Melbourne’s population has been skyrocketing, adding about 100,000 people a year. The metro area had a population of 3.7 million in 2006. By 2013 it had jumped to 4.35 million. Some projections predict the population increasing to 8 million by the year 2050.
Melbourne was once considered a much more affordable city than Sydney, but the population growth has changed that as housing demand outstrips supply and they are neck and neck when it comes to cost of living. Melbourne is now suffering an acute shortage of housing and families looking for affordable options are increasingly being pushed to the outskirts of the city. This is currently one of the most expensive cities in the world.
RENTING IN MELBOURNE
As you begin your home search, it’s important to know that rent prices here are listed per week, which is different than most parts of the world where the price is the monthly cost. As you plan out your budget, you have to be careful since monthly rent does not equal 4x the weekly rent. You’ll need to multiply the weekly rent by 52 (weeks per year) and then divide by 12 (months per year) to get the monthly rent. For example:
On our neighborhood guide pages, the median rent listed is a monthly median since that’s what most people are familiar with and it’ll save you some math.
As mentioned, the the supply of housing in Melbourne is limited and this has led to competition for units in many of the city’s more desirable areas. Most available properties are shown in an open house format on the weekends for a short block of time. Properties are typically managed by real estage agencies and they’ll stagger their open houses in a suburb since it’s likely the same agent running each one. For instance, one open house may be from 9:15-9:30am and the next will be 9:45-10:00am to allow the agent to get between the two.
Depending on the location and cost of the property, this means you could be rubbing shoulders with lots of other people looking at the property during this inspection time. In fact, you’ll likely see the same crowd at each property if you’re visiting several in the same area.
WHAT YOU’LL NEED TO RENT
Given the competitive market, if you like a property it’s important you move quickly and have everything ready to go. You’ll need the following documentation to apply:
There may be a modest, nonrefundable fee to submit the application. Also, you may be able to submit an application online.
Submitting an application does not obligate you to take the apartment, so you can submit applications for several properties.
If you get the property you’ll need to sign a lease. At this time you’ll need to pay the first month’s rent and a bond (aka security desposit) typically equal to 4-6 weeks worth of rent.
BUYING IN MELBOURNE
Buying a home in Melboune is just as competitive as renting. Most homes here are sold through an auction format: a floor price is set for the property and then people who want to buy the property bid up from there. Some unscrupulous agents will purposely set a low floor price to attract buyers to an auction. In some cases, there can literally be a line out the door. People have spoken about going to open houses every week for a year, bidding on many of the properties, and continually getting outbid.
To compound that frustrating process, homes here are incredibly expensive. Something that seemed affordable can quickly skyrocket out of your budget during an auction. You may need to lower your expectations about what you can afford unless you’re a multimillionaire.
Two additional costs add to the overall expense of buying a house: stamp duty and, though optional, a buyer’s agent commission.
Stampy duty is a required tax on any property sale and is based on the price of a home. A $500,000 home would lead to about $18,000 in stamp duty. A $1 million home would incur a $40,000 stamp duty.
Not all home buyers use a real estate agent, referred to as a buyer’s agent for their role as an advocate for the buyer, not the seller. Still, many buyers do obtain the services of a buyer’s agent to help navigate the murky world of real estate. A commission for a buyer’s agent will be 1.5-2% of the purchase price, though some may charge a fixed fee.
Melbourne has seen a lot of property purchased by foreigners in the past decade. This has partially contributed to the housing shortage and home prices in the metro area and the government is cracking down. Foreign buyers will have to provide citizenship and visa information. You’ll also need to be approved to buy a home by the Foreign Investment Review Board.
Foreign buyers will also have to pay a fee to the Australian Tax Office. The fee is $5,000 for homes under $1 million and $10,000 for those over.
HELPFUL REAL ESTATE WEBSITES
1form.com.au – This handy website and mobile app lets you set up a profile with all the information you’d need to apply for a rental property. Instead of pulling together documentation every time you want to apply for a property, you can easily submit everything with this app.
Stamp duty calculator – Calculate how much stamp duty you’ll owe if you purchase a property in Melbourne.