EP. 15 | Victoria - State of Investment | Property Market Outlook 2026

Yeah.

So that's how 2025 has been mixed market. And that's, that's where we need to see that how the whole the rental, the yields, the cash flow and the capital growth, how do they sustain coming in the coming year. Yeah, absolutely right. So Melbourne has been a mixed market and Melbourne has somehow in the last two, three years, it's not been there where it has been. It has been always been in the radars of investors, but it's still not been there. Last five year growth is a modest 15%. And you look at a Brisbane or a Perth or an Adelaide, it's 80% plus 90% in Perth, right? So very, very different markets altogether in the other states. But I think Melbourne has been a clear legard in the capital cycles, right? Yeah, last five years is only 15%. When you look at Brisbane, it's around 86%.

Yeah.

Perth and Adelaide are close to 80-90%. So when we had seen Dev group by around 80-90%, then they have reached up to the median of Melbourne. The biggest issue in Melbourne why it is not growing is either the two main concerns, the yields for the investors still sitting at around 3.1%. Unit yields are slightly better which is around 4.8%. The supply is still relatively higher and that is killing the growth which is not allowing land prices to go up and then relatively the housing prices are not growing. When you look at the buying affordability for Melbourne, it's around 52 years, improved by 1.3 years. That means actually the growth hasn't happened. That's why prices are so cheap that even though Perth is around 55 years now, Melbourne is still at 52 years. That's only capital city which got better in terms of the buying affordability. Yeah, vacancies are slightly higher, like around 2.17% across the state. So that's not that great because when you look at national averages, it's around 1 to 1.2%. Yeah, all right. Yeah, yes. So see, I think Melbourne has suffered from what has happened in terms of what's the market, what's the what, how the houses have been moved, how the yields have been there. And supply has also created a large issue in Melbourne itself, you know, it was the demand recovered, but the interstate migration I think it took a while to normalize. The pandemic really, really messed it up. And once it got messed up, it didn't come back so quickly. It is becoming normal now. It's coming much better now, but it has not been so good. 25 really suffered from that as well. The stock on market was OK. It was 0.31%. I think it's still low when you compare it with the other capitals. It's still in the kind of a low supply, kind of an area or a band which you can call it, right? Yeah, there's a market being lower. Is that correct? Clearance rates have been 70%. That's correct, but Melbourne always go in the pocket. So there are certain pockets within few councils in Melbourne where we could see extremely high demand for owner occupiers and investors in between. when the interest rate was starting to falling. But suddenly when the interest rates start rising and then there's a lot of land tax and all these issues come arise. So that's the time when, again, we could see the property prices have stalled for a while. Other than that, when you look at most of the buyers within that segment are very close to a million dollar segment. Absolutely right. I think below million dollars is the one which is the quickest and the best running segment. Above million dollars is kind of struggling right now in that place. Though you know, it's a very surprising bit because Melbourne has always been a darling of all investors, owner-occupiers both. It has always been like that. But because of all of these, the inventory is low, stock level is so much of stock available, people are not People are not distressed selling, but they are all very cautious. Their new listings are low. It's a very balanced position, but not a very strong position to be in when you compare inventory versus any other major capital. And I think the biggest problem with Melbourne has been the way the whole government regulation and intervention and thing has been, which has really put a dampener on the whole prices out there in Melbourne, right? No, absolutely right. So when we compare with different other capital cities, so what has happened is that whether it's Perth or Brisbane, Adelaide, all of them, in terms of the price of houses, for example, Melbourne and Sydney were always kind of competing with each other. They were always kind of considered right above the rest in terms of the property prices. But what has happened is that in the last five years because of the capital because of the growth in the other capital cities Sydney has of course price have gone way ahead and including Brisbane, Perth, Adelaide all of them have caught up with Melbourne because the property prices they have gone up significantly higher and Melbourne has not seen that kind of growth. So almost all these capital cities are sitting at a median house price of close to a million dollars now. So Melbourne while it was way higher property prices has not seen that growth. One fine example of how mismanaged government regulations can really impact someone and you can really impact an area in terms of prices and can you really create a bit of a mess in the whole situation and that has been Melbourne, right? Yeah, that is true because mismanaged government then basically you always have a higher rental vacancies which is not impacting on rental run over. So, letters are not rising. Demand and supply always have a lot of gap. There is so much of inventory which is coming up. So, the cash flow is not there. That's why investors can't hold it up. Yes, there is owner-occupied demand, but since there are a lot of houses still coming up on the market, because the land prices are not moving, construction costs move around 15-20%. But whatever you used to buy in 2018-19, if you look at now, the land prices have gone up by around 10-12%. That's why there is no movement on the entire asset value. That's why the Melbourne is struggling, because no investor pressure, For owner-occupiers, there are a lot of opportunities because land prices are not moving, so they can go with the new houses at the same price. So existing inventory doesn't have that much of pressure in the market. Yeah, correct. That's why I think one way it has been good is what I read for first-home buyers and new owner-occupiers to come into Melbourne. But eventually, once you occupy a property, you don't find a capital growth in your property, whether you're an investor or an owner-occupier. you're kind of stuck and people after two years, three years of finding that their property value is there where it was. Whereas other states and other capital cities, people have seen a lot of jump in their property price and have been able to get a better value out of what they've done. But regional Victoria is not what it is, right? Regional Victoria is maybe today in 25 with what Melbourne used to be, you know, good prices decent yields and a good buyer pool which is still not priced out, you know, still they are affordable. This is an affordable alternative to Melbourne with good value still available there. A lot of pockets there which has a great value out of versus what it is there in Melbourne, right? Yeah, correct. So, in regional Victoria, when we look towards the surrounding of Melbourne there, Lots of significant urban areas where you still have a good opportunities for jobs, good economical indicators, and then still you have a good population growth, good infrastructure around. So when you look at the median prices are very close to $650,000. For houses. Yes, and the units are around $440,450. Houses grew by around 6.1% and units have moved by around 5.8% in 2025. All right. So that's a good moment. So that means that in fact, both houses and units there have in regional Victoria have really performed well and they've given a good yield as well and they've given a good growth as well. And it's broadly, you know, it is. It is tracking the recovery trajectory. It's doing a much better job of recovery versus Melbourne, the original Victoria area. And I think a lot of hubs are there, a lot of portions are there, a lot of areas are there which have done good with good yields and good unit yields and good housing yields and meaningfully better income profile than Melbourne Metro. So it's an overall good scenario for people now. Yeah, absolutely. Overall better. And also if we compare with the regional areas of let's say Western Australia or Queensland, there are a lot of re-rating has happened that the prices have the capital growth that those regions have seen. So the regional victory is still yet to see that kind of re-rating. It is one of those rare regional areas where that has not happened. So it is still more affordable. And of course, somebody's win is somebody's loss. So for somebody, for investors, if it is still affordable, it's still a good entry point, maybe. Yeah, that's right. For people who are looking to live in owner-occupied, the prices are low. But then as an investor, you also start, you want them to see the capital growth. So that's where we need to see where it goes. Correct, absolutely right. As an investor you want to see, not even an investor, as an owner or occupier as well. It's like this, I want to buy cheap but then I want it to become expensive. But if I buy an owner or occupier on an investor, I feel bad when it's not happening to me. I feel bad when I'm wanting to buy expensive but I feel bad when I have to sell cheap as well. So maybe it's the way everything is. That's where I think we are stuck in regional Victoria as well. But I think the whole bit of our demand and supply there is still, regional Victoria has still got a lifestyle and a migration boom, kind of a thing which is coming into, from Melbourne, it is coming into regional Victoria. And that's driving a bit in some segments, right, in say Geelong, you know, Moreton Peninsula, the Bellarat corridors, they're all doing pretty good Is that correct?

