The Melbourne Property Market – 29 Investor Tips

The Melbourne property market has been one of the surprise performers over the last few years.

Many commentators predicted the Melbourne market would slump citing factors such as: strong rising property prices, the death of manufacturing in Victoria, an oversupply in CBD apartments and rising unemployment.

However the markets have confounded the pundits and kept rising.

In fact, after the booming Sydney real estate market, Melbourne has been the best performing capital city market over the last few years.

But…is it too late to get into the Melbourne property market?

Like most things in real estate the answer is – it depends.

While some areas still have strong growth ahead, certain sub markets should be avoided like the plague.

I’m going to examine this in detail in this blog (which is a little longer than normal, so if you’re looking for a particular element of the Melbourne property market, use these links to skip down the page.

Melbourne’s Many Markets
1. MELBOURNE PROPERTY MARKET PRICES
2. LONG TERM MELBOURNE PROPERTY MARKET TRENDS
3. MELBOURNE’S AVERAGE RENTAL YIELD
What’s So Special About Melbourne?
4. MELBOURNE’S DEMOGRAPHICS
5. MELBOURNE’S LAYOUT
6. MELBOURNE’S INFRASTRUCTURE
7. MELBOURNE’S ECONOMY
8. MELBOURNE’S GROWTH
9. MELBOURNE’S CULTURE
What types of properties perform well in Melbourne?
10. MELBOURNE HOUSES
11. MELBOURNE TOWN HOUSES
12. MELBOURNE UNITS
13. MELBOURNE FLATS AND APARTMENTS
14. COMMERCIAL, RETAIL AND INDUSTRIAL PROPERTIES
How do Melbourne’s areas compare?
15. MELBOURNE’S INNER CITY
16. MELBOURNE’S BAYSIDE AND SOUTH-EASTERN SUBURBS
17. MELBOURNE’S EASTERN SUBURBS
18. MELBOURNE’S WESTERN & NORTHERN SUBURBS
Advanced Strategies & Things to Look For
19. TAKE ADVANTAGE OF HIGH STANDARDS
20. AVOID POOR QUALITY APARTMENTS
21. MELBOURNE’S INNER AND MIDDLE RING
22. PROPERTY OVERSUPPLY
23. NEGATIVE GEARING IN MELBOURNE
How do I choose an investment property in Melbourne?
24. INTRINSIC VALUE
25. OUTPERFORMING AVERAGES
26. PROPERTIES WITH A TWIST
27. POTENTIAL CAPITAL GROWTH
How can I keep up with the market?
28. NEWS, UPDATES AND ADVICE
29. INVESTMENT ADVICE

Clearly Melbourne isn’t “one” property market

There are multiple markets in this diverse sprawling city; divided by geographic location, price point and property type.

Currently some markets are still hot, while others are not.

So to help you better understand what’s going on in Australia’s second largest property market are 29 things you should know if you’re considering investing in Melbourne property:

1. Melbourne Property Market Prices

Over the past couple of years Melbourne home values have risen at the second fastest pace of all capital cities.property house arrow high price

Auction clearance rates have consistently been high and discounting and time on market levels have fallen across the city over the year showing strong market depth from a range of home buyers and investors.

As at the end of the first half of 2015 CoreLogic reported:

Melbourne median house price: $615,000; up 11.2% on the previous 12 months.

Melbourne median unit price: $480,000; up 2.4% on the previous 12 months.

2. Long Term Melbourne Property Market Trends

Historically, the city’s property market has gone from strength to strength. In 1966, the median house price in Melbourne was just $9,400.

Values have doubled six times since then, with the median crashing through the $100,000 barrier in 1988, and pushing through the half-million dollar mark in 2010.

Melbourne Property Market

 Source: CoreLogic.com.au

However dwelling price growth in Melbourne has been very fragmented. While some suburbs has just chugged along others are strongly outperforming.

Many inner south eastern, more affluent suburbs have well outperformed these averages. In particular suburbs property prices for homes within top Victorian government school enrolment zones have rocketed up to 32 per cent over the past year.

 

3. Melbourne’s Average Rental Yield

While over the long term rentals have grown in line with property values, more recently rental growth has remained moderate.

The average rental income from an investment property in metropolitan Melbourne was $365, according to the Department of Human Services in Victoria, rising 2.4% from the previous year.

For investors, this means an average rise in rental income of $8-10 per year.

The Eastern metropolitan area fetched the highest median rent at $490, while Port Phillip and Stonnington in the Southern metro generated the highest rental return by suburb, achieving $1,050 and $1,150 respectively, according to a report from the Department of Human Services.

What’s so special about Melbourne?

4. Melbourne’s demographics

As Australia’s second-largest city, Melbourne is home to around 4.35 million people.

The culturally diverse and creative city is home to residents from an estimated 180 countries, who speak over 233 languages and dialects and follow more than 100 religious faiths.

Of the 130,000-odd thousand people who live in Melbourne’s inner city (the CBD), more than half are aged between 15 and 34, and they are generally living in single-person households or as couples without children.

According to Census data, this is strongly influenced by the high number of higher education students (both domestic and international) that reside in the city.

