The fragmented nature of Melbourne’s market can make for some unpredictable movements; however, navigating this metaphorical minefield could be easier than you think
Australia’s second fastest-growing housing market is a happy place for many investors. Growth continues to rise and low interest rates are encouraging positive market sentiment.
However, in Victoria, it remains ever more important to keep a level head and not get caught up in the hype. One step in the wrong direction could see investors waltzing into a pitfall they may struggle to get out of.
“It’s still very much a suburb-by-suburb scenario,” says Jeremy Marsden, Victoria residential manager at Propell National Valuers.
While housing is doing well in some suburbs, other areas are struggling with little capital growth. In the city’s notorious apartment market, it’s looking even more like a mixed bag.
“It’s basically because of that supply issue,” Marsden says.
“There’s been some evidence of a decline in prices, not large amounts. It tends to be project specific.”
Looming closures in the manufacturing industry only add further to the swirling pool that is the Melbourne property market.
“Here in Victoria we’ve got a lot of potential closures in the automotive industry and other manufacturing but we haven’t seen any flow-on effects from that yet.”
Where to look
According to Marsden, houses in the established middle to inner suburbs are seeing the strongest growth.
“There are clearly some suburbs doing particularly well around the middle-type suburbs in the school zones, which are certainly doing better than most,” he says.
“If you go out into the outer suburbs, things are transacting very well so volumes are up, but there’s still not a lot of growth in the values themselves.”
While new land is being released in Melbourne’s outer suburbs, there has been little reprieve in terms of demand for inner-city property.
“There’s at least 20 or 30 years of new land ready to be developed in the outer suburbs ... but clearly house prices keep rising within the inner and middle suburbs. That’s where people want to live, and there’s still a finite amount of land within those areas.”
On the apartment front, the situation is not looking so healthy. An oversupplied market has led to a considerable increase in resales and a decrease in values.
“Part of it is supply, but you can go down the road and buy something new for a similar price, or generally less than what people want for their second-hand stuff.
“There’s probably a degree of caution to take when buying into those projects too early on without doing sufficient research.”
The increasing popularity of inner-city land has led to significant high-density development. Recent changes to zoning laws have broken up the market, allowing developers and landowners to take advantage.
“Neighbours are getting together, two or three of them, and selling their houses in one lot, which are getting picked up by developers who are looking to do a higher-density development,” Marsden says.
Into the regions
As the Melbourne property market continues to ebb and flow, the real quiet achiever has been Victoria’s regional markets.
PRDnationwide Bendigo sales manager Tom Isaacs says a shortage in availability of land has driven up existing dwelling prices.
“There’s been a shortage of land up until late last year,” he says.
“The larger residential sites have been a long time coming, which has certainly seen regional Victoria land prices jump dramatically. In a lot of instances it has not been far behind the fringes of Melbourne prices.”
While vacancy rates have seen an increase, vendors are still seeing strong returns from property.
“Their returns are still very strong. Vendors are probably having to push towards correct pricing as opposed to having slightly higher rates.”
Recent developments such as the $600m Bendigo hospital redevelopment and Ballarat’s push for industry have encouraged considerable growth in the regional areas.
“A lot of core infrastructure has been provided,” Isaacs says.
“Those hotspots will typically be quite consistent in their growth, as opposed to those peaks and troughs you might see in metro areas.
“Regional Victoria will get stronger and stronger as the state government encourages industry to push externally and have places like Bendigo and Ballarat as satellite areas.”
SUBURB TO WATCH
Reservoir: Inner-city lifestyle sees unprecedented growth
Located just 12km north of Melbourne’s CBD, the booming suburb of Reservoir is one investors should look to dip their toes into. There are so many ways to describe this family-friendly suburb, but the word that seems to pop up most often is convenient.
The central location allows for easy access to all parts of Melbourne via the Metropolitan Ring Road, a range of bus routes, tramlines and a whopping four train stations. The suburb itself is home to a variety of recreational facilities, such as Edwards Lake and the Reservoir Leisure Centre. Parklands and sports clubs also litter the suburb, along with seven schools. It is no wonder this suburb is becoming incredibly popular with young and established families. La Trobe University also neighbours Reservoir, making it popular with students.
Shopping areas tend to be located around Edwards Street and Broadway, which are home to cafes, bakeries, supermarkets and much more. The Northland Shopping Centre is also a trip down the road, while the Preston market neighbours the suburb.
Reservoir’s northern location means homes in the suburb tend to be a little bigger. As its popularity continues to rise, so too do prices. With a median house price of $565,500, Reservoir is not cheap. However, bargains can be found by those willing to look. Four-bedroom homes perfect for families can be found on Massey Avenue, Gellibrand Crescent and Cheddar Road for under $370,000.