Correct.

So they are actually a surrounding of Melbourne where we should drive around an hour, an hour and a half and then you can reach up to Geelong at the Bellarat and then when you go towards the southeast end towards the Mornington Peninsula. So there is good lifestyle opportunities. Employment opportunities are pretty good. Plus when you look at the infrastructure upgrades plus all kind of amenities which have been created around the surrounding of that area are pretty good. So basically there is good opportunities. good affordability and then good rental returns as well. That's why we could see there is a little movement into that area. Yeah, correct. And the movement has been there because of these factors. It's been an affordable area. It's remote work. Victoria still commands a lot of remote work. In fact, I think government was trying to bring a policy where they would have a mandatory remote work for a particular period of time. And that actually has kept the demand in regional areas going. It has got more supply than Melbourne and less competitive conditions. It's not such massive competitive conditions versus the other regional areas. So it still preserves the value for people who are buyers and people who are sellers. Two speed market, is that right? Is it? Yeah, it is. So basically, either you go towards the coastal lifestyle, where you have such a good demand because there is no supply coming up. And then you have an inland agriculture related, the inland councils, where you could see there's a little bit of demand because of this agriculture related work, but more demand, which we could see towards the coastal paradises, where towards the Mornington or the Geelong, where we could see a more demand which has been created by an investor as well as the owner occupies. Yeah, yeah, yeah. And I think that's that kind of a demand whole, there's a bit of balance and there's a bit of a mix across regional areas. And that's more because of the way the inventory is there. And I think inventory is pretty balanced. It's kept everything in checks and it's not let things run away their course and It is still, listings are still okay, it's reasonable, it's not, the days of market are still fine, there's still a much under control. So as a thing, it brings, for buyers it's okay, because for buyers you don't feel that there's too much of competition happening. You're okay, you're not struggling, you're not having properties too long in the market and you're not having properties too short in the market. So it's alright, alright kind of. the scenario where I'm happy that I'm able to get what I want in the time which I wanted to get. And it gives me a negotiating power as well, right, in the regional markets versus if I look at a WRA Queensland which we're talking there, it's not like that. They're damn hot. These are pretty good right now. OA its markets are moderate it's like it's like it's not super hot where in WA your days of markets are less than a week. So the moment you list property hundred investors there and since there is no supply immediately they'll go and offer. Over here yes there is demand but there is a supply as well. It's not over supply but it's not under supply as well. So basically when you look at the demand and supply score over there, it would be very close to in between around 58 to 60, which is like moderate. Yeah, but I think the coastal ones still don't have an under supply, right? The coastal ones still are a bit, they need a bit more, but within, once you leave the coast and you come inland, then you have enough supply. There's lots of stuff going there. But some corridors, which are important, Geelong. Geelong is a good corridor, Ballarat and Bendigo. Geelong, Ballarat, Bendigo, then you go towards the Shepparton. You look at the Wurrunga. They are the good corridors where we could see little movement in our prices, even the Latrobe Valley. It depends on which side of those pockets you go towards, because there are a lot of ups and downs within that councils as well. especially I could see more movement towards the Wurrunga towards the Shepparton and Bendigo and the Latrobe Valley. Bellarite is still moderating the supply. Bendigo had moved a lot. Shepparton and Wurrunga have moved a lot. Latrobe Valley moved a lot as well. Okay, so in terms of purchases, a bit of a mixed bag when you look at Weather Melbourne, when you look at Weather Regional Victoria, if I would want to say, if we want to discuss about how it's happening in terms of our rental affordability position across Melbourne. I think Melbourne was one place where I think renters, you know, you take a break or something, you know, you find that, okay, landlords are not thrilled, they're not having a great return or something. Whereas, for a tenant I am fine, tenant I am looking okay and I am finding that even if I am converting and buying my own house from being a tenant, it is alright. It is kind of similar position. I am not better off, I am not worse off. So, it is kind of an achievable market where everybody is achieving everything but nobody is getting anything. That's a good way to put it. It's one of the most accessible rental market across all the capital cities. The vacancy rates are pretty high right now, 2% plus compared to other capital cities. The rents have gone up but very moderate, I mean 2-3% kind of thing rental increase. which is probably the lowest increase amongst all capital cities and that's why rental affordability