You can be forgiven for being confused about the Melbourne market.

On the one hand, news media is full of stories about investors shunning Australia’s largest city because of draconian taxes and policies by the nation’s worst state government.

There are also frequent articles about the lack of price escalation in Melbourne markets, at a time when many other capital cities are delivering stellar capital growth.

But this is balanced by the analysis from those who believe Melbourne to be a prime opportunity for buyers to get in early in a growth cycle, with the city’s markets poised for revival.

A strong state economy, a big infrastructure program and some compelling population data support the view that Melbourne is overdue for a growth spurt.

The first thing to understand is why Melbourne has underachieved in the past couple of years while others have excelled.

The lingering impacts of the Covid period are considered at least partly responsible. Melbourne was locked down for longer than other Australian cities and was indeed dubbed by media as “the world’s most locked-down city”.

There’s no doubt the attitudes and policies of Dictator Dan (Andrews) deterred many. And subsequent state policies unfriendly to investors – including the reality that Victoria has the highest stamp duty and the highest land tax in the nation – have deterred buyers from investing in Victoria.

On the positive side, Melbourne is the nation’s biggest beneficiary of overseas migration, which made it a national leader on population growth last year. Australia experienced a record number of new additions to the national population in 2023, with 84% of it attributed to overseas migrants.

So Melbourne, despite losing residents to internal migration (people moving to other parts of the nation), grew its population by almost 3% last year. Only Western Australia had higher growth.

Victoria consistently ranks among the nation’s leading economies and ranked third in the July 2024 edition of the State of the States report by CommSec. The July report comments that Melbourne is consistently strong across all the metrics used to rank the states and territories, which include population growth, construction work, housing finance, retail spending and employment performance.

A strong economy underpins the residential real estate market, because it means there is busy economic activity creating jobs, and from that springs demand for homes.

A key factor keeping the Victorian economy vibrant is the big program of infrastructure development across Greater Melbourne. They include multi-billion-dollar developments now under construction like the Suburban Rail Loop, North East Link, Metro Tunnel and West Gate Tunnel – which combined are estimated to cost over $70 billion.

Those projects alone – and there many others impacting the city – are likely to energise the local economy in ways likely to lead to growth in demand for homes.

So there’s a plausible argument that now is an opportune time to be considering investment in Melbourne, rather than doing what many investors do, which is dive into markets when they read there’s a boom on.

Far smarter to buy before the boom starts.