Immigration from China and India accounted for 32% of overall growth in population numbers, making Mandarin the second most commonly spoken language in the city.

5. Melbourne’s Layout

A well-planned city that is amply serviced by a range of public transport options, Melbourne is laid out under the Hoddle Grid’, so named after its designer Robert Hoddle, which runs roughly parallel to the Yarra River.

As with most large cities, greater Melbourne is divided into ‘east’ and ‘west’ neighbourhoods; those in the east are more established and generally considered more affluent, while those in the west are more affordable, newer suburbs with less established reputations.

6. Melbourne’s Infrastructure

Melbourne residents enjoy the use of some of Australia’s most advanced and well-connected systems of road, rail and tram infrastructure, which give locals plentiful options when deciding how to get around the city and its surrounding suburbs.

tram Melbourne transport

The city received a perfect score of 100 for its world-class infrastructure in the 2013 EIU Liveability Report, where ongoing investment in Melbourne’s infrastructure was highlighted as being one of the factors that keeps Melbourne at the top of the index.

Meanwhile, Melbourne Airport handles more than 30 million passengers annually along with 350,000 tonnes of air freight, making it Australia’s largest air freight hub.

The city is also home to a number of world-renowned universities.

However as Melbourne suburbs sprawl further and further out from the CBD, the difference in level of amenities between the inner suburbs and the poorly serviced outer suburbs is becoming more glaring, causing people to pay a premium to leave closer to the CBD and the better serviced inner suburbs.

7. Melbourne’s Economy

As a cosmopolitan, creative city that is served by a number of industries, Melbourne residents enjoy employment in diverse industries, from tourism, hospitality and entertainment to commerce, industry and trade.

The unemployment rate presently hovers around 6% in the inner city, growing to 6.5-7% in the inner and north east, and 8% in Melbourne West.

Like much of Australia, Melbourne is transitioning from a manufacturing state to one driven by service industries, which is creating strong job growth and resultant overseas and interstate migration.

While the economy may not be as robust as it was, the momentum of the Melbourne property market is creating a “wealth effect” for many of its residents who are feeling wealthier as the value of their homes keep increasing.

8. Melbourne’s growth

Melbourne is one of the fastest-growing cities in the country, adding a robust 1,800 people a week to its population, which now stands at 4.4 million, according to the latest ABS figures.

Think about that…growing at just under 2% per annum, this means Melbourne’s population will increase by around 10% over the next 5 years!

A large chunk of this growth is happening in Melbourne’s outer west, where the number of residents has increased by a figure equal to the population of Hobart over the last decade.

South Morang, for instance, a neighbourhood in the city’s outer north, is now the fastest-growing suburb in Australia, with 80 people a week moving to the area in the year to June 2014.

melbourne lanes cafe social

In fact, seven of the country’s top 10 growth areas were outer suburbs of Greater Melbourne, with international migration a big driving force behind Melbourne’s population growth.population

By the way…

Just because there is significant population growth in these areas doesn’t mean there is strong capital growth of property values in these areas.

In fact there isn’t!

That’s why I would avoid investing in these new outer suburbs as they lack the demographic and economic drivers to push up property values.

9. Melbourne’s culture

The city of Melbourne is nothing if not multicultural, with dozens of different cultures and nationalities 140 to be exact living side-by-side.

The city’s Multicultural Hub was launched as a friendly, supportive environment for Melburnians of all cultures to get together and work, share and learn, while the city’s diverse and awarded restaurant scene is highly influenced by immigrants from diverse backgrounds including Chinese, Italian, Greek and Lebanese.

What types of properties perform well in Melbourne?

10. Melbourne Houses

Decades ago, the Australian property market was dominated by demand for freestanding houses.

The appetite for ‘the Australian dream’, complete with a comfortable home on a big block with a picket fence and a pet dog, was insatiable, and home buyers as well as investors flocked to houses as a preferred investment type.

Today, the concept that land goes up in value is still well recognised, but not all land is created equal.

What’s more, changing demographics and evolving family situations have shifted dynamics to the point where more Melbournians are trading backyards for balconies meaning apartments, units and townhouses can be just as highly sought as freestanding homes.

With median house values in Melbourne virtually doubling in the last decade, many people can’t afford freestanding homes, so they smartly start their home buying or investment journey with apartments instead.

11. Melbourne Town Houses

The term townhouse originally referred in British usage to the city residence of a member of the nobility, as opposed to their country estate.

Today the term refers to medium density (often multi story) dwellings that may be, but not necessarily, terraced (row housing) or semi detached.

They are modern accommodation on small lots of land and have become the preferred style of accommodation for an increasingly large Melbourne demographic and make great investments.

12. Melbourne Units

housevunit

Units (sometimes called villa units) is the name given to single-story, older-style dwellings, mainly built in the 1960s and 70s.

Today, developers rarely build in this style because it’s not as profitable as building ‘up’.

This style of property makes an attractive investment, as they are increasingly popular with small families and young tenants, who enjoy the privacy with no one above or below and the small yard.

13. Melbourne Flats / Apartments

If you invest in a flat you are generally buying an apartment that has other dwellings attached to it; these could be above or below, next door, or a combination of the above.

