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Yes, the analysis of Melbourne's property market is included in our pack
Melbourne's rental market offers some of the highest yields among major Australian cities, particularly for apartments in inner-city areas and student-heavy suburbs.
As of June 2025, Melbourne apartment investors can achieve rental yields ranging from 6.6% to 7.8% in top-performing suburbs like Carlton and the CBD, while house yields typically range from 4.6% to 4.9% in outer suburbs. The market remains tight with a citywide vacancy rate of just 1.3%, driven by strong demand from international students, young professionals, and skilled migrants.
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Melbourne's rental yields are particularly strong for apartments, with inner-city locations achieving 7.4% to 7.8% yields as of June 2025.
The market benefits from extremely low vacancy rates (1.3% citywide) and consistent demand from students and professionals, making it an attractive investment destination compared to Sydney or Brisbane.
| Property Type | Best Performing Suburb | Rental Yield | Median Price | Weekly Rent |
|---|---|---|---|---|
| Apartment | Carlton | 7.8% | $447,500 | $525 |
| Apartment | Melbourne CBD | 7.4% | $490,000 | $650 |
| Apartment | Notting Hill | 6.6% | $392,500 | $550 |
| House | Coolaroo | 4.9% | $545,000 | $485 |
| House | Dallas | 4.7% | $545,000 | $500 |
| House | Campbellfield | 4.6% | $612,500 | $515 |
What types of properties can you invest in across Melbourne?
Melbourne's property market offers six main investment options for residential real estate.
Detached houses represent the traditional choice, featuring free-standing homes on private land with gardens, typically located in middle and outer suburbs. Apartments or units dominate the inner-city market, ranging from studio spaces to luxury penthouses in high-rise buildings with shared amenities.
Townhouses provide a middle ground between houses and apartments, offering multi-level living with private entrances, often clustered in developments across various suburbs. Terrace houses, particularly common in Melbourne's inner areas, feature the classic row-house design with shared walls and heritage charm.
Duplexes and semi-detached properties offer two separate dwellings sharing a common wall, while villas typically provide single-level living in smaller complexes. Each property type targets different tenant demographics and offers varying rental yield potential depending on location and market demand.
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Which Melbourne suburbs deliver the strongest rental returns right now?
Carlton leads Melbourne's rental yield performance for apartments, delivering 7.8% returns as of June 2025.
For apartment investments, Carlton tops the list with its $447,500 median price generating $525 weekly rent, followed closely by Melbourne CBD at 7.4% yield ($490,000 median price, $650 weekly rent). Notting Hill and Travancore both achieve 6.6% yields, with median prices of $392,500 and $383,000 respectively.
House investors should focus on outer northern suburbs, where Coolaroo delivers 4.9% yields with a $545,000 median price and $485 weekly rent. Dallas matches Coolaroo's median price but achieves 4.7% yield with slightly higher weekly rent of $500. Campbellfield rounds out the top three for houses at 4.6% yield, though with a higher entry price of $612,500.
These high-yield suburbs benefit from strong tenant demand, particularly from students near universities and workers seeking affordable housing options. The combination of reasonable purchase prices and solid rental demand creates these attractive return scenarios for investors willing to target specific locations.
What are the exact rental yields by property type across Melbourne areas?
Melbourne apartment yields significantly outperform house yields across all high-performing suburbs as of June 2025.
| Property Type | Suburb/Area | Median Price | Weekly Rent | Annual Yield |
|---|---|---|---|---|
| Apartment | Carlton | $447,500 | $525 | 7.8% |
| Apartment | Melbourne CBD | $490,000 | $650 | 7.4% |
| Apartment | Notting Hill | $392,500 | $550 | 6.6% |
| Apartment | Travancore | $383,000 | $505 | 6.6% |
| House | Coolaroo | $545,000 | $485 | 4.9% |
| House | Dallas | $545,000 | $500 | 4.7% |
| House | Campbellfield | $612,500 | $515 | 4.6% |
How much will you actually pay for a property including all taxes and fees?
A $500,000 Melbourne investment property will cost approximately $525,000 to $530,000 including all purchase expenses.
Victoria's stamp duty represents the largest additional cost, calculated on a sliding scale that reaches 5.5% for investment properties over $960,000. For a $500,000 investment property, expect stamp duty of approximately $25,070, while owner-occupiers pay around $21,970 for the same property value.