is high for anybody who is looking to rent. The gross yields are compared to other capital cities on the lower side, of course not comparing with Sydney, but house yields sitting close to 3%, unit yields are better, close to 4.5%. So overall, if you're looking as an investor, last year, if you look at that, then you were better in terms of cash flow management if you were owning a unit compared to a house. But having said that, then you start comparing with other capital cities and all that, right? Yeah, but I think the biggest concern which I have seen in the Melbourne market has been the vacancy rates. Considering being a capital, it has the highest 2% plus vacancy rates and which is not small, which is a lot of vacancy rate to happen. And this combines it with subdued price growth. You're not in a very happy situation when you look at this in isolation that, OK, I'm looking at a high vacancy rate, which means if somebody leaves, my tenant leaves, then I may be vacant for maybe a month or two or whatever. I don't know that. And even if I get the rent, I'm not getting a great rent out of it. That adds up to the cost of the holding as well, because more than 2% is average. There are a lot of pockets where vacancies are around 4.5% as well. And that's the places in the northern or the western corridor where you see a lot of homeland packages and new properties are coming up. And that is actually giving a lot of pressure because properties are not going on the rain for around one and a half to two months. So for our investors, two months properties vacant plus you have land tax plus yields are pretty poor, there is no rental growth, so it's a worse situation for the investors. Yes, if I have two weeks of rent not coming in, out of 52 weeks, which I have, say eight weeks of rent not coming in, out of 52 weeks, I'm already at close to 10% of the whole year's income gone in vacancy, and which is a lot of impact. And that's not a small impact for anyone to have and I think it's it's that's that's caused me that the rental demand has really brought it down because Because I was already suffering from this a Melbourne was already suffering from the migration laws which had happened people moved out and that's what it's and now when and I have that there is so much of a vacancy rate which is higher I am I don't the demand is softer, so I don't really find that I The supply is going to improve in any way whatsoever. I don't find anything. I think the only saving grace for Melbourne in this year 25 was the strong student and the international renters which had come in. maybe hung on to the unit demand because that's what they prefer. And Melbourne has always been stronger in terms of supply of units, but that's the only saving grace which kept the rental demand on. Otherwise, it was in a tough situation when Melbourne was there for the whole year, right? And that's why there's not too much of a growth which happened in rental inventory. A lot of inventory is still available, right? But still, the inventory is rising. More and more inventories coming in, listings are recovering, but not a good scenario. In fact, out of all the capital cities, again, the built-to-rent, that has increased a lot more in Melbourne. So, not so common in other capital cities, you would hear that, but that's Melbourne's specific supply of what's coming up in terms of the rental. A lot of the other capital right but that's also maybe getting the rental supply up that's one of the factors which must have got this rental supply into the market and that's allowed people to come and and that's maybe kept the vacancy rates high as well and that's also kept the rents moderate right but but on the other side if I'm if I'm a tenant it gives me a good balanced market when I want to when I want to rent it it's not going to be having too much of an impact on my income I think my rent versus my income ratio is a best managed in Melbourne city itself, right? But regional Victoria was not like this, right? Regional Victoria is a bit different, right? Regional Victoria you still have a tight vacancies. So most of the places your vacancies are very close to 1 to 1.2%. Plus when you look at the rental growth, it's more than 5 to 6% in last year. So plus the yields are more than 4.5% in certain pockets. So, basically in regional Victoria, the impact which you have seen towards the metro Melbourne, regional Victoria, certain pockets, the impact was a bit different because inventory is low, yields are better and then your rental vacancies are lower as well. Yeah, and I think it's a more accessible rental market than Melbourne, right? If we compare it within Victoria, if we compare it, it's a more accessible rental market. The income profiles are also good as well. In most of the areas in regional Victoria, people's income profile is fine and that's why you get a good yield, 4.4% plus yield and close to 5%, 4.9, 5% in apartments. Pretty good, right? Better than Melbourne in terms of houses and in terms of the apartments one is where correct absolutely and so if you look at because of a better rental yields the total return on the property is in last year has been close to 10 to 11 percent although if it if you look at again compare with other capital cities other other areas then that was higher other states close to 14 15 16 percent there but it is lower than that but still When you compare it with Melbourne, you still see a better return from a growth plus rental yield perspective.

