whiz, bang, flash, have all the bells and whistles, all that sort of thing.

There's more of an openness and a preparedness to do a bit of work themselves, which is a good thing, but there's still not that real demand of renovators delight. And that's partially to do with obviously costs and building costs and inflation and those sorts of things at the moment.

So there's not the appetite to do a full-blooded renovation across the board, but cosmetic upgrades, those sorts of things are certainly, there's an openness to consider that.

and then obviously one of the most popular in terms of listenings from our podcast perspective has been on villa units and there's a real appetite around those sorts of things and you can still get those in those middle ring type suburbs for sub 950 and so there's a popular look at those and they're a good option from those that perhaps can't afford a house but want to be in a reasonable area but perhaps don't like the idea of an apartment and want a bit more space to have a

a pet dog that sort of thing to have the courtyard that's secure and and still be able to to access public transport but also the the cosmopolitan lifestyle of you know sort of middle middle ring inner city melbourne so they they are a good option too and certainly are becoming quite popular so they're they're probably the main sectors in that sort of sub 950 market the the first of all we're there bouncing and something with you so

From my understanding is a lot of the investment BAs, the borderless BAs, yes, some are looking at the villa units. Some are looking at the older style apartments. Some are actually even worse. I mean, which I think they're actually decent assets, right?

You know, particularly if you get boutique blocks or you get, you know, great villa units surrounded by houses and good streets in more affluent suburbs. Like that's, you can absolutely argue for those as being good. You know, they're kind of offering similar lifestyles at houses, you know, and privacy and,

And there's a real scarcity because you can't replicate these things, et cetera. But I think a lot of them are actually not doing that. A lot of them are going to the Western suburbs of Melbourne. They're going and trying to buy in the newer, older estates.

And they're kind of flooding that market in the West where there is a lot of supply. There's a lot of land. But just because building prices have gone up a lot and land prices have gone up that you know, they're sort of trying to buy in those markets.

Do you have concerns around that type? Do you think that's good? But from my understanding, that's what they're doing.

Most of those types of properties, Chris, focus then on, well, by nature, you're out on the outskirts and you're aligned on the infrastructure that It's not there at the moment.

That's part of the reason why the state government at the moment is talking about the activity centres and trying to encourage development in those because by the time you start to really... And Melbourne's urban sprawl, as I've spoken to you both about in the past, is significant and just continues to happen.

And that's where the costs around infrastructure continue to build as well. So... By going out to those outer suburbs, you're heavily reliant on what's already there. But there's also a hell of a lot of option for more construction to occur, for more land releases to occur.

So the supply in those sorts of areas and the construction costs continue to increase. That's part of the reason of why values have lifted in some of those areas because of the construction costs. And it's justified. So that's what they look at.

But yeah, I do have concerns in that because the supply levels and the alternate for supply levels out there is still very strong.

Also, I mean, the government is encouraging or upzoning in inner areas and in field sites. And we've discussed on this podcast a few times around the middle wing and the three-storey level and encouragement of building up to three storeys.

I was thinking about that when you were talking about villa units and wondering whether you're seeing any redevelopment of those sort of smaller dwellings with land in in those inner suburbs. Is there a change happening? Are you seeing a change in suburbs?

In terms of actually renovating those units and making them two storeys?

Well, I'm not sure about that so much. More developers buying up the strata. Well, I know that like small, like if you have three townhouses or three building units in Melbourne, you don't even need a strata, do you?

No, depending upon... With those, we're definitely seeing that with apartments, with the older style apartments, because generally they're, and it's particularly in the bluest of blue chip locations.

So around Stonington, Burradara, those sorts of locations where land value is very strong, there's been quite a significant amount of developers buying up land in those sorts of areas or buying apartments. And sometimes they approach the whole block and try and do it in one hit.

Other times they'll just buy apartment after apartment after apartment as they come in and then basically take control of the owner's corporation and then decide whether or not there's going to be any works done or not. And it basically then makes it hard for tenants to really enjoy living there.

So they just push their way through. So there's differing ways on that. But obviously in Victoria, it's slightly different to New South Wales in that you've got to have complete control. You can't just have the 80%. So we've definitely seen that.

It's probably a bit harder in the villa units because there's a lot more owner-occupiers in that space and owner-occupiers are more hesitant to go down that path because it's not so much about the funds, the finances. It's more about, well, how can I replicate my lifestyle?

So if I'm going to leave this unit, what am I going to go into? And am I just moving sideways and I know where I'm at and I know my neighbors, why would I want to do that.

So I need to be able to step up the property ladder rather than just move sideways. So it needs to be considerably more. And the thing with a lot of the villa units too, is that they are in more middle ring type locations, whereas the older style apartments are inner city.

So the middle ring locations have less controls over from a heritage and a planning perspective, which means that you don't necessarily need to go to the effort of trying to buy three or four villa units. You can just buy a house and do the same thing on a

The middle ring suburbs, we're not seeing it as much yet because the pressures aren't there.

