The best suburbs to invest in Melbourne in 2021

By:

Unlike some of Australia’s other major cities, Melbourne’s house values were severely impacted by the state’s extended Coronavirus lockdown in 2020.

But while the state’s property market suffered a dip, since late October, the Melbourne market has rebounded strongly.

The latest Corelogic stats show that Melbourne house values grew 5.5% over the last quarter and 8.9% over the last year.

Melbourne will exhibit strong double digit capital growth over the full 2021 year as some of the underperforming months of last year fall off the rolling averages.

Melbourne apartment values did not grow as much, + 4.7% over the last 12 months

But there is still plenty of growth and opportunity left in the Melbourne housing market