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Melbourne’s west shines a light on Australia’s first home buyer woes

New land estates are sprouting up everywhere along Melbourne’s urban growth corridor, with once flat plains to the west and north of Melbourne being developed at breakneck speed. However, these last affordable bastions of first home buyers are becoming less about the Great Australian Dream of home ownership and more about the ongoing affordability nightmare, according to a recent report in The Age.

Melbourne’s fastest growing municipality of Wyndham, with suburbs including Werribee, Tarneit, Truganina and Wyndham Vale, saw the local population increase by 7.1% (or 10,000 people) in 2010. And this rapid expansion is set to continue, with a further 46,000 hectares allocated for development in the western and northern suburbs.

While price is the key driver for housing in these mortgage belt areas, many are finding their dreams of home ownership dashed as land prices in the area soar. In the 1990’, the median land price was around $50,000, however between 2006 and 2010, median land prices jumped by 71% to a median of $294,500.

Before I discuss this a little more please let me make my thoughts clear…

While these suburbs may be great areas to live and attractive to first home buyers, investors must be cautious – I would not be investing my money in these areas. More homes and more properties being built does not mean capital growth. Nor are these areas where there is a large demographic of tenants looking for properties.

I have discussed why affordable properties do not make good property investments in a previous article- click here to read why.

To make matters worse, once affordable house and land packages that appealed to the large proportion of single income households who buy into the area (15% of all purchasers), are now beyond the reach of many as prices creep up over $415,000.

Prices are being driven by increasing demand – with Melbourne and Wyndham’s record population growth continuing – and a lack of supply; a record low 551 vacant house lots were available for purchase in June last year in the Wyndham district, compared to 3577 blocks in June 2005.

According to the Urban Development Institute’s Tony De Domenico, these land supply issues are a result of the Victorian Government’s policies on urban growth boundaries and municipal planning constraints.

”You’ve got more people wanting land than there is land available to sell, which means the price goes up,” says De Domenico.

”By the time the Growth Areas Authority and everybody else has a say, including councils … it takes up to four years and sometimes five years to get the thing [land] on the market.”

Victoria’s new Planning Minister, Matthew Guy agrees with his view saying, ”Constricting supply at a time of great demand has an obvious price impact. That is the case in every city around the world and I fail to see how Melbourne could be any different.”

However is government bureaucracy really to blame, or is it more a case of developer greed? Early last year, The Age reported that private developers and land owners were sitting on almost 70,000 house blocks already zoned for development, worth an estimated $12.6 billion.

In additions, government developer VicUrban had a stockpile of 25,000 housing lots listed for development, even though it was only marketing just over 700 lots a year, or only 3% of its available stock.

This suggests that developers are well aware of the price pressure occurring due to ongoing supply and demand issues and the subsequent dollar value of tightening the reins on land sales. So is it simply about making more land available, or does the government need to do more to ease the price problems faced by first home buyers?

While these suburbs may be great areas to live and attractive to first home buyers, investors must be cautious – I would not be investing my money in these areas. More homes and more properties being built does not mean capital growth. Nor are these areas where there is a large demographic of tenants looking for properties.

I have discussed why affordable properties do not make good property investments in a previous article- click here to read why.



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


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