The inner suburbs like South Yarra, Toorak, Hawthorne, those sorts of areas where there's greater planning controls as well, if you can get access to those sorts of apartment buildings, but there's not as many villas in those locations either. Yeah.

Jarrod, is there anything that, if you look at your investment philosophy that you've pivoted over the last five, 10 years, I mean, obviously even buying the older apartments in Melbourne has just really been a bit of a challenged investment, right?

Got scarcity, but if you keep building a lot of new high density, it just overall keeps the stock price levels down, right? Because people have always got choice.

you know, I feel like some of the smaller houses have, you know, massively underperformed as well, the smaller blocks, like that maybe you would have, I don't know if you would have bought them a few years ago, but now you really avoid, but is there any, something like some of the Wakelands like tweaks you've, you've made where consumer preferences, you know, the work from home movement, like people, you know, buy behavior, they're willing to go a bit further or they want something with it.

You know, they're willing to make more compromise. Like how are the, your investment philosophy shifted or is it shifted? Not at all.

No, it has a bit. More probably so, Chris, around that apartment market. We've certainly done and clients have done previously quite well in that space, but less so obviously as I've spoken about in the last five to 10 years.

And so we've pivoted away from advising that unless there's a lifestyle element to it as well. Because the performance just hasn't been as strong and there's been quite a bit of supply, as we've spoken about in that space, which it does flow on to compete.

Whereas, say, 18 plus years ago, the feeling was that there was – and it was at the time a very different market. Those that were looking at modern high-rise type apartments – were not the same as those that were looking at older style, whereas that's not necessarily the case these days.

People probably group them a bit more together. Sometimes from a town-based perspective, people like the suburban feel of being in a boutique block, but others prefer the security of driving straight into a basement, catching a lift up to their apartment and going in that way.

So we do feel as though there's a bit more crossover and therefore the overall apartment market does have a bit of a concern in that space.

I still feel as though the cottages and terrace houses across, I agree they haven't performed as well as what I would have liked and what we probably would have expected. But I still feel like they've got a very strong place.

And you only have to look at the way that they're being inspected at the present time where the market is very flat. And there's still good numbers attending the right ones of those properties. And the competition is still there on those types of properties. And that's in a very, very flat market.

And that's what I guess I come back to before to that multifaceted demand element. They do have that in this market because it's investors from interstate are looking at that, upsizers are looking at them and downsizers are still looking at them. So they've got that cross-bore depth.

So in your experience over the last, say, five to 10 years, you're saying it's been a very flat market, but what sort of property has outperformed?

There's been an element of development type, not development, but those that have got sites where you can perhaps do a duplex type site in some of the middle ring suburbs have done quite well because there's been opportunities to add value that way.

That's probably been a good location and a good style of property. They're probably that middle ring and the more affordable, the higher end probably hasn't done quite as well.

Properties that are in reasonably good condition and that haven't needed to have significant work done to them or cosmetic type work has certainly been beneficial because anything that's needed considerable amounts of work has meant that you suffer the consequences of the building issues that we've had, whether that's getting a builder or whether it's just getting materials that have become quite expensive.

That... Certainly during the COVID times, anything that needed work was shunned. Anything that was ready to go was quite popular. So that sort of thing's done quite well as well.

So it's been a bit of a mix, but it probably hasn't been a consistent type of property profile that's done really well over this period. It's been a bit more select.

It's like cherry picking. I mean, that's where asset selection comes into it, isn't it?

Correct. Yeah. And it's probably the biggest thing that we speak to our clients about is so many people focus on price. No one ever wants to pay more than they need to and everyone wants to pick up a bargain. And that's not a criticism of anyone. It's human nature.

But I think the most important thing is to buy the right property.

Do you believe there's a lot of pent up demand in the market, right? Like you can see how much other markets have moved, you know, Brisbane, Adelaide, Perth, you know, people would have felt like they wanted to upgrade, but they were just a bit scared to take on more debt.

They felt if they could just delay it a few more years, build up a bit more cash and then make the move, there was no urgency there. And then all of a sudden,

you know, prices start moving, they get a bit of growth and then they're like, hang on a sec, if I don't upgrade now, I'm going to regret it. And then there's like this sort of FOMO cycle. You know, do you feel like that's what Melbourne?

No, no, I'm not feeling that, Chris. I'm not feeling that it's pent up demand and that there's people ready to go and want it.

We would get that feeling from the inquiry perspective and what it would be and what I've seen in the past is the inquiries are coming in, but no one wants to take that step to commit and to, yes, we'll sign up. Yes, we're ready.

Or you would at least get them making the phone calls, having the discussions, having the meetings and then saying, I'm just not sure. I'm just not sure. And we're not getting that. We're not getting that. really strong number. We're getting good numbers of inquiries.

It's not as though it's dead and quiet, but it's not really good inquiries that then aren't converting. It's genuine people who have got an interest for whatever purpose, whether it's downsizing, upsizing, interstate investors, as we're speaking about.

