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Melbourne's rental yields vary significantly between property types and locations, with apartments delivering higher returns than houses.
As of September 2025, Melbourne apartment rental yields average 4.7% across the metro area, while houses generate approximately 3.5% yields. The CBD and inner suburbs offer the highest apartment yields, reaching up to 8.6% in some areas, while growth corridor suburbs provide the strongest house yields at 4.3-4.9%.
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Melbourne apartment yields currently outperform house yields, with CBD units delivering the highest returns despite higher purchase prices.
Mortgage costs and ongoing expenses significantly impact net yields, making accurate budgeting essential for investment success.
| Property Type | Median Price | Median Weekly Rent | Rental Yield |
|---|---|---|---|
| House (Melbourne metro) | $860,000 | $575 | 3.5% |
| Unit (Melbourne metro) | $610,000 | $555 | 4.7% |
| House (Regional VIC) | $567,000 | $480 | 4.5% |
| Unit (Regional VIC) | $425,000 | $400 | 5.0% |
| CBD Units (premium locations) | $450,000-$650,000 | $650-$750 | 7.1-8.6% |
| Growth Corridor Houses | $520,000-$680,000 | $450-$520 | 4.3-4.9% |
| Townhouses (Melbourne metro) | $720,000 | $520 | 3.8% |
What types of properties can you invest in across Melbourne?
Melbourne's investment property market consists of three main categories: apartments (units), houses, and townhouses.
Apartments dominate the CBD and inner suburbs, appealing to singles, couples, students, and young professionals who prioritize proximity to work or study locations. These properties typically range from studios to two-bedroom configurations and offer the highest rental yields in the Melbourne market.
Houses are predominantly located in middle-ring and outer suburbs, targeting families, long-term renters, and those seeking space and privacy. These properties generally provide more stable tenancies but deliver lower rental yields compared to apartments.
Townhouses represent a growing segment, offering more space than apartments while requiring less maintenance than standalone houses. They attract small families and downsizers, providing a middle ground between apartments and houses in terms of both rental returns and management requirements.
How do rental yields vary across Melbourne's main areas and suburbs?
Rental yields in Melbourne vary dramatically based on location and property type, with CBD and inner-city areas delivering the highest apartment yields.
| Location Type | Best House Yields | Best Unit Yields |
|---|---|---|
| CBD & Inner City | 2.8-3.2% | 7.1-8.6% |
| Inner Suburbs | 3.0-3.8% | 5.5-7.5% |
| Middle Ring | 3.2-4.0% | 4.5-6.0% |
| Growth Corridors | 4.3-4.9% | 4.8-5.5% |
| Regional Victoria | 4.5-5.2% | 5.0-5.8% |
| Outer Suburbs | 3.8-4.5% | 4.2-5.0% |
High-yield house suburbs include Junction Village (4.9%), Lang Lang (4.8%), Dallas (4.7%), and Melton (4.5%). Top-performing unit locations are Melbourne CBD (8.6%), Travancore (7.6%), Carlton (7.5%), and Southbank (7.1%).
The CBD's exceptional unit yields reflect high rental demand from students and professionals, combined with relatively affordable purchase prices for smaller apartments compared to the weekly rental income they generate.
What are the current typical rental yields for each property type and area?
As of September 2025, Melbourne metropolitan area delivers specific yield ranges depending on property type and precise location.
Melbourne metro apartments average 4.7% yields with median prices around $610,000 and weekly rents of $555. Melbourne metro houses generate 3.5% yields from median prices of $860,000 and weekly rents of $575.
Regional Victoria properties outperform metro areas, with houses achieving 4.5% yields from $567,000 median prices and $480 weekly rents. Regional apartments deliver 5.0% yields from $425,000 median prices and $400 weekly rents.
Premium CBD locations command the highest yields, with select buildings achieving 8.6% returns, while growth corridor suburbs like Dallas, Melton, and Lang Lang offer house yields between 4.3% and 4.9%.
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How do surface size and bedroom numbers affect rental income and yields?
Property size and bedroom configuration significantly impact both rental income and yields, with smaller properties generally delivering higher yields per dollar invested.
Smaller apartments including studios and one-bedroom units generate higher yields due to lower purchase prices combined with strong rental demand from students, singles, and young professionals. However, these properties experience higher tenant turnover and may require more frequent maintenance.