Correct.

And I think that's because of the overflow which came in from Melbourne, the people which came in here, the people who came in for lifestyle and all that. So it still added to the benefit of regional Victoria area, correct?

Yeah.

That's why that's kept the demand steady rather than a huge jump, but it's kept a bit of a steady demand which came through from these areas, right? Geelong and Ballarat and all those areas which you were talking about. Correct, yes. So we could see internal migration a lot from, not exactly a lot, but there's a moderate internal migration towards the surrounding of Melbourne. So, lots of people are moving towards the Geelong, lots of people from Metro Melbourne are moving towards Ballarat, then a lot of owner occupiers are grading themselves towards the Mornington Peninsula. Then a fair bit of people are moving towards the Uranga. There are a lot of opportunities. towards the Bendigo in education sector. So even students are moving there as well. Towards the Shepparton and Wodanga, we could see a lot of health-related infrastructure. That's why we could see more demand which is being created over there. So we could see a moderate amount of people are moving across the regional town centers because of the good economical indicators. They're good jobs. They're good jobs. Yeah, that's fine. And I think except for the areas where, you know, like Mornington and the coast there, where you still have a lot of Airbnb going wrong, that was still a lot of impact there. Otherwise, rent was pretty much okay. There's not too much of a pressure in these areas, right? And pretty balanced kind of inventory is available in the market, not too much of a vacancy rate, though it's still higher than your WAs and Queensland's of the regional areas of those states, but still it's okay. It's not always intense like the Queensland or south Australia where you actually don't have any houses to rent. It's available there. It's not too much of competition, but it's not bad either. Yeah, there is more shortage, but it's not freely available as well. I think it's in that band where everybody is happy, happy. But tighter, I think, the momentum side and all, it's still a bit tighter, but the other areas mostly are fine with what's happening there. Most of the regional Victoria is fine. But I think the biggest impact which will come in this year will be the vacant land tax which is going to start. I think that started happening already from late 25 and 26 it's going to move a bit further. So, that should push a lot of vacant investment properties into the rental market, right? That will increase the supply even more. It will increase the supply because six months if you've not constructed then if you see that, oh, there's going to be an extra tax now. It's going to push more people especially because if you're not deep pockets, if you're not able to kind of cash flow, because in the current climate where the interest rates are a bit high, so the ability to hold onto a land also goes down that way, right? So that will push more supply in the market. That's been the problem with Victoria in all totality put together that it already had a land tax issue. The other states are now coming to the land tax issues but it now has another tax above the land tax which is on vacant lands which is available that if you've not leased out for six months then you're going to have a tax implication and I think 26 will see when we talk of the what's going to happen in 2026 we'll be talking about the impact of that tax which is going to come there because that's going to really put pressure on the investors who are looking to come into Victoria or wanted to do into Victoria. That's another thing to really look at and see and what's what is the issue. But but if I would, let's talk of 2026, when we're looking at the economic bit about Victoria. The inflation, I think inflation has a big impact on there. The primary drivers of inflation in Victoria similar to other places have been housing but I think rents have also become a bit of a factor coming here. Construction cost, it has still a good homeland industry and I think construction cost has also added to the inflation in Victoria. So, that is something which is there. It is not looking like Victoria will come back into the mid-2000, by mid-2028, it will come back within the target 0.23% odds is there. So, anyways, the war situation and whatever is happening in terms of government and the government subsidies which are coming in, it is a big risk which is now coming into the inflation with the cost, the construction cost, It doesn't look like we are having a great positive impact on the Victorian market, at least in this. And what do you think about the interest rate scenario now? What do you think is going to be what's going to happen in Victoria with the impact of what's happening in respect to rates? Interest rates, especially because of the war, the inflation we are seeing, and then because of which, a couple of interest rates increases have already happened this year. and it is expected more raise, it rises will happen. One more probably will be announced in a few weeks from now and then there's more expected in the year. So interest rates are expected to go up, which directly puts more pressure on Victorian market wealth. The gross yields are not very high, right? So the gap between your rental income and the cost is going to increase. So unless you have a way of holding the properties for longer, This year is going to be a little tougher from an interest rate and the rental yield perspective. It is going to be a bit tougher from that. And I think that's why we're seeing that there is the confidence index, the consumer confidence is I think at the lowest as of right now. And more because of the rate rises which are going to come in, because of the global uncertainty, because of what is happening in terms of turmoil everywhere. We are seeing that we are finding that the whole