But there's not an influx of those coming in and then saying, oh, I'm just not sure, which is usually the sign that there is some pent-up demand there.

But do you believe it's there? It's just not getting activated. Like, do you feel like that, you know, people's lives are moving on, right? They're having kids, the kids are going to primary and they're going to high and, you know, and they haven't been transacting, right?

There's this desire to stay where they are because they're worried that, it's not going to be a good financial decision because rates are high, borrowing capacity is there. If they delay it a few years, it's not going to cost them much money.

But as soon as if there was, say, for example, actual rate confidence and borrowing capacity came up and prices start to move, they'd be like, well, yeah, actually, we do need to get, we do want to move. Or do you feel like that

I feel like those things that you've mentioned, that's not just a simple, if that happens, it'll change everyone's mind. There's a lot of things that have to happen for that mindset to change. And I'm not saying that those things are all going to change in one hit.

We were seeing probably around July, August last year, It felt as though things had started to shift and that I wasn't expecting it to be an influx of, oh, wow, the market's going to run. But it certainly there was a mindset shift and things were just building. There was a bit more confidence.

We thought, right, we'll get through the spring market and things will start to build. And then maybe into 2026, the market will really start to kick on. And the spring market through probably the back end of August, September, October was good. It wasn't strong, but there was confidence, there was momentum.

But then once the thing started to shift come November, it was really after the Melbourne Cup long weekend, we really started to notice that there was just an element of negativity around. That's when the RBA started to talk about, well, maybe not down now, it could be up and

As soon as that conversation started to happen, and then obviously the Middle East in early this year, it just changed. So we lost that potential for momentum. So I guess you could say what you were saying before, that maybe if there was a bit more positivity, that would happen.

But with what I'm reading and what I'm hearing and seeing, that's not going to be a quick turnaround. That'll be another six to 12 months before potentially there might be another element of confidence. But I don't see it being an overnight change.

We've had exactly the same circumstances in Sydney. Exactly. You know, we certainly saw green shoots towards the end of last year. I do a monthly market video. I was sort of saying, look, some of the signs are pointing towards more confidence and actually a stronger start to 2026.

And, you know, at some point we're going to enter another growth phase and maybe this is it. I was starting to see the green shoots and then it was like, I don't know, about six weeks later, I'm like, no, we're not. They're gone.

Had a little bit of blasting sun and they've shriveled up. So we don't know how long until the next growth phase. Who knows? We've just got to act in the conditions that we find ourselves in.

But what we often find in our market, I'm sure it's very similar in Melbourne, is people just sit on their hands and they're waiting for everyone to get off the fence at the same time. And then basically when things start moving, it's already past tense.

You know, when everyone decides it's time to move, it's too late. You're actually on the upward trajectory.

But you've got the added issue, which we don't have in Sydney, and that is state government is in a lot of debt, you know, and you've got a lot of extra taxes and a lot of extra costs. They ain't got public transport for free, but let's not.

Let's talk about going further in debt. And that contributes to negative sentiment in Melbourne in particular in a way that we certainly don't have in Sydney. And that's much more systemic in my view.

And I think that that's also contributed to a lot of investors selling out of Melbourne, apart from the fact that they have had those costumes that says a death by a thousand carts. But there is that sentiment. lack of confidence in the state. And how do you see that?

You've got people coming from interstate buying investment. You've got first home buyers who are finally seeing an opportunity and good on them for taking it.

And then you've got the locals who, A, are getting out of investments, but also not really wanting to transact much at all, even in terms of their own homes. How do you see that all playing out?

So I think with the – and it's an interesting point. I've had this discussion a few times. It's around those that are leaving the market. They've had, as I said before, they've had that bad experience.

So they've been in the market, they've seen no growth or seen things plateau or minor growth, and then they've had these extra costs. Those that are coming into the market from a first-time perspective and perhaps haven't had an investment property in Melbourne before and this is their first venture –

look at things very differently because they can factor in a lot of these costs that perhaps the others weren't or didn't factor in because they weren't expecting them when they bought the investment property.

These new buyers coming in can look at it and say, okay, well, I know my land tax is going to be this, so I can factor that in. I know I've got to have these minimum rental standards, so I'll either...

hold back some costs so I can implement them or I'll buy something that I know is compliant and is going to be ready to go.

So that's the mindset that I'm seeing the new buyers come in with and they're looking at it and saying, well, I can work with this and I can understand this and this is a good value proposition and it may not change for me and build me equity within the next 12 to 24 months, but I know that this market is a proven performer and I know it will come back at some point.

I'm on a personal mission to help more people make better property decisions. You know, most people don't realise that they can cost themselves hundreds of thousands of dollars over the medium to long term when they make property decisions without all of the information that they need.

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So the government could probably say, well, that's a success. You know, we've actually got a different type of investor who's prepared to invest in the properties and raise standards for renters. But I suspect what's hiding in that is a structural change in tolerances types of property that are available for rent.

