Why investors are rushing back to Melbourne

Flint mortgage brokers have revealed that investor lending is up 16 per cent over the past year, and a growing portion of that capital is heading south.

Redom Syed, the Managing Director and Co-Founder of Flint Group said: "Melbourne has become a target market for data-driven investors, drawn in by strong value, better affordability and ideal timing in the property cycle."

With interest rates falling, sentiment shifting, and population growth surging, Melbourne is setting up for one of its strongest years in a decade.

Over the past 30 years, Melbourne and Sydney have delivered almost identical long-term capital growth.

But right now, Cotalility shows that Melbourne homes are trading close to 60 per cent below Sydney levels, double the long-term average.

Syed said: "That kind of gap doesn't last. It creates a clear case for Melbourne to catch up."

Melbourne is no longer the least affordable city in Australia. Brisbane, Adelaide and even Hobart have overtaken it on several metrics.

That perception shift matters.

"Buyers are seeing value again and, importantly, Melbourne borrowers still have capacity. Price-to-income ratios have improved, and support from parents or inheritance is helping many bridge the deposit gap," said Syed.

Two rate cuts have already been delivered, and another is expected in August. Melbourne, with one of the most interest rate sensitive economies in the country, tends to respond faster than other capitals.

Lower repayments and improved borrowing conditions are already translating into higher enquiry levels and a noticeable lift in investor activity.

Melbourne is expected to add 1.5 million residents over the next 11 years. That is more than the entire population of Adelaide being added in just over a decade. Demand for housing is locked in long term.

Victoria is also the best-performing state when it comes to housing supply. It is the only state on track to hit its 2030 targets.

Syed believes that's a positive for future residents, but investors need to choose locations carefully.

"Some areas will be flooded with new stock, while others will benefit from stronger scarcity and price growth," he warned.

"Melbourne is entering a catch-up phase and investors are paying attention.

"The sentiment is back, investors are circling, and the numbers stack up.

"If you are looking for value and long-term fundamentals, Melbourne house values will likely perform well over the next 12 months" said Syed.