scenario about capital investment and these rules which are going to change about capital tax against tax and all that is really impacting people from there. And I think the Sydney and the Melbourne market are most exposed to whatever happens in terms of the rate of interest changes. If you look at a 6-6.5-7% rate of interest which most owner-occupier or investors would be paying right now, it's a bit of a large impact which is there and especially Melbourne market with all this being rate sensitive, being so exposed to rates and so exposed to so many of other taxes has a straight direct impact about what's going to happen. Especially because when the median price is sitting at a million dollars, then there are a lot of properties which are above that price. The moment you go to 1.2, 1.3, 1.5 million dollar kind of properties in Melbourne, the impact is straight away there. direct impact on what your take home income is and how much you're paying to the banks. And the surprising part is despite that prices have not really moved up here, it is still the most leveraged when it comes to having a rate of interest impact. And that's why only when rate cuts resume in maybe 2027 late or 2028, that's where we are looking at Melbourne to start having a bit of a recovery in terms of prices or in terms of any kind of growth. And it is always been the government play which has happened there. Even if you look at when you look at the Victorian budget or we look at any of these things, they are still not talking of a very high employment rate to grow through. In 26, they are still looking at a high unemployment rate of about 4.7, 4.8%. which used to be historically low, but they are not really looking at anything better to come through here. Even the budget talks about higher unemployment rate, which will be there in Victoria in this year, right? Yeah, so coupled with higher unemployment rate, coupled with inflation, higher interest rates, it doesn't create a very rosy picture that way. Yeah, I think the high infrastructure costs the land tax. I think one of the most aggressive land tax state regime is there in Victoria, right? And then this, I think this elections as well in 26th in the state, right? And all of that has a severe impact on Victoria on what's going to happen and how things are going to be there, right, in Victoria in this coming year. Yes, correct. And then when you look at the population forecast for Victoria, so it's around 1.7% per annum from 2005 from 25 to 26, which is the strongest volume addition to any state. When you compare the net interstate outflow, It's moderate to 2024 and 2025 because during COVID it used to happen a lot but now it's moderate and then Melbourne is expected to add more amount of population till 2030. That means that those structurally we should be okay in terms of the population coming in, the demand coming in but because there is not so much of a The population is still there, but still there is so much of a supply that it's not materially impacting what is going to happen with respect to rates or with respect to anything else. I think it's all getting absorbed pretty much easily within the whole belt in itself right there. Especially with the supply perspective, I was looking at a few numbers. If it is the way the current supply is coming up versus the amount of population which has been expected to grow till 2032 and the way the current construction industry is going on, Melbourne to become supply neutral, the population growth has to be extraordinary and then the construction industry has to be slowing down till then by 2032 if this scenario happens. Then only Melbourne will start becoming a supply neutral. All right, but the amount of supply which is in line and then which is already in pipeline which is coming in Absolutely, right. But yeah, no, that's that's that's right. So that's a lot of road to cover right? Yes, and then when you complicate it with a structural decline in home ownership rate because the investors are not coming and owner-occupiers are just taking over from the investor. So there is a Structurally, the number of properties which are now available are not growing anymore. This is the plant tax regime which is very strong there. Now, with the vacant plant tax coming in as well across Victoria, Then you've got, I think we've got an emergency services fund as well, right, which is also a large levy, which is starting for even investment properties now from 2026, from July 2026, is coming there as well. So that's another impact which is going to come into the area. Then you have some areas with congestion levies coming in, which is, which is coming into there. So parking is there's a levy, which is coming in there for a lot of areas in in Victoria. But these are significant things, you know, that's bringing in a kind of a two speed Victoria, you know, one where you can you find good infrastructure is there, but there's a lot of cost there. And there is when there is not too much of an infrastructure, but still, you know, you can just go there because you can afford it, but it doesn't have all the other stuff. I think this is one of the key reasons that individual moment that investors are not able to come and hence the built to rent sector has kind of taken it over. They're doing a lot of stuff in terms of adding more and more stock into those areas in the individual market. Victoria, right? You're absolutely right. So when you talk about these levies and the taxes, if you look at in isolation, then each one of them may not be big enough amount. But if there are two, three, four, five, six of these, they keep getting adding up. When they add up, then it becomes a substantial amount, which is going out from your pocket. So, as an investor, you start thinking that this tax, this tax, the vacant land tax, then the higher tax, then stamp duty being high, gross yield is not so high, plus all these levies adding up. So, I mean, where does it go? Where does it go?