There might be whole segments that can no longer get access to properties, potentially. I suspect there's a lot of bigger properties have been sold and new investors coming in are spending less money, so they're buying smaller properties in different areas.

I suspect also that some tenants can't afford to pay the rent for a beautifully maintained and up-to-date property. I know this is sort of skirting on dangerous territory here, but it is a fact that in every market there are A lower standard is a problem. I'm not advocating for slumlords here at all.

But the rental standards set a very high bar.

I'm on a couple of property management forums on Facebook, for example, and some of the things they're talking about, like windows above toilets and things like that, like really minor things in the whole scheme of things that hold back a property from being up to standard. So is a tenant's...

always benefiting from these sorts of laws or are they sometimes missing out?

Well, the thing with a lot of these rental changes is that they are absolutely well-meaning and the right thing to do. The problem is then they're not targeting the right people. So a lot of the people that should be fixing properties and improving them are the slumlords that don't go through property management.

and probably don't have tenants living in them that are in a position to be able to go and report them and say, this is not right, this is not acceptable, or wouldn't know where to go to do that, which is not fair.

But then those that are doing the right thing generally and are prepared to improve their properties and things, they're getting hung up on some of the most minor things that need to be fixed. And that's what's making it.

And then they just get to a point where they say, no, look, this is just too hard. And it means that I'm just going to sell this property. I can't deal with this anymore. And when they sell the property, they fix it up to an attractive standard from a sale perspective.

And most of the time it's being bought, particularly in that older style apartment market, by first home buyers. And so you're losing those potential rental properties.

Again, they're going to call that a win. It gets more people in the market.

And that's the other thing. So what they'll say, what the state government... And I haven't heard them say this, but, I mean, arguably they should be, is that... The Melbourne market, it's one of the most affordable going around. So talking about unaffordability, it's not the case here.

I think property is affordable, relatively speaking. Okay, you can't necessarily go and buy a family home in certain suburbs because it is hot, but there's affordable accommodation there.

And so the argument can be made that the changes that they've done in terms of getting more first home buyers into the market have been successful if that was your objective. From an investor's perspective, no. No.

And not necessarily for tenants in either.

No. I mean, these newer style apartments, I mean, if investors have sort of switched on to the underperformance, it doesn't take a rocket scientist to go, when did that property, oh, it was $400,000 in 2010.

I can buy it now for $420,000. You know, like they obviously would, a lot of investors would say, well, I'm not going to buy that unless they sort of think that now it's going to go up in value because it hasn't gone up for so long.

Are you worried that, you know, obviously when they are selling that a lot of the first time buyers are buying these as well? Like there's a... now building issues that, you know, and so the next generation is getting stitched up a little bit.

Now they're the ones taking advantage of the 5% deposit scheme. Raconcy rates have come down a lot. Rents are going up in Melbourne. They're like, well, I might as well just buy something. And then they're renting an apartment in sort of docklands and then they're buying one. Like there's,

You know, because they're just, they're not taking an investor lend. They're just taking a, I need to buy something to live in.

And, you know, they don't have this sort of knowledge that, oh, actually they're still, now they're owning, they're actually investing and taking a mortgage on and they're missing an opportunity of buying something better.

Like, so you sort of, the investors are offloading these, but they're also then just offloading these DART assets to a lot of first home buyers and the people who can least afford to buy them.

It's hard to determine what's a good asset and a bad asset at the moment for first home buyers in Melbourne, because you could look and some of the good assets have not performed necessarily as well as you would expect over an extended period of time because the market's been so ordinary.

So if you try to look at performance and say, well, none of these properties have done very well in recent times. So which one should I buy? And so it's looking and understanding what fundamentally has been good and why this one might be better than that one over a long period.

It comes back, Chris, to exactly what we were saying before, is that asset selection is absolutely key. And it's probably almost more important for a first home buyer to be doing the right due diligence and homework buying the first property because

they're not buying that first property to live in it for the rest of their lives. They're buying it to take steps up the property ladder.

And so whether it's through being able to build equity by changing the property and improving it themselves, or whether it's just through capital growth, or whether it's through paying down the loan, they're all avenues to build equity to take steps up the ladder.

But the one that we know is going to help them the most is the capital growth side of things. So if you select the right one, It'll help you that way.

The others can be a bit more controllable in your sense in that you can renovate a kitchen and a bathroom or you can pay down the loan if the capacity is there. They're the ones that are controllable.

So if you can work those to your favor and then buy something that's got good growth potential, then that's where you're going to give yourself the best chance to take steps up that ladder.

So Veronica and I've been doing so much trying to understand, well, I definitely have, and I assume you have too, Veronica, around understanding the impact of the state government with zoning. We've had low to medium rise, Todd. Developments are getting approved even outside that. It's crazy.

If I'm tracking it, I'm just like, whoa. And there's uproar in communities. You know, like single level houses, now all of a sudden there's eight stories. And, you know, even in places like Bronte, for example, or, you know, just random locations.