Larger properties including three to four-bedroom houses and townhouses attract families seeking stability, offering lower yields but greater rental stability and reduced vacancy periods between tenancies.
Melbourne metro averages show apartments generating approximately $360 per week per room, while houses average $177 per week per room, demonstrating the yield advantage of apartment investments.
Two-bedroom apartments often provide the optimal balance, attracting both couples and sharers while maintaining reasonable purchase prices and strong rental demand across Melbourne's diverse tenant market.
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What are the upfront costs and ongoing expenses for Melbourne investment properties?
Melbourne property investment requires substantial upfront capital and ongoing expense budgeting that significantly impacts net returns.
Upfront costs include a 10-20% deposit, stamp duty ranging from 1.4% to 6.5% of purchase price (approximately $39,000 on a $600,000 property), legal and conveyancing fees of $2,000-$3,000, property inspections costing $300-$600, and optional buyer's agent fees of 1-2% of purchase price.
Ongoing annual expenses typically include council rates, water rates, and insurance totaling approximately $4,500, property management fees of 7-10% of rental income, maintenance costs of $1,000-$2,000 for newer properties (significantly higher for older houses), and land tax reaching up to 4% of property value for Victorian investors.
Additional costs may include strata fees for apartments, typically ranging from $2,000-$8,000 annually depending on building amenities and age, plus periodic major maintenance items like carpet replacement, painting, and appliance updates.
How does mortgage financing impact your net rental yield?
Mortgage financing dramatically reduces net rental yields, with current interest rates significantly impacting investment returns.
September 2025 variable mortgage rates average 5.3-5.5%, meaning a $600,000 loan requires monthly repayments of $2,820-$2,867. These repayments cover both principal and interest, with interest portions being tax-deductible for investment properties.
Net yield calculations must factor in mortgage interest, ongoing expenses, and tax implications. For example, a property generating 4.7% gross yield may deliver only 1-2% net yield after mortgage payments and expenses.
Most mortgage payments in the first 10-15 years primarily cover interest rather than principal reduction, meaning investors rely heavily on rental income and potential capital growth rather than equity building through principal repayments.
Investors should calculate net yield as: (annual rental income minus all expenses minus mortgage interest) divided by initial equity invested, providing a realistic return assessment.
What are the vacancy rates across different Melbourne suburbs and property types?
Melbourne metropolitan vacancy rates average 1.8% as of July 2025, slightly above the national average but varying significantly by location and property type.
| Area/Property Type | Vacancy Rate | Risk Level |
|---|---|---|
| Melbourne CBD Units | 3.83% | Higher Risk |
| Inner City Apartments | 2.5-3.8% | Moderate Risk |
| Saint Albans | 0.61% | Low Risk |
| Werribee | 1.48% | Low Risk |
| Craigieburn | 1.53% | Low Risk |
| Outer/Middle Suburb Houses | 0.5-1.5% | Low Risk |
| Regional Victoria | 1.0-2.0% | Low-Moderate Risk |
CBD and inner-city units experience higher vacancy rates due to increased tenant turnover, particularly among students and young professionals who frequently relocate for study or career changes.
Outer and middle-ring suburbs with houses typically maintain vacancy rates below 1.5%, reflecting greater tenant stability among families and long-term residents.
What rental demand and tenant profiles drive Melbourne's market?
Melbourne's rental market benefits from diverse tenant segments creating consistent demand across different property types and locations.
Strong demand drivers include university students concentrated around CBD, Carlton, and Parkville areas, young professionals seeking convenient commutes, international migrants establishing themselves in Australia, and families gravitating toward growth corridors with better value propositions.
Primary tenant segments include singles and couples preferring apartments for lifestyle and convenience, families requiring houses or townhouses for space and schools, downsizers moving from larger family homes to low-maintenance apartments or townhouses, and transient workers in growth areas seeking temporary accommodation.
Student demand remains particularly strong around major universities, while young professional demand concentrates in inner suburbs with good transport links to employment centers. Family demand drives the outer suburban rental market, especially in areas with quality schools and amenities.
What are the realistic average rents for different Melbourne property types?
Melbourne rental rates vary significantly by property type and location, with September 2025 figures showing clear market segmentation.