Yeah.

So, if you look at the land tax and if you look at all these levies which are coming in, and I think there are mandatory inspection ones, and then you have to have gas fitting, then you have to have You've got a lot of inspections to be done as well. You're finding that an average investor pays off at least eight to ten weeks of rent in these costs itself on a normal basis. If you're paying off in these costs and then you have interest, which is at the peak right now, interest rates, which is again a large cost to you, then you've got council rates and then you've got insurance to buy for the property. So in an overall basis, the cash flow negativity is too large for someone. And that bit creates an impact on me. And I may be an owner-occupier, and I may say, OK, I'm an owner-occupier, so it doesn't impact me. I think that, OK, if borrowing capacity is not constrained, and I'm getting the benefit of a first home buyer scheme, I'm still hauled right here. But I'm not still so good, because I'm finding my capital gains is not there. So my property is not rising there. No, I think the only saving raise there being that the property prices, some property prices in certain areas and certain maybe units or somewhere are not too high. So, because of which, although there's the overall cash flow is negative, but because if the prop, if you're able to hold onto a property which is not too high value, then you can, because not even if your pockets are not very deep, you can hold it for longer period. That's probably the only saving it is, but then if it is not growing in capital much, then where does it take you?

Correct.

Yeah, that's right. So for me, if to enter it into it, because my renting versus buying calculation is working well, is a good entry point. But if it doesn't take me anywhere, I'm not holistically happy. I may be happy for that transaction, but holistically, I may find that it doesn't work out for me. Though regional Victoria is still all right, OK, there is some good price point, but not everybody wants to go and live in regional Victoria, right? But as an investor, if I start looking at this, As an investor, I find that my gap of about 3-3.5% yields and a 6.5% rate of interest which is a good 3% plus gap between this and I am not even taking the other cost is a huge gap. Right three three and a half percent gap straight on this and then your other cause is something which was an investor It's like we were talking it's a tough kick to cover up how much money can you put in for your property and then if there's a negative gearing changes which come in then Victoria is in for a lot of problem for investors, but I I think units have still been a saving craze in Melbourne, but otherwise it's not a great scenario which is happening in that case. 3.5% is on $700,000 purchase value. That means if property prices have to go up to around, for an example, $800,000 or $900,000 margin, if rentals are not growing significantly, then that yield will be very close to 12.5%. Which is tough. Which is a Sydney yield right now. Correct, at 1.5 million. Yeah, correct. And in Melbourne, the biggest issue is the vacancy is higher, more number of properties are coming into market for the rentals, which is not resulting into you'll have a good rental growth. So in a case, if suppose property prices have to rise and the rental has to grow first, or else it's not sustainable for any investor. So, if you look at this, let's assume these rental conditions are there in 2026. Do you think that these rental conditions will sustain investors in 2026? Highly unlikely, because of the fact that in 2026, originally we were expected to go down, but now we are expecting three more hikes. And rental to rise, you need to have a lot of pressure on the properties or rental turnover has to be higher. The situation is otherwise. So in this case, it will be highly unlikely that investor will enjoy this period. And it will create them a lot of pressure. That's why we were talking that it's a contrary in capital growth city, you know, you thinking that, OK, you're speculating or maybe you're hoping that there will be a growth that how how low can it go?