And I think it'd be really hard if I was a buyer's agent to be going like, well, what do we know? What do we know is going to be true? What are the known knowns over the next 10, 20 years?

And what can we bank on that, you know, is valuing the property today will always be there tomorrow, whether it's privacy or a view or... you know, quietness or nature, et cetera. So it's all sort of being thrown up in the air because you just don't know what's going to happen.

Is there some type of similar scenario in Melbourne? Or do you feel like that there's a much cleaner sort of understanding of, you know, how Melbourne's going to grow? We're going to build a lot more dwellings, but they're going to build it this way.

And then you as a buyer's agent, when you're looking for clients briefs is you can be much, you know, better understanding of where to buy and where not to buy.

The activity centres that have been the big talking point over the past sort of three to six months, and they've given a fairly clear now guide as to what they are. Now, whether that stays the same or not, who knows? We've obviously got a state election later this year.

So if there was a change in government, all of this could go out the window and things could change again. And that's, I guess, the thing with planning legislation is that it can change so quickly.

So you can make decisions based on things now, but you could have made what would have been a very sound decision based on historical performance and the way approvals have been granted through the past 10 to 20 years. You could have made that decision five years ago.

And now with these activity centres, with what the... regulatory height clearances and things that are going to come into play and how close you thought you might have been.

Oh, I'm near a major juncture here, but I'm not too close, so I'm going to get the benefits of being able to use those facilities, but I don't have to worry about it. Well, now you do have to worry about it. So...

You can, with those new plans, we can get a very good understanding as to where they sit at the moment. And there is some significant heights there. There's up to 16 stories in some of the suburban locations. Eight, 10, minimum of, in a lot of areas of three now, rather than just two.

But some of it, so it's, there's a lot there. But as soon as you get within the realm of one of those areas, we're checking those to see them. Okay, what is it now? The problem is it could change again so quickly. It could change so quickly.

Oh, we find that too, Jarrod. I mean, obviously, you've had whole suburbs that are impacted, that the whole suburb will change over maybe the next couple of decades, assuming nothing, no zoning, no further zoning changes. But also, you know, we've had major infrastructure too, with tunnels and...

you know, smokes, what do you call it, exhaust stacks and on ramps, off ramps, tunnelling underneath houses. And there's been whole areas that we've quarantined to say, well, until we've got more certainty around the long-term impacts, we just won't buy in that pocket.

You know, so I presume you've done a similar thing throughout Melbourne.

I mean, it's a while ago now, but as an example, when the previous government was talking about the East West Tunnel that was going to go from the end of the Eastern Freeway right through around to where Melbourne Zoo is and the Flemington Road, and they started doing compulsory acquisitions of houses around there for on and off ramps and stacks and those sorts of things.

And that was around Clifton Hill, Collingwood type locations. And they did, the government acquired a lot of houses in and around there, and then obviously that project didn't go ahead because it got scrapped. But we were avoiding those southern sections of Clifton Hill. And there's some great property in there.

There's some secondary stuff, but there's some great property in there. And around Collingwood as well. So, yeah, we've certainly been mindful of that in the past.

You have to be, and it worries me when you've got lots of people coming from outside the city. They have no understanding of that, no understanding of the changes that might be coming, and I guess it's one of the big dangers for interstate buyers.

If they're using a buyer's agent who's also interstate rather than using a local specialist, or if they're coming themselves and not actually bringing any of that local knowledge themselves, that is a huge danger. When you've got such a changing landscape in a city, that's for sure.

You can't rely on what's currently there to remain there.

That's right. I mean, the interstate buyers agent, I mean, just the lack of intimate knowledge of a suburb and what drives it, but also whether or not it's being artificially grown by multiple purchases by certain people, by certain companies and things in an area. It sort of becomes self-fulfilling then. Yes.

Jared, I mean, one of the reasons the government's in a lot of debt is because they've been building a lot, right? There's been a lot of...

The infrastructure is enormous and the amount of money that's been spent.

The rail, the, you know, maybe an airport train one day, but, you know, there's a lot going on. You know, level crossing removal, which makes just traffic because that's a nightmare. I never miss those sounds go off when I was living in Melbourne. I'm like, oh, here we go.

But, you know, this is making the city much better to live in, right?

So do you think that, you know, just when you're in the construction and it's all happening and, you know, everyone's a bit down, the state governments, but ultimately on the other side of this, you know, Melbourne's much more livable with this infrastructure coming in.

You know, it's easy to get across the Westgate now if you wanted to go north. You know what I mean? So like...

Or do you think that they haven't spent it very wisely and the improvement just isn't really there and it's just so far behind that there's still the same bottlenecks and there's still the same issues going around the city?

Far be it for me to get too involved in how to spend a budget on infrastructure and things. But look, I think a lot of it, I agree, Chris, a lot of it is going to be very beneficial eventually and it will help a lot. The query is whether or not

you should do it all at one point in time. And when you're already in a significant amount of debt, because a lot of the debt, yes, is to do with that.