They are the preferred style of accommodation for young Melbournians and are generally easy to tenant and therefore, if well located, make great investments.

As the entry costs are lower, they are also the first type of accommodation bought by many first home buyers.

14. Commercial, Retail and Industrial properties

Commercial properties, (retail shops, factories, warehouses and office spaces) are in a very different league residential property and out of the domain of the every-day investor.

Whilst there are many benefits of investing in commercial properties, they are more suitable for the sophisticated and experienced investor, particularly as they are more yield-driven than capital growth-driven.

Consider it this way: for most advanced investors, your job is to build your asset base.

Once your portfolio is big and robust enough, you begin transferring into a cash flow strategy and at this point, a commercial property can be a good investment.

How do Melbourne’s areas compare?

15. Inner City

Melbourne’s inner city core has a population of around 29,450 people, a figure that is expected to double to 59,900 over the next 20 years.

As a result, there is much more property development activity in Melbourne CBD than anywhere else in the larger metropolitan area, with the majority of these developments comprising of high-density high-rise apartment buildings.melbourne

The area of Southbank, just south of Melbourne’s CBD, currently boasts over 9,000 distinct dwellings, the majority of which are family households (45%).

The number of residential properties is set to rise to more than 26,000 over the next 20 years.

Currently I’m worried by the large number of poorly built inner city apartments on the market or planned for completion.

Many, in fact most, of these are being bought by overseas investors and as these are likely to become the slums of the future.

I would avoid this segment of the Melbourne property market.

16. Bayside and South-Eastern Suburbs

Melbourne’s south eastern suburbs boast distinct communities, neighbourhood attributes and differing property growth cycles. However while intricate, they’re considered by many to be the best Melbourne property investment suburbs.

The inner south eastern and bayside suburbs of Melbourne make great locations to invest.

17. Eastern Suburbs

These include some of the most affluent areas of Melbourne –  the residents of the eastern suburbs enjoy a median personal income of $1,164 per week, according to ABS figures.

Around 33% of properties are owned outright or mortgaged here, with 20% of housing comprised of townhouses or semi-detached homes, and only 33% of residential properties being high-rise apartments.

This is a dramatic difference from the inner city, where apartments are the dominant dwelling type.

The inner eastern suburbs of Melbourne also boast some great investment locations.

18. Western & Northern Suburbs

While the outskirts of Melbourne’s west and north is home to several of the city’s fastest-growing outer-suburban areas including Truganina, which increased by 18%, Tarneit (16%), Point Cook (12%), Melton South (11%) and Wyndham Vale (10%).

However these more blue collar areas have lower average wages growth and therefore lower ability to sustain capital growth.

In general there are better investment opportunities in Melbourne’s inner eastern and south eastern suburbs.

19. Melbourne has high standards

Melbourne has repeatedly been named as the world’s most liveable city by the Economist Intelligence Unit’s liveability survey, and for very good reason!

Boasting excellent healthcare services, premium education facilities (including world-class universities), a stable and diverse economy, solid investment in infrastructure and a thriving, creative culture, it’s easy to see why Melbourne an incredible 97.5 out of 100 – ahead of Vienna (97.4) and Vancouver (97.3).

With such a high standard of living and ready access to good quality facilities and amenities, it comes as no surprise that people continue to choose to call Melbourne home.

In addition, the median house price is high: $669,000 with an upper quartile of over a million dollars, the second highest median price in the country (behind Sydney).

20. Avoid Melbourne’s poor-quality apartments

Just because Melbourne has a well-deserved reputation for quality, that doesn’t mean the city is flawless – far from it.

In fact, the Melbourne CBD (Central Business District) is riddled with poor quality apartments, with one report stating that an estimated 55 per cent of the city’s tallest apartment buildings are of “poor” quality, with common design flaws.

No one wants to live in a sub-standard apartment, regardless of how affordable it is, and there are only so many people who would find a hotel-sized apartment appropriate for full-time living.

The fact that an estimated 40 per cent of apartments in Melbourne are smaller than 50 square metres, according to the Melbourne City Council’s planning department, shows just how big this issue has become – particularly when you consider that the minimum size a single bedroom apartment can be in Sydney, London and Adelaide is 50m2 or above.

Not only are the apartments lacking in breathing room – literally – they’re also flawed in a number of other ways, with kitchens placed in hallways, a lack of ventilation and natural light, and poor storage.

All of these design faults make these types of developments less attractive to potential tenants, which reduces the desirability of these properties.

Investors would be well advised to steer clear of apartments that don’t tick all the boxes.

Shoebox-sized living spaces, alongside common design flaws in the building itself, should raise some serious red flags for buyers.

The problem is many overseas buyers are purchasing these properties which will become the slums of the future.

21. Look for Melbourne’s best properties in the inner and middle ring suburbs.

Studies – and time – have shown that properties close to the city’s CBD (but not in it) and in bayside suburbs close to water will increase in value more quickly than other properties and suburbs.

House-Target

The demand for property is higher in these regions, as there is no land available for release, but the areas remain close to employment or desired locations.

Not only are properties closer to the CBD closer have better access to amenities and more employment opportunities, but transport costs are often lower and, as a result, people are willing to pay a premium to live there.