Right.

It's it's such a it's it's a tenant friendly city, country, city, state, sorry. But it is not the investment is not the prime motto there. And you're just sitting there hoping that I'm in there one fine day, it will improve and I'll get a great capital growth coming out of there. I think you're absolutely right and that's what is a lot of investors are. The hypothesis is it has last five years. Other states have gone up by 80% capital growth. This has gone up only by 15% and that is why it should grow. I think that is one way of thinking, but the other way is like looking at the fundamentals of supply and demand and migration and what will make it grow. And the taxation. And the taxation. Yes, that's a big one, right? So I think just because it has not gone up, it should go in itself is not the entire perspective. You need to keep in mind the fundamentals, why it should grow, how is the demand, and basically your taxation and your demand supply, structural things, and how the market is today in terms of the interest rates, where they are going, the microeconomic factors. All that combined will give you a better idea of where it should be. And the moment that they introduce the rental cap, where you can't increase the rent about a certain percentage, that's done. These holding costs, these kind of costs which are going to keep on coming in are really driving the investors away. For me it's tough to hold on as it is right now to a property and what's going to happen if my holding cost keeps on increasing. Then there will be a point where everyone will say, okay, thank you very much. I've had enough and maybe I'll come back in two years. But right now, this is not the place for me. So then if we look at it like this, okay, if we look at all of these things coming in, what do you think is a purchase outlook for Melbourne in 2026? So if I'm looking at a purchase position, Where do I see me? I know that I've got a 15% growth which I already had. We've spoken about that. We've already seen that the apartments and houses have grown 5% in Melbourne and about all that stuff. But what do you think? Where does it go? Melbourne still is about 1% away from the March peak. It's below that. It's not even recovered, right? So what do you think is going to happen then? 2026 will be mixed and it's tough because of the fact that we all know that interest rates are changing. Holding capacities are going to be a big issue for a lot of investors. The rentals are not improving even though there is a good renting affordability within the population because the rentals are significantly lower than the entire country but still because of the extremely high supply of rental properties Rentals are not rising. So, 2026 will be in a case if suppose, their pockets where there is extremely high owner-occupied demand and any of the investor who bought the property over there probably you could witness little bit of growth in those pockets. But generally, there are locations where the rental yields are lower plus there is excessive supply towards the western and the northern corridor or towards a few pockets of the southeastern corridor. I believe they will be hardly movement into the property prices. All right, yeah, even though there may be a little bit of an investor demand coming back, but I think it's more speculative demand rather than in there. And I think 26 with the elections coming in, and I'm very sure there will be a more focus on plant tax and maybe tightening of rental regulation and who knows some more of stand duty reforms, like you had those apartments, you can get stand duty waivers and all that. that's going to be a very very relevant point for all the investors to see or occupies a pretty well of the pretty much in a good position there in Victoria if you wanted to buy but not in terms of capital but at least you can buy but as an investor you you will have to see what's going to be there and then you start comparing as well right in 26 okay I'm seeing whether should I go on into Brisbane or should I go into Perth or should I go into Melbourne or should I go into Sydney And then when I see that, okay, I can say, okay, I've got other buyer choices, I've got choices in the other places here. So, do I really want to go there or not? And that's why buyers may have a good, they won't occupy a buyer, may have a good position to be in, but as an investor, I may be into an issue. compound it with what's happening here, compound it with expiring schemes and supports of first-room buyers, the stamp duty ones and all that. It's going to be a bit tight, right? And what do you think is the cash flow position is going to be in 26th with it? How does it look like? See cash flow like we said that there's a good gap of both houses and units There's a gap and the gap is gonna increase this year further because of the increase in the interest rates So cash flow is going to get worse overall because of the increase in the interest rate even if the the rentals increase a little bit but because of the capital rental prices which are expected there and the cash flow situation is going to be more and more negative. And the only good thing is that if you're able to get a property for less than 500k, then the cash flow is not so much negative. It will be under control. You can probably hold on because of that.

Yeah.