But a lot of it's also to do with having to support people and the states during the pandemic, because we were locked down for so long.

And so there was a lot of money spent in that area to then go on to continue to go down the path of spending more and more money on infrastructure and

Perhaps it, again, as I said, far beat for me, but they perhaps just rather than doing it so much at one time and then having to recoup costs might have been, it just may need, but the argument then can be, well, if we don't start doing it now, it's going to be another 25 years before things are done.

So it needs to be done at some stage.

Geelong, we'd love to get your thoughts on it. Everyone's sort of looking to spend less than 950 grand in Melbourne from an investment point of view.

They look and they don't want to buy a villa unit, they don't want to go to the western suburbs of Melbourne, and then all of a sudden they end up in Geelong and it's the hot spot for all these investment sort of borderless buyers agents. What's your thoughts on it?

Yeah, definitely there's a case study there, right from sister city to the capital city, great lifestyle down there. You can't knock being on that sort of surf coast and, you know, being down there. Have you got concerns about it?

Do you feel like it's, it's warranted the growth and the optimism about, you know, the city?

There's scope there. And I don't think it's necessarily a bad, but I, I also, it's done quite well, comparative, and it probably hasn't come backwards as some of the other regional areas have post COVID.

A lot of those which had the artificial growth patterns, Geelong probably hasn't come back quite as much as what some of the, the more minor regional areas have. I guess the, well, I say concerns, but there's a number of properties there that probably aren't far off some of the Melbourne prices.

So in terms of they've done quite well. So are you better off spending similar or maybe only slightly less than what you could get of a similar property in the right pocket of a Melbourne?

So that would be my counter thought to it as to, well, if I can spend a little bit more and be in a good spot within the metropolitan area, am I better off doing that rather than going to the regional?

Yeah. So you're not moving there for affordability because the affordability is not actually that much better. I'm moving there because of lifestyle. And then that's a big shift because you've got to worry about work and do I have to get into Melbourne for work?

And then so, you know, there's probably less of that now though, Chris, you don't have to get into Melbourne as much. I mean- My brother-in-law comes up that freeway once a week and he says it's still just as bad as it ever has been. So it's still quite busy.

So you still need to, but there's probably a degree of more flexibility.

Then the query becomes, well, do you want to be in Geelong or do you want to go further down the coast and actually be on that surf coast, be in a Torquay or an Ocean Grove or further down at Anglesey or Lorne?

But I guess Geelong is rather unique. We talk about, you know, in Sydney, for instance, you've got Wollongong, you've got Newcastle, you've got Geelong or Ballarat. You know, up in Brisbane, you've got the Gold Coast. But Geelong, from my understanding, is probably the closest to the capital city of all of them.

And actually you can do a train ride within an hour. So it's like an outer suburb of Sydney, like the Sutherland Shire is about the same distance as Geelong, you know. And so it sort of behaves in some ways like an outer suburb.

It's getting more like it. Yeah, yeah, absolutely. It's becoming more like it.

And you've got probably a bit more, you get a bit more, if that's what you would like, a bit more of a regional lifestyle by being in that area, if that's what you would prefer, rather than being in a suburban so much of a lifestyle.

So it's quite unique in that regard. But you've also got a lot of interstate buyers agents that have been buying stuff down there. And I know the northern suburbs of Geelong can be a little bit problematic. And there's been a lot of interstate money going into those suburbs.

Where do you see the dangers with that type of, I guess, that type of groupthink?

Well, the demographic is probably the thing that you need to be cautious around in those sorts of locations is the buyer profiles in terms of resale, but also from a tenancy perspective, what sort of tenancy are you likely to get? Is the demand going to be there?

Because they're affordable, does it mean that there might be more of an option for owner occupation? So people might prefer to buy if it's an affordable location. That's always the risk when you're in a lower valued area that there might be a preference for buying and maybe not

Such a demand from a tenancy perspective and those that are looking to rent in that area may not necessarily be those that will look after the property as well for you.

So it's just a mindset of looking at who your demographics are and who you're likely to get the performance out of it that you would hope.

Yeah, I mean, we've definitely seen that's the second one. And then, you know, so the western suburbs of Melbourne, then they're going down to Geelong, but then they're also then going to Bendigo, Ballarat and Mildura. So, you know, they're almost like applying the...

There's this regional sort of, no matter really where you go regional, you know, you know, the Victorian market, right?

And yes, there's locals that are driving that market, but a lot of what drives those markets up is the exodus out of the capital city, you know, because of affordability, the incomes, you get the city incomes in the regional locations, you know, and people buying for lifestyle and the owner occupies drive.

It's not the, you get investors driving it. Well then, you know, when the investors stop buying there, because it's no longer the place that looks good on the data, the locals have to keep paying it, right? And so what's your thoughts on those type of locations as well?

Like not so much in the past, but particularly at the moment when they're getting driven by a whole new cohort of investors.

