• The highest demand is within the inner suburbs around the CBD and the Dandenong region
• Rental growth within the housing market was 21 percent in 2007, the best of any Australian capital city. Within the unit market rental growth was 15 percent, second only to Perth (Residex)
• Suburbs with the lowest vacancy rate in Melbourne are Dandenong and Noble Park.

What does this mean for investors? Braxton Chase does not expect the Melbourne residential market to enjoy another year of truly exceptional capital growth, (the house and unit markets both grew by over 20% in 2007), although we do expect it to be one of the top performing regions in Australia. However, due to high levels of migration to Melbourne, an undersupply of housing that is becoming more and more apparent each month and a lack of affordability for first time buyers, it is likely that Melbourne’s rental crisis will get worse before it gets better. For those investors already established in the market, it is likely that median yields for units will hit 5 percent for the first time in a decade, despite two years in which the median value of property has increased by 30 percent.