All right. And in terms of capital growth, what do you think, Julius? Where do you think we are looking at in Melbourne? It will be too slow this year. Probably we might go negative in most of the places because of the fact that when we look at the boom cycle or a pressure on the property prices, investor has a major role in the property price appreciation. In Melbourne, we could see there is a good demand for owner occupiers because those who can't afford properties in $500,000, $600,000 range. Yes, you have two options. Either you go towards the good regional town centre where you see there is a good growth on the property because of the demand and supply gap. So in Melbourne, it's affordable, but there are still options available across the country where the investor can get into and make more money than Melbourne. So at this stage in 2026, we don't see any improvement in the property prices. All right, yeah. And when you look at regional Victoria, what do you think? It's a nicer, quite a place than a Victorian thing, but less exciting, but again, less risky as well, right? So how do you think is going to be there in regional Victoria in this way? The original Victoria from last one and a half years, we could see there is a price movement. So especially when you look towards the original Victorian towards the Viranga or Bendigo, Shepparton, I think Viranga achieved around 16% in last year. Shepparton is around 12%. Bendigo is in double digits. So at this stage, there is enough pressure on the property prices. Demand and supply still has a bit of gap, so that's why we could see a little bit of movement in those regional town centers. In Ballarat, especially, there is this supply which is coming up. In the case of suppose there's a rental gap and if rentals are not moving, so because of the supply constraint, it might be a little slower, Ballarat and Geelong, because they are the bigger region. But especially when you go towards Urduanga, right, due to a strong population growth in Albury-Urduanga region, due to that inland rail network plus good health infrastructure, it is driving more population towards Urduanga and it is creating more impact towards the property prices because demand has already been there, there is no supply. Similarly, in Bendigo, also due to extraordinary government funding across the health commercial, which is around $2 billion, which is good enough for that particular region. That's why there is a good demand indicators. Same thing in Shepparton as well. Shepparton, yeah, again, similar to Wudunga, there's also a lot of health and infrastructure bit which is coming there in Shepparton. It's still a mining area, it's not a mine, sorry, agricultural area which is there and a lot of stuff is happening on that and that all the energy and all that is still contributing to the good employment growth and good long-term employment growth which is coming into that area in Shepparton as well, right? And similarly Melbourne is okay, okay. Melbourne may not be looking at a re-rating or something unless in the year 2026. And without Melbourne, I don't think so. Victoria is going to be having a great future there. There's a good value which is preserved here. But I think there's a lot of gap, you know. There is a lot of gap. And I think it will take 12 to 18 months, maybe even more, for stuff to happen in that area. in totality in what's happening in this way. We're looking at a lot of issues which are coming through in this bit as well. Now, looking at rental, okay, we talked about purchase. What do you think is going to be in Melbourne in terms of rentals in the area? At this stage in Melbourne, there are enough vacancies and enough properties for the rental. If you look at 2025, the vacancies are more than 2%. It is going to be same in 2026. There might be little changes because a lot of investors are selling properties and converting into owner-occupiers. And if there are not more homes coming up in a market, then you might see a little bit of surge in rental prices. But the vacancy is still going to be about one and a half percent. Yeah, close to two percent. Close to two percent, yeah. Yeah, but the only hope is the more and more education investment which is going there in that segment is bringing the students back. I think before COVID, students were the biggest driver of apartment demand. And I think once they are coming back, the apartment demand is going to come back into it. That's going to stop the migration as well. So I think net migration will start becoming more positive for Victoria in this year. But overall, I think the demand is still quite far away from where it should have been, right? Overall, demand should go up. But how far, how fast those becomes, I mean, no very, very strong or driving reasons that it should pick up by a large margin. I think that's where it... Yeah, that's why like Julius was saying, it will still have a much larger vacancy rate when you compare it with all the other capital cities, right? It will still have cash flow, negative issues which are going to still be compounded and as we said that good 3% plus negative in houses and all that, it's going to continue. So it's going to be, it's still have a kind of an okay, okay rental growth in apartments and houses but not very great situation there, unless you're really looking at a really contrarian view in Melbourne in terms of rents as well, right? And regional Victoria, what have you seen in regional Victoria in terms of rental outlook for 26? The rental demand is higher, especially in those all the regional Victorian region. And the rentals are rising. So, 2026 is going to be steady. It's not like you'll have a lot of vacancies in the market because there is still enough population growth plus enough demand for properties because of this all infrastructure development and the economical indicators which are happening there. So, 2026 for the regional Victoria will be a stable. be stable. And again, unlike Melbourne, it doesn't even have the built-to-rent activity which is happening there. So it's only mom and dad investors which are going to contribute. And that's not too many. So it's going to keep a moderate growth in the rental growth and rental yield. So it's going to be still remaining where it is. Maybe not exciting, but not boring as well to invest there in regional Victoria. That will keep it there.