So there was a lot of artificial growth in those sorts of areas during COVID. The pandemic, I mean, there was particularly say around Ballarat, that sort of a location. And I can speak probably more around that.

That's where I went to school and worked there for sort of five or six years as well in my evaluation day. So I know that market reasonably well. And I've got some good friends, contacts who are agents up that way as well. And so that market was... artificially inflated during that COVID period.

There was an influx of buyers coming in there that was never going to be sustainable. You were never going to get that consistent level of demand on an ongoing basis. So it pushed prices up and then it came backwards quite significantly.

And there was a, for a time period there and it started, it's held itself now and started to get a bit better. The top end of the market's probably still not as good, but the entry, the sort of mid to entry level ranges are quite good. But they're starting to recover.

But for a long period there, post-COVID, agents up there were having to go to buyers for the first time in 20 plus years and say to vendors, well, your property is not worth what you paid for it.

And Ballarat's not been a consistent growth the whole way through, but it's certainly been a, it just ticks along and it's in a good spot. It's got some good fundamentals to make it a city that people want to be in. Got great hospitals, great education facilities, all those sorts of things.

And it's an easy trip to Melbourne. So it was always moving along, but it went backwards. And it was the first time for a long time that values were less than what people had paid for it within a sort of four to five year period.

And I guess that's the concern, right? That's the owner-occupier artificial demand, right?

Yeah, well, that wasn't really investors during COVID pushing that market. That was owner-occupation.

Yeah. And if that's the now getting driven up, say the lower end buy, yes, locals, you know, needing rental crisis, need to buy, you know, I just want to buy something. But then also now that's getting, you know, by investors, is it, is that, you know, when markets get driven by investors.

It's the same just from a different profile, Chris. Back then, it was artificial, unreliable owner-occupiers coming into the market. This time, it's investors coming into the market, but there's not going to be a never-ending supply of investors coming in.

As soon as they don't see value or perceived value, they'll stop coming, and then you won't get that consistent level of demand.

Yeah. And the problem with investors is they're much easier to sell, right? You know, someone who moves out of Melbourne, moves to Ballarat, they don't want to sell because it's worth less than what they paid. Like, they can't afford to, right? They don't like it, absolutely.

They may want to go back to Melbourne, but they have to hold it. So you don't get this sort of flood of exodus, but...

investors are way more fickle right like if they think that they can put that money particularly this style of investing because it's i can invest anywhere i'm borderless i don't really care where the growth is i'll just buy there and you know i'm just sort of if it's not there anymore i'll just go somewhere else it's not this long-term mentality and you know that that's an issue with when you are to inflate demand artificially because you pump it up but then you also dump it and

I guess that's the, you know, when I start thinking about not just, you know, the Geelongs or even the second, now not the higher, not the better parts of Geelong, but when you start getting markets driven predominantly by investors, and I think just regionally, Victoria is just such a hotspot now because they've already gone and burnt all this, you know, Queensland, you know, New South Wales is already too fast, all of their budgets, Perth's gone through the roof, Adelaide's gone through the roof.

So

regional victoria is sort of like a real hot spot on where people look at the data and go oh yeah this has got to be the place to invest yeah and they look and particularly some of those capital cities you mentioned like they look at what the regional areas around them have done and see that they've done extremely well and then apply that logic again to victoria and whether or not that's sustainable yeah not convinced

Well, particularly if it's fed by a handful of big buyers agents that buy in bulk. When you've got that moving into areas, it doesn't necessarily have fundamentals other than it's a knock-on effect. It's the next town to take off. That's scary.

I've said many, many, many times on the podcast, I've spoken to regional selling agents across Australia.

pretty much the whole eastern seaboard, and I just heard the same story over and over again about selling to buyers' agents who never set foot in the town, got no idea, never been there, don't know the right side of the tracks or wrong side of the tracks, don't know values, will actually happily pay up and compete up

prices and then go and sell to the next investor how good it is because of price improvements. So it's a really scary formula and a lot of people are falling into this trap. So other than that, have you got any other property dumbos you can give us to take us out this episode?

The one that I've seen a couple of times this year is people, particularly homebuyers, who feel as though the market's on the decline. I mean, you'll have seen this too. Every buyer wants to buy at the bottom of the market and be able to then see it rise up.

More often than not, we don't see it and you won't know that until six months later and then you'll be playing catch up. And I've had a couple lately who said, oh no, we think the market's going to go down further, we'll wait.

And they've got very particular ideas around the type of property they want to buy, which is not necessarily a readily available asset. And so they are holding back. And I still think that Melbourne is good value at the moment. I don't think it's going to go back too much more.

If it does, it'll only be minor. I think it's pretty well at its level and the only real way is to go up.

And also we've discussed about asset selection. Some properties do suffer a lot more under adverse market conditions than others. And if you buy a good asset, you aren't going to be enjoying, if you want to call it that.

You're not going to be enjoying price drops to allow you to get to buy a superior property at a real bargain basement price. But how long have you been in this game for, Gerard?