The end result for property investors is that the inner and middle ring suburbs will (generally) out-perform the averages for suburbs located further from the city.

22. Be mindful of a Melbourne property oversupply

Melbourne’s property market has been typified by strong population growth, with almost 90,000 people moving into the city every year.

To keep up with surging housing demand, there have been a huge number of new developments – mostly in the form of high-rise apartment buildings, in and around the CBD – that have been approved.

But this is leading us to a city over-supplied with too many new inner city apartments.

With such a large number of development projects either completed, begun or approved in recent years, the risk for property investors is that there will be an oversupply of properties in and around Melbourne’s CBD.

This oversupply will result in minimal capital growth and sluggish rental growth on your investment – so avoid Melbourne CBD properties.

23. Make the most of Melbourne properties through negative gearing

While most investors understand the concept of negative gearing, but for those who are not yet up to speed, here’s a quick refresher:

gearing negativeA property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs and depreciation – exceed the income it produces.

Since the costs of producing an income are generally deductible against the taxpayer’s other income, property investors can effectively offset some of the interest expense against their wages.

Why would anyone go into a business deal to make a loss?

Generally it’s because property investors hope that their income losses will be more than offset by their capital gains when they eventually sell (or refinance) their property.

And in Australia capital gain is not taxed unless you sell your property, and then it is concessionally taxed; again evoking the argument that it favours wealthy landlords.

Of course negative gearing is more favourable for taxpayers who earn high incomes.

How do you choose an investment property in Melbourne?

24. Buy a property for below its intrinsic value

I’m a big believer in buying property for below its intrinsic value – that’s why I avoid new and off the plan properties, which generally attract a premium price tag.

25. Buy a property that outperforms the averages

In an area that has a long, proven history of strong capital growth is one that is likely to continue to outperform the averages, and this is largely because of the demographics in the area.

These suburbs tend to be those where a large number of owner occupiers desire to live in the area, because of lifestyle choices of offer.

I look for  suburbs where wages (and therefore disposable income) is increasing above average. This translates to being an area where locals are able to and prepared to pay a premium price to live there, putting a financial floor under your investment property.

26. Buy a property with a twist

An investment must have something unique, or special, or different or scarce – some ‘X factor’ that makes it stand out from its neighbours – in order to land on my shortlist.

27. Buy a property where you can manufacture capital growth

An ideal investment is one in which you can manufacture capital growth through refurbishment, renovations or redevelopment.

How can I stay on top of current information?

28. Get property news, updates and advice by email

There is so much information available about various property investing trends, strategies and market information that it can be overwhelming knowing where (or how) to get started.free advice

Join the 90,000-plus Australians who subscribe to my weekly newsletter, which offers a diverse range of analysis, articles and expert commentary that is essential for successful property investing.

You can also sign up for my personal market updates by getting a daily dose of insightful commentary in your inbox each morning.

Join here; this is free and different to our newsletter subscription.

29. Take advantage of investment advice

Whether you are new to property investing, or a seasoned landlord with many years of experience in the trenches, the team at Metropole would love to help you formulate an investment strategy or review of your existing portfolio, with a shared goal of helping you acquire your next A-grade investment property.

We can help you take advantage of opportunities currently available in the property market, by offering independent, unbiased advice.

Contact us for a complimentary, obligation-free session with one of our property strategist’s today.



Want more of this type of information?


Michael Yardney

About

Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'The Melbourne Property Market – 29 Investor Tips' have 65 comments

  1. July 28, 2015 @ 11:04 am Fred

    Great read Michael. Have you, or will you do a similar article on the Sydney market

    Reply

    • Michael Yardney

      July 28, 2015 @ 5:51 pm Michael Yardney

      Thanks Fred – yes I will be doing a similar research piece on Sydney

      Reply

  2. July 28, 2015 @ 11:44 am Albert

    Thank you for this article. Found it comprehensive & helpful. I’m a foreigner looking to invest in Melbourne.
    Once again, thanks

    Reply

  3. August 2, 2015 @ 3:45 pm Eric

    Thanks Michael,
    I am keen on investing in Melbourne but the buying frenzy is putting me off at the moment. Just waiting for the buyer’s market to take place..

    Reply

    • Michael Yardney

      August 2, 2015 @ 4:28 pm Michael Yardney

      Eric
      I understand how you feel, but while you’re waiting for the market to slow down I know I’ve bought some great properties as have 2 of my children. They’ve added value through renovations, so that even if the market slows down they’re ahead. Don’t wait for the timing to be “perfect” – it never will be

      Reply

      • August 2, 2015 @ 8:17 pm Eric

        Thanks for your reply Michael,

        It’s just I don’t want to get caught with the forces we’re waiting to happen. Firstly, the downturn on the market which I’m sure will eventually come so as the interest rate rise. And then theres a talk about abolishing the negative gearing in which slowly will take place.. Correct me if I’m wrong but those forces favour the buyers. At the moment, I think, a $100k down payment will still be a negative geared property in a desirable areas in Melbourne even at this low interest rate environment.