Legal and conveyancing fees typically range from $1,000 to $2,500 depending on property complexity and solicitor choice. Building and pest inspections cost between $400 and $800, while mortgage establishment fees vary from $0 to $1,000 depending on your lender and loan package.
Properties under $25,000 attract 1.4% stamp duty, rising to 2.4% for values between $25,000 and $130,000, then 6% for properties between $130,000 and $960,000. The calculation becomes complex, so using online calculators ensures accuracy for your specific purchase price and circumstances.
What ongoing costs should you budget for Melbourne rental properties?
Melbourne rental property owners should budget approximately $8,000 to $12,000 annually for ongoing expenses on a typical investment property.
- Council rates: $1,200 to $2,400 per year, paid quarterly and varying significantly by suburb and property value
- Property management fees: 6% to 8% of gross rental income for professional management services
- Building insurance: $800 to $1,500 annually, plus landlord insurance for $200 to $500 yearly protection
- Body corporate fees: $2,000 to $4,000 per year for apartments and townhouses, covering common area maintenance
- Maintenance and repairs: $1,000 to $3,000 annually depending on property age, condition, and tenant care
- Utilities during vacancy: Approximately $70 per week for electricity, water, gas, and internet when properties sit empty
These costs directly impact your net rental yield, potentially reducing gross returns by 2% to 4% depending on property type and management efficiency. Factor these expenses into your investment calculations to determine true profitability rather than relying solely on gross yield figures.
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How do current mortgage rates affect your actual returns after loan payments?
Melbourne investment mortgage rates of 6.04% to 6.29% significantly reduce net rental yields compared to gross returns.
As of June 2025, investor variable rates with principal and interest repayments range from 6.04% to 6.29% for loans up to 80% of property value. Owner-occupier rates sit slightly lower at 5.84% to 6.29% for the same loan-to-value ratio, though investment properties typically face higher rates and stricter lending criteria.
For an 80% leveraged investment property, mortgage repayments typically consume 2% to 3% of gross rental yield annually. A property generating 7% gross yield might deliver only 4% to 5% net yield after loan servicing, before considering other ongoing costs like rates, insurance, and maintenance.
Interest rate rises directly impact investment viability, with each 1% increase in rates reducing net yields by approximately 0.8% for highly leveraged properties. Current rates remain elevated compared to the 2020-2022 period, making cash flow positive investments more challenging to achieve in Melbourne's current market conditions.
What rental income can you expect from different Melbourne property types and areas?
Melbourne rental income varies significantly between property types and locations, with inner-city apartments commanding premium weekly rents.
Houses across Melbourne generate median weekly rents of $580 to $600 as of June 2025, while apartments typically achieve $550 to $565 weekly. However, location creates substantial variation within these ranges, particularly for apartments in high-demand areas.
Inner-city apartments in the CBD and Carlton command $525 to $650 weekly rent, benefiting from proximity to employment, universities, and entertainment precincts. Outer suburban houses in areas like Coolaroo and Dallas generate $485 to $500 weekly rent, reflecting their distance from central Melbourne but offering larger living spaces.
Short-term rental markets can achieve 20% to 40% premium over long-term rentals in tourist-friendly areas, though vacancy periods and management complexity often offset these higher rates. Long-term rentals provide more stable income streams with lower management intensity, making them suitable for most investment strategies focused on consistent cash flow generation.
How tight is Melbourne's rental market across different areas and property types?
Melbourne's rental market remains extremely tight with a citywide vacancy rate of just 1.3% as of May 2025.
| Area Type | Suburb Example | Vacancy Rate | Market Condition |
|---|---|---|---|
| CBD | Melbourne CBD | 3.8% | Higher turnover |
| Outer Suburbs | Saint Albans | 0.6% | Extremely tight |
| Growth Areas | Werribee | 1.5% | Balanced |
| Established Suburbs | Craigieburn | 1.5% | Balanced |
| Inner Suburbs | Carlton | 1.0% | Very tight |
Who are your typical tenants in Melbourne's current rental market?
Melbourne's rental market attracts a diverse tenant base dominated by international students, young professionals, and skilled migrants.
Inner-city areas like Carlton and the CBD primarily house international students attending Melbourne's universities, along with young professionals working in finance, technology, and creative industries. These tenants typically seek modern amenities, proximity to public transport, and vibrant social environments, often willing to pay premium rents for convenience and lifestyle benefits.