Buying now 16, I think, years, 10 years in valuations.

So 26 years total. I've been in real estate now for 26 years as well and buying for about 19 years.

And honestly, if I could have had a dollar for every single person I've said this to in every market slump to say, you know what, you're always whinging about it's really difficult to buy and it's difficult to buy good property at any time anyway. And you're always complaining about that.

Now you've got an opportunity to take advantage of it and you don't like how many people just will not.

And the amount of people afterwards, six months, 12 months, whatever, you know, as we go into the next upturn and they say, God, I wish I had, I would have been living in it for two years. I would have been settled. I would have whatever they're. Investing is different.

Investing, you do have to be a lot more careful about the cycle. And I'd be very careful about buying on the tail end of cycles in other cities where you can see there's been that lovely, that recency bias. You go, well, this is great. It's going gangbusters.

But certainly, upgraders, downsizers, maybe not so. I mean, obviously, a flat market is ideal or a falling market is ideal for an upgrader, not so for a downsizer. Absolutely.

That's been my frustration with these couples. They are upsizers and I think they're in a very good position to do quite well at the moment and not try and time things to the nth degree.

It's so hard though, isn't it? Because you know they might have to take a bit of a hit on their expectation for what they're going to sell their existing property for. It's that that stops them, not the gap. But that's the gap, isn't it? I know.

The gap is what should be the focus. Exactly. We're doing really well on this one. If you take a little bit of a hit on this one, the gap's going to be, you're going to be much better. Otherwise, you'll wait the other way and then the gap's going to go like this. Exactly.

Exactly.

It's really, but it goes against loss aversion. You know, we feel like we've lost something there instead of gaining it. And the pain of loss is greater in magnitude than the feeling of excitement when you gain something. And you can just see that human psychology playing out against our better interests. I agree.

That's a big dumbo.

Yeah, absolutely. I think that's the opportunity there where you, if you are needing to upgrade, you're really clear on where you want to be. You've got the ability to sort of get into a suburb and into a location and a property that you're going to be super happy in long term.

I think that people are not only concerned around the gap and the interest rates, but they're also concerned about their jobs right now, right? There's this, you know, the AI, you know, high income. Is it going to be sustainable? Does that, you know, you know, do I really want this?

They've potentially had friends and, you know, have also leveraged up quite hard and they've seen how stressed they've been in recent years. You know, this is what's happened in Sydney a lot.

And so there's this apprehension to make the move, you know, and, and some that, you know, we've got some doctor clients at the moment that are doing it and Because they've got zero worries about their income, right? They're actually really confident. And so they're like, they go zero job uncertainty.

If anything, they're like next level confident and they understand where they want to be. And they see the opportunity to get into a long-term forever home for them. And then they see the benefits of doing it, you know, once they've explained to it. So they're like willing to go.

But it's like if you add in everything else plus a little bit of, you know, and just so many jobs are exposed to it, right? Like adjust, you know, and business owners have had some tough times, right? Like it hasn't been this sort of consistent.

And so you've got the, you know, business owners aren't that confident. You know, a lot of people aren't confident around their jobs and their bonuses and their commissions and on top of the war and everything like that. But if those things go, plus there's rate confidence, all of a sudden that'll come back.

And, you know, then you'll find that what was happening in June, July, August, we absolutely saw the exact same thing. You could see the, you know, the confidence was slowly coming back and then all of a sudden people were coming to us to upgrade.

And I think that's the worst time you want to buy, right? Because you just, you get into this sunk costs. Oh, I could have bought that three months ago for this. But now I got there and the open home's got 20 people and

oh, but I want to get that again, but that's gone now.

And then you got six, 12 months and then bang, it's so that window's gone. And I do feel like we sound like we're beating the drum and like other people be laughing in the buyer's agent world and saying, oh, you guys are just saying the same thing. You're talking your book.

I still think that's the best strategy. And I think everything the government's doing is forcing people to be anti-investor. They're

know cutting negative you know let's say they do it or don't you know capital gains tax attack super you know maybe they'll attack supplement superfund lending and property like you know they're tracking trusts so but they're not going to attack home ownership right they're not going to attack the sacred you know tax-free asset where predominantly family's wealth is and i feel like that's what they're you know you can probably bet on quite confidently and i feel

Yeah, a lot of people just aren't seeing that. They're thinking, I'll just sit here. I'll go and buy these regional investment properties and, you know, hope that that outperforms. And I feel like it'll catch people out. May well.

Well, on that note, thank you so much, Jared. It's always good to chat.

Thank you for having me.

Let's hope that, you know, we have a little bit more buoyancy in the year than we're expecting and we're currently experiencing. But, you know, we keep plotting on giving good advice.

Very good. Thanks so much, Jared. Thank you for having me. If you have a question that you'd like us to answer in an upcoming Q&A episode, you can send us a voicemail or written question via the website, theelephantintheroom.com.au or you can email us directly at questions at theelephantintheroom.com.au.

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