        Reply

        • Michael Yardney

          August 2, 2015 @ 9:48 pm Michael Yardney

          Eric You’re right – with $100,000 you’ll probably only be able to buy a $400,000 property plus costs and all high growth properties are negatively geared at 80% LVR

          Reply

          • August 3, 2015 @ 5:31 am Eric

            Thanks For reaffirming that Michael,
            Buy now or not is a risk. I might as well not and go for the debt reduction process and wait for that right moment…

  4. August 26, 2015 @ 11:33 pm Dave

    Thanks Michael
    Will you been doing a similar article on Brisbane?
    Cheers,
    Dave

    Reply

  5. August 28, 2015 @ 2:42 pm Penelope

    Michael thank you for this interesting and informative article. I note that you talk about Inner Eastern Suburbs and South Eastern Suburbs and Bayside as being the best places to invest at this time. I would like to buy a property in one of these areas, as an investment. How do I find out more about what those suburbs names actually are? Also what do you think about using finders for properties as I live a long way from Melbourne, it would be preferable to narrow down before I fly to look before I buy? Thanks Penelope

    Reply

    • Michael Yardney

      August 28, 2015 @ 5:05 pm Michael Yardney

      Penelope
      It’s hard enough for locals to get property selection right, so I believe you should get a property strategist on your side – but of course I’m biased – however my team at Metropole would love to help you. click here and organise an obligation free chat.

      Reply

  6. September 17, 2015 @ 1:30 pm Krista

    This was a wonderful overview and thankfully confirms a lot of my research so far. Thank you!

    Reply

  7. September 18, 2015 @ 9:59 am Lee

    Hi Michael,

    Thanks for your sharing, I am interested in the following Melbourne Inner City market:-
    “Many, in fact most, of these are being bought by overseas investors and as these are likely to become the slums of the future.
    I would avoid this segment of the Melbourne property market”.
    As I already have an unit of Nova (Elizabeth Street) since 2001 and Art On the Park (Williams) since 2013, do you suggest I sell them on keep it for further observation.

    Your advice is greatly appreciated, thanks.

    Reply

    • Michael Yardney

      September 18, 2015 @ 2:44 pm Michael Yardney

      Lee
      As I do not kno your personal circumstances I cannot give you advice, however with the huge looming oversupply of apartments in the CBD it’s been suggested it could be up to a generation before you see some significant capital or rental growth

      Reply

    • November 29, 2015 @ 10:22 am Corene

      Hi Lee,

      I’m a real estate agent based in the melbourne CBD. Would you like a free market appraisal for your Nova and Ark on the Park apartments?
      Agreed with what Michael said about the city apartments.

      Reply

  8. October 10, 2015 @ 5:29 am suny

    Hi Michael
    I am looking to buy investment property in Melbourne. My budget is 450k at 90% LVR. The suburb you recommend seems to be pricey for my budget. Can you help me or will I be better off with someone who is used to work in that type of budget (probably working in outer north or western suburb).I would also like to know your fees(charge)? it seems finding right buyers agent is more difficult then finding right property…….

    Reply

    • Michael Yardney

      October 10, 2015 @ 6:43 am Michael Yardney

      Suny
      When you purachse an investment property there are 3 major variables:
      1. Your budget – that’s fixed for you, but still doable
      2. The location of your property – you can’t compromise on this
      3. The type of property you buy – this means you may need to buy an esatblished apartment – still evry doable in your budget.

      You ask how much our fees would cost you, a better question could be – can you afford to pay a “learning fee” to the market by getting it worng like many beginning invetsors do? Especially at this more mature stage of the proeprty cycle.
      By the way…we’re much, much more than buyers agents. We don’t just take orders like many other buyers agents. As property investment strategists, we formaulate a long term strategy and tehn help you implement it, then reguallry review your progress. We build relationships.
      Why not come in and have a chat Just click here

      Reply

  9. October 29, 2015 @ 8:30 am edward cerantonio

    Hi Michael
    Interesting comments and thank you for sharing.
    What do you expect annual market price for the Melbourne market for units, houses to be over the next 5 years.
    One expert believes that property market will continue to boom for the next 13 years .

    Reply

    • Michael Yardney

      October 29, 2015 @ 8:36 am Michael Yardney

      Edward
      Sorry to say – it won’t boom for 13 years – the proeprty market cycles.
      I think Louis Christopher gave a great assessment of what’s ahead here There are some good times ahead and then things will slow down – they always do

      Reply

  10. November 29, 2015 @ 10:39 am Corene

    Hi Michael,
    I love your articles and I had met with your strategist a few years ago but I regretted not taking action to purchase another property at that time due to fear.
    I sold my apartment in Southbank early this year as I don’t think the long term growth is there as you said. I have been looking to buy a house or townhouse but the prices have gone up ridiculously high. You mentioned that you bought great houses when the market was high. I spotted a townhouse that I like in Kew but it’s on Barkers Road which can be noisy during peak hours. However the location is great and it is close to the CBD where I work. This townhouse needs substantial refurbishment and it was built in the 70s. Land size around 300sqm. The quoted price range is lower than other streets in Kew. Do you think I should go for it if the price is right or I should bite the bullet and pay more on better streets ? Thanks

