Houses in the metro are inaccessible for many first-time buyers, who are turning instead to the apartment lifestyle
With Victoria continuing to set records in terms of interstate migration levels, demand for properties keeps climbing.
According to the April 2017 Quarterly Housing and Economic Review published by CoreLogic, Victoria had the highest net gain out of all states in the year leading up to September 2016. For Charles Tarbey, chairman and owner of Century 21 Australasia, this result is unsurprising given the strength of its market.
“The Victorian market is a standout in Australia, and Melbourne continues to outperform other Australian capital cities,” Tarbey says.
“The state offers not only many affordable areas to purchase property but good prospects for employment. The opportunities for work are as strong as in Sydney; however, property can be secured at a more affordable price in comparison, so it will likely continue to attract plenty of investment interest.”
ABS data indicate that, as of the end of 2016, over 2,000 people were migrating to the capital each week. Little wonder that Jane Slack-Smith, director of Investors Choice Mortgages, considers Melbourne to be the “powerhouse of Australia when it comes to population growth”.
“Population growth is one of the key factors that will see continued growth in Melbourne, particularly in its major regional feeder cities of Geelong, Ballarat and Bendigo. Like Sydney, the feeder cities should continue to experience good growth off the back of proximity to Melbourne as well as having their own dynamic economies.”
Investors seeking out good-quality apartments
There is a significant difference in the rental rates and returns of houses and units in Melbourne, and apartments are getting a lot of attention from investors because of their higher average yield (4.26% compared to 2.93% for houses).
Slack-Smith notes that a top choice is older, high-quality units located in established suburbs with good public transport.
While there are concerns about oversupply, the level of apartment development remains appropriate, according to REA Group’s chief economist, Nerida Conisbee. With houses becoming more and more unaffordable for first-time buyers, units are an attractive alternative, and if oversupply pushes prices down, this could push demand up to meet the existing stock levels. Moreover, the changes announced in the federal budget have made it easier for first-time buyers to make deposits.
Those who aim to get into the house market of the highly sought-after inner-city suburbs can still do so by considering the renovation of older properties. However, the process of obtaining planning approval could be a hassle.
SUBURB TO WATCH
Doveton: Affordable farm suburb attracts buyers
One of the lowest-priced suburbs in Melbourne, Doveton is getting recognition from buyers.
Property values have been increasing steadily for the past five years, although both houses and units in this suburb remain very accessible at under $450,000. Apartments in particular are a great bargain – there is strong potential for capital growth, prices are low and returns are significant at almost 5%.
With the redevelopment of the Dandenong city centre, Doveton is expected to see even more demand given its proximity to this area. Moreover, there are three primary schools to attract families with children, including Doveton Heights Primary School and Maranatha Christian School.