1. **Apartments/Units**: $555-$650 weekly across metro Melbourne, with CBD properties commanding premium rates of $650-$750 weekly2. **Houses**: $575 weekly average across metro Melbourne, with regional Victoria averaging $480 weekly 3. **Townhouses**: Generally $520-$580 weekly, positioned between apartments and houses4. **Studio Apartments**: $380-$480 weekly, popular with students and singles5. **Three-bedroom Houses**: $620-$720 weekly depending on suburb and condition6. **Four-bedroom Houses**: $750-$950 weekly, primarily in family-oriented suburbs7. **Luxury Apartments**: $800-$1,200+ weekly for premium CBD or inner-city locationsRental rates reflect location premiums, with inner suburbs commanding 15-25% higher rents than outer areas, while CBD apartments can achieve 30-40% premiums over suburban equivalents.
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We did some research and made this infographic to help you quickly compare rental yields of the major cities in Australia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
How do short-term rental returns compare to long-term lease returns?
Short-term rentals through platforms like Airbnb can generate higher gross returns but involve significantly more complexity and costs than long-term leasing.
Well-located Melbourne units can achieve $3,500-$4,000 monthly through short-term rentals, representing 10-15% higher gross income than traditional leasing. However, these returns come with substantial additional costs including 15-20% platform fees, higher vacancy rates due to seasonal fluctuations, intensive management requirements, and Victoria's new 7.5% levy on short-term stays.
Long-term leases offer greater income stability, lower management complexity, and reduced ongoing expenses. Many properties deliver similar net yields after factoring in short-term rental costs, vacancy periods, and additional maintenance requirements.
Short-term rentals may outperform during peak tourist seasons but often underperform during quieter periods, creating income volatility that many investors prefer to avoid. Regulatory changes, including potential additional restrictions, add uncertainty to short-term rental strategies.
How have Melbourne rents and yields changed over recent years?
Melbourne's rental market has experienced significant volatility over the past five years, with recent stabilization following earlier dramatic increases.
Rent growth in 2025 has moderated to 1.1-1.7% annually, following substantial increases of 8% in 2023 and 5-7% during 2020-2022. This moderation reflects improved supply conditions and economic uncertainty affecting tenant capacity to absorb further increases.
Rental yields for apartments now sit slightly higher than pre-pandemic levels due to rent increases outpacing price growth in some segments. House yields have generally plateaued or declined slightly, as property price appreciation has outpaced rental growth in most suburban markets.
Compared to 2020, Melbourne units show improved yields due to rent recovery following pandemic-related decreases, while house yields remain under pressure from continued price appreciation in many desirable suburbs.
What are the smartest investment strategies and how does Melbourne compare to other cities?
Melbourne's optimal investment strategies focus on high-yield opportunities while maintaining reasonable capital growth prospects and management simplicity.
Best-performing strategies include targeting inner-city apartments under $400,000 for maximum yield, purchasing affordable houses in established growth corridors, focusing on furnished apartments for premium rental rates, and selecting areas with strong rental demand fundamentals including transport links, employment centers, and educational institutions.
Melbourne currently delivers competitive yields compared to other major Australian cities. Sydney offers lower yields but potentially higher capital growth, Brisbane and Adelaide previously offered higher yields but now lag Melbourne for apartment investments, while Perth provides higher yields of 5-6%+ but with greater market volatility.
Melbourne apartment yields now rank among Australia's highest, particularly for well-located inner-city properties. The city's diverse economy, population growth, and rental demand fundamentals support continued yield competitiveness over the next 1-5 years.
Long-term projections for 1-10 years suggest Melbourne will maintain stable yields with units continuing to outperform houses, moderate growth expectations, and rental demand remaining strong unless significant supply increases occur.
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Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Melbourne's rental market offers compelling opportunities for investors seeking consistent income streams, with apartments delivering superior yields compared to houses across most locations.
Success requires careful location selection, accurate expense budgeting, and realistic yield expectations, particularly when factoring in mortgage costs and ongoing expenses that significantly impact net returns.
Sources
- Real Estate - Property Investment Types Comparison
- Savings.com.au - Victorian Rental Yields
- Rent.com.au - Rental Market Snapshot June 2025
- REA Group Rental Report December 2024
- State Revenue Office Victoria - Property Buying Costs
- Property Update - Rental Vacancy Rates
- Metropole - Melbourne Housing Market Update
- Australian Bureau of Statistics - Rental Market Insights
- Property Planning - Melbourne Market Analysis
- CoreLogic Rental Review December Quarter 2024