    Reply

    • Michael Yardney

      November 29, 2015 @ 12:20 pm Michael Yardney

      Corene
      I know the exact property you’re looking it becuase an owner occupier asked us to look at it for them as a home.
      Steer clear:
      * Terrible main road location
      *The property has some structural issues
      DON’T MAKE THE SAME MISTAKE AGAIN – while not call our office and have a chat with our senior proeprty strategists Kate Cull – 03 9591 8888

      Reply

  11. December 19, 2015 @ 10:33 am dave

    Thanks for the great read Michael. I’m just a bit worried now, as i have just invested in a new house and land package in Melton South. I knew it had a slow growth but thought it was still a good investment because it was way under $300,000. Do you think it was a bad idea?
    Your opinion would help a lot!
    Thanks
    Dave.

    Reply

    • Michael Yardney

      December 19, 2015 @ 10:48 am Michael Yardney

      Dave
      I’ve just been updating one of my books, so looked at the performance of Melton over the last 40 years.

      It was the worst performing suburb in that time and I’m sorry to say is likley to remain so

      Reply

  12. January 14, 2016 @ 2:31 pm lakshmi nallan

    Hi Michael,

    I have recently bought a lot of size 448sqmts at woodlea suburb in stage 11 for 200k near rockbank in the land release. Looking at the news about melbourne property market I am little hesitant on whether I did a right decission.

    Could you please review and would be thankful if you can advise me on my property purchase.

    Reply

  13. January 22, 2016 @ 2:25 pm Rebecca

    Hi Michael,
    Thanks for sharing. Do you think it’s good investment in Williams Landing? Thanks.

    Reply

    • Michael Yardney

      January 22, 2016 @ 2:43 pm Michael Yardney

      I don’t know your circumstances and I don’t know the property you have in mind – but the simple answer is William’s landing would definitely NOT be on my list of places to invest.

      It has none of the growth drivers required to make a good location

      Reply

  14. January 28, 2016 @ 1:36 pm connor

    I am a first home buyer looking at apartments around the footscray area. Would you recommend off the plan or older apartments im looking at something with city views and 2 beds. Roughly around 400-500

    Reply

      • January 31, 2016 @ 2:38 pm connor

        I definitely know what you mean in these articles. Lets say 3 bed apartment in footacray with perfect city views 2 baths 2 carparks 100m2 is currently selling for 670k by developer but i can buy from nomination sale for 610k even though original purchaser bought for 580k at first release. So i am buying the property less than what developer is asking now so even if they place comes in a little under valued i only payed just over 600k so i think im in a safe position unless the apartments are 100k over priced feom the beginning but i cant see this with a good m2 value for size and un interrupted city views.

        Also i have been looking at caufiled village as a second choice

        Reply

      • January 31, 2016 @ 2:43 pm connor

        Also i am very lucky as my mother will come in as a guarantee on my loan meaning i can avoid Lmi but will be borrowing 100% of loan to get in on the market sooner. So with this property i could potential make equity of valued at what developer is asking now but i do know thats not the case always . But i beleive in footscray booming its too close to city and so much interest. Everyone i talk to loves the place and wants to move there. I ca see it getting better quickly

        Reply

        • Michael Yardney

          January 31, 2016 @ 3:40 pm Michael Yardney

          Connor

          Footscray has underperformed the Melbourne averages fot the last 50 years – why should things change now?

          Reply

          • February 1, 2016 @ 7:22 am connor

            Since living in Sydney for years i cant not see this suburb booming because of its proximity to the city and more and more young people wanting to live close to the city in an affordable and upcoming suburb. I already speak to friends of friends and they all want to move to footscray its becoming a suburb of younger independent people wanting that place close to city. Look at property this close to sydney cbd. I like port melbourne too but may be too expensive already

  15. February 1, 2016 @ 2:54 pm JayJay Bedi

    Hi Michael,
    Thanks for sharing.
    Do you think it’s good investment around Point cook, Sea meadows and Altona Meadows ?
    Thanks.

    Reply

    • Michael Yardney

      February 1, 2016 @ 3:06 pm Michael Yardney

      JayJay
      None of these suburbs would be on my areas to invest list – they are new home buyer areas that will underperform

      Reply

      • February 1, 2016 @ 3:15 pm JayJay Bedi

        Hi Michael,

        Where would you recommend to invest? Which area or suburb?
        I am from Sydney so i don’t have much idea about Melb.
        Thanks

        Reply

        • Michael Yardney

          February 1, 2016 @ 3:54 pm Michael Yardney

          I can’t advise you without knowing your budget, your strategy, your aims etc. it would be very wrong to do so. Why don’t you have a chat with our Sydney Metropole team. They can help you with Melbourne info. 1300 203030

          Reply

  16. February 3, 2016 @ 11:02 pm Dan Mannix

    Michael, thanks for the interesting read.
    We have just recently been looking at upmarket apartments in St Kilda Rd., off the plan.
    Seems like not your recommended course of action on two counts. However, these don’t seem the types of places ever to become slums but will all apartments be tarred with the same brush come the time of oversupply?
    Also, this would be our ppor and not an investment property and wondering if that makes it any less a dumb idea to pursue?