Middle and outer suburban areas attract families, local professionals, and some students seeking more space and value for money. These tenants prioritize schools, parking, and family-friendly amenities over nightlife and CBD proximity, creating stable, longer-term rental arrangements with lower turnover rates.
Skilled migrants represent a growing tenant segment across all areas, often seeking quality housing while establishing themselves in Melbourne. This group typically demonstrates strong rental payment history and stability, making them attractive tenants for investment property owners seeking reliable income streams with minimal vacancy periods.
It's something we develop in our Australia property pack.
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 have Melbourne rental prices and yields evolved over recent years?
Melbourne rental prices surged dramatically from 2020 to 2023, followed by stabilization through 2024 and early 2025.
The 2020-2023 period saw exceptional rental growth, with house rents increasing 15% and unit rents rising 16% during 2023 alone. This surge reflected post-pandemic demand recovery, international student returns, and migration increases coinciding with limited housing supply expansion.
2024 marked a transition year with rental growth slowing significantly, as house rents increased only 4% while unit rents remained largely flat. This moderation reflected affordability constraints reaching tenant capacity limits and some new supply entering specific market segments.
As we reach mid-2025, rental yields for units have strengthened due to property price stabilization while rents hold steady, creating the current attractive yield environment. House yields face pressure from continued property value appreciation outpacing rental growth, though overall returns remain solid compared to other Australian capitals. This trend suggests unit investments currently offer superior yield prospects in Melbourne's evolving market dynamics.
What rental yield trends should Melbourne investors expect going forward?
Melbourne rental yields should remain stable through 2025 with gradual increases expected from 2026 to 2028.
Short-term forecasts through late 2025 suggest rental yield stability, with modest growth tracking inflation rates as the market digests recent price adjustments. Supply constraints continue supporting rental demand, while affordability concerns limit aggressive rent increases that could further strain tenant capacity.
Medium-term projections for 2026-2028 indicate gradual yield improvement as supply shortages persist and population growth maintains rental demand pressure. However, rental growth will likely remain constrained by tenant affordability limits, preventing the explosive increases seen during 2022-2023.
Long-term yield expectations center on low-to-mid single digit growth annually, barring major policy interventions or economic disruptions. Government housing initiatives, interest rate movements, and international migration policy changes represent key variables that could accelerate or moderate these baseline projections for Melbourne's rental investment landscape.
How does Melbourne's rental yield performance compare to other major cities?
Melbourne delivers superior rental yields compared to Sydney, Brisbane, and major international markets as of June 2025.
| City | Median Weekly Rent | Vacancy Rate | Typical Unit Yield | Market Strength |
|---|---|---|---|---|
| Melbourne | $651 | 1.3% | 7.4%-8.5% | Very Strong |
| Sydney | $855 | 1.5% | 4%-5% | Moderate |
| Brisbane | $684 | 0.9% | 5%-6% | Strong |
| Auckland (NZD) | $630 | ~1.5% | 4%-5% | Moderate |
| Vancouver (CAD) | $2,800/month | <1.5% | 3%-4% | Weak |
Melbourne's competitive advantage stems from relatively affordable property prices combined with strong rental demand, creating yield premiums of 2% to 4% over Sydney and international alternatives. This positioning makes Melbourne particularly attractive for investors prioritizing income generation over pure capital growth strategies.
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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 stands out among global cities for rental yield performance, offering apartment investors returns of 7.4% to 7.8% in prime locations as of June 2025.
The combination of tight vacancy rates at 1.3%, strong tenant demand from students and professionals, and relatively affordable property prices creates an attractive investment environment compared to Sydney, Brisbane, or international alternatives like Auckland and Vancouver.
Sources
- API Magazine - Property Types in Australia
- OpenAgent - Highest Rental Yield Suburbs
- Savings.com.au - Rental Yield Victoria
- Eagle Peak - Stamp Duty Victoria 2025
- Mortgage Choice - Property Costs 2025
- Commonwealth Bank - Home Loan Rates
- Rent.com.au - Rental Market Snapshot 2025
- CBRE - Apartment Vacancy Report 2025
- Property Update - Vacancy Rates
- Everything in Melbourne - Rental Market Trends 2025