    Reply

    • Michael Yardney

      February 4, 2016 @ 6:38 am Michael Yardney

      Dan – obviously the criteria are different for your own residence as opposed to an investment property.

      Having said that apartments in the 3004 postcode have had minimal capital growth missing out on the last boom. Just be careful you don’t overpay

      Reply

      • February 5, 2016 @ 9:19 pm Dan Mannix

        Thank you, Michael.
        Think I might give your office a ring.

        Reply

  17. February 21, 2016 @ 7:35 pm Amy

    Hi Michael,
    I am considering to buy an 1 bedroom luxurious apartment (off plan) for $498000 in Brunswick/ Victoria street with 6% rental guarantee for 3 years. How much growth in the next 10 years can I expect for this property according to the previous market growth in Melbourne? The vendor said it would be double in price after 10 years but would that be applicable for a 1 bedroom luxurious apartment ?

    Reply

    • Michael Yardney

      February 21, 2016 @ 7:39 pm Michael Yardney

      Amy – please don’t do that – have you read my blogs about off the plan purchases? And those of almost every other independent advisor.

      How much growth will you get int he next 10 years – possibly NONE in that location where you over pay and then there is an abundance of new stock

      Reply

  18. February 25, 2016 @ 9:26 pm Aki

    Hi Michael,

    Excellent analysis. I recently bought a house (1 of 2 on the block) in Ringwood East in outer East Melbourne for 551,000. It’s close to the station & in Ringwood secondary zone. It is one of the better schools where you can still buy under a million. Good buy? What are your thoughts?

    Reply

    • Michael Yardney

      February 25, 2016 @ 10:46 pm Michael Yardney

      Aki
      I don’t really know Ringwood is a good area, but a bit far out for my strategy. having said that it’s performed extremely well lately.
      Having said that not every proeprty in a good suburb is an “investment grade” property and not every street is a good street. So without further details I can’t help – however it sounds like you’ve done your homework

      Reply

  19. February 29, 2016 @ 1:23 am frankie

    Hi Michael,

    Have been following your daily commentary for a few months and find it very useful . I have invested in a 2 bedder apartment in south melbourne. It is a small development about 45 units and I bought it of the plan. I bought it because it is a small development and is near CBD. I also heard there is a lot going in in that area – fisherman bend. A lot of jobs going to be created. Do you see any potential in this area? I know you are not in favour of buying of the plan .

    Reply

    • Michael Yardney

      February 29, 2016 @ 7:50 am Michael Yardney

      Frankie
      I don’t know your property, it’s location or the price you paid, so I can’t really give you an opinion about your specific property.
      It’s good that you’re in a smaller block, but the location is one I’m concerned about. Too much oversupply and I don’t see Fisherman’s Bend as a positive – the huge supply will limit you capital growth for years.

      Reply

  20. March 24, 2016 @ 7:34 pm Jem

    Hello Michael,

    I’m planning to buy 2 bedroom apartment as an investment in Melbourne CBD for under $300k and rental return is slightly higher than repayments. Its not one of those self serviced, non owner occupying apartments. I’m also a first home buyer. Would like to hear your thoughts on this?

    Thank you

    Reply

    • Michael Yardney

      March 24, 2016 @ 8:03 pm Michael Yardney

      Jem
      I don’t know your circumstances or the apartment, but with a huge undersupply looming most commentators agree that there will be no capital or rental growth in the Melbourne CBD for years and years – possibly a decade or 2 – steer clear

      Reply

  21. April 5, 2016 @ 4:03 am Bree

    Hi Michael,
    Great article. I was just wondering what areas you would recommend buying in… My partner and I are first home buys, looking to spend around 450,000-500,000 for a 3 bedroom home, planning to starting a family so will be living there potentially the next 10+ years. We both are in the northern suburbs currently and are unsure what areas to start looking at. Any help or recommendation would be greatly appreciated.

    Thanks
    Bree

    Reply

    • Michael Yardney

      April 6, 2016 @ 11:52 am Michael Yardney

      Bree – good with this house hunting, it’s not easy finding your first home and clearly it is a substantial investment for you.
      This is important to put investor cap and not let your emotions rule too much.
      When looking for a home you’ll use different criteria like proximity to your work, schools interest, and be wary in some of the northern suburbs where unemployment is high the demographics suggests wages won’t grow holding back capital growth.

      However there are some good opportunities in the northern suburbs

      Reply

  22. April 13, 2016 @ 3:24 pm jay

    Hi Michael,

    Thanks for the great insights.

    You had mentioned to stay clear of oversupply apartments in Southbank and referred to them as slums. My question is – why are the developers focusing on these areas knowing that these will not be good investment vehicles? Are these houses built for buyers to stay only?
    I remembered during the period before the housing bubble burst in US, developers just need to find another fool bigger than themselves to sell off their stocks. Is this a similar situation here?

    Thanks again
    Jay

    Reply

    • Michael Yardney

      April 13, 2016 @ 4:15 pm Michael Yardney

      Jay

      You’re right – the developers are after short term – one off – trading profits. They try and fit as many apartments as they can on the block and make money – that’s their job and that’s OK.
      But if you buy from them you lose out

      Reply

  23. April 13, 2016 @ 8:41 pm john sipple

    gidday michael,
    have owned a 2 b’room flat in a block of 10,(2 story building) in glen iris,overlooking Gardiner park and near the new Burke Rd train station since 2011.have noticed in that time that the house market has been going really well, however unit market hasn’t had much movement at all.it is surrounded by all the old cal bungs etc, and i was expecting more growth than what has occurred.Am interested on your thoughts of the area,as i have been pondering on maybe selling out of the area and heading down the beach bay side area that you are keen on.
    thank you for your time,
    cheers john

    Reply

    • Michael Yardney

      April 13, 2016 @ 9:49 pm Michael Yardney

      John
      I agree that house prices have risen more than apartment prices in Melbourne over the last few years,
      I have no issue with Glen Iris – but of course that is too broad – there’s areas there I would avoid. but in general Glen Iris is a good location and your apartment should have increased in value.

      Reply

  24. May 15, 2016 @ 10:22 pm Charu

    Hi Michael,
    Thanks these are valuable insights to someone like myself trying to get into the property market.I’m currently looking at a 3year old 2BR apartment in Hughesdale on Kangaroo Rd close to Warrigal Rd and opposite a secondary college.I’m looking at a price between $450000 to $ 480000. Could you provide some insights as to the prospects for capital growth for Hughesdale aptt market given there is a likelihood of more developments in future ? Thanks,Charu

    Reply

    • Michael Yardney

      May 15, 2016 @ 10:30 pm Michael Yardney

      Charu
      I often get asked about specific properties or locations and I don’t like responding as I don’t know enough about you and wouldn’t want to mislead you. I don’t know your plans, your risk profile, what else you own etc.
      Hughesdale is a good area but not all streets in the suburb are “A” class streets and many proeprties are not investment grade.

      Before we recommend a property to a client we do heaps of due diligence – I hope you are doing the same

      Reply

  25. June 5, 2016 @ 10:18 pm Shane

    Hi, I’m looking at more spacious apartments in St Kilda with something unique about them such as a roof top terrace. My concern is that in 10 years, many of these don’t seem to have grown more than 15-20% outside of inflation while miniature houses in the same area have gone up more than 50% outside inflation. I am having difficulty understanding why more spacious, better quality apartments would still have poor growth? Could this be because of the constant supply of new comparable apartments in St Kilda? Do you think their prices would only start to rise when most houses have been converted, and there is no more space for conversions to townhouses / apartments? Your thoughts are greatly appreciated.

    Reply

    • Michael Yardney

      June 5, 2016 @ 10:27 pm Michael Yardney

      Shane
      St Kilda is a great area, but there are some segments of St Kilda that have outperformed others, and some apartments are more popular than others and have stronger capital growth.
      A roof terrace would not be high on my list of characteristics of an investment grade apartment.
      Over the last few years, houses of outperformed apartments in St Kilda, because they are in short supply,and they are is highly sought after by owner occupiers – but they are out of the budget range of most investors.
      If your budget can afford it, I’d go for a house in that area, if not I’d buy an apartment there rather than a house in an outer suburb

      Reply

  26. July 1, 2016 @ 3:00 pm Dave Cooper

    Working out of South Yarra, I couldn’t agree more with Point 22 – There is so much oversupply in these areas and over the next couple of years there are going to be dozens of 100+ apartment complexes shooting up. My focus is on Point 21 – Every second street in these inner and middle ring suburbs has one or two townhouses replacing an old home. The profits these property developers are making is unreal! Homeowners need to educate themselves and take a slice of that pie!

    Reply

  27. July 17, 2016 @ 10:11 am Michelle

    Thanks for the commentary Michael. I am trying to educate myself about the pros and cons of certain types of investments. In your expert opinion, in the long term, would a stand-alone town house in South Yarra be better than an attached newly renovated and landscaped townhouse in Malvern? While I will live in the property, I am willing to choose the location/property that will appreciate more over time. Both walking distance from shops, public transport and off street parking.

    Reply

    • Michael Yardney

      July 17, 2016 @ 10:51 am Michael Yardney

      Michelle they are both great locations and should give you long term capital growth for townhouses, but I’d avoid apartments in South Yarra.
      So which would be better – it really depends upon the features of the individual properties and the location within the suburb – there’s more to a good investment than suburb – that’s probably only 75% of the equation

      Reply

  28. August 1, 2016 @ 10:29 am Andrew

    Micheal, interesting information, thanks for the read! We are in the process of purchasing a two bed, ground floor apartment with outdoor living space in Brunswick East as a long term investment for 610K, are we mad? The apartment is developed by the caydon property group and on face value appears to have the x factor. Our apartment will front Barkly St.

    Reply

    • Michael Yardney

      August 1, 2016 @ 8:05 pm Michael Yardney

      If you’re considering buying a new or off the plan apartment in Melbourne and esp in Brunswick – STOP and read all the info about the huge looimng oversupply and minimal or no capital and rental growth for a decade or more.
      The ” x factor” won’t help. It’s too hard to swim against the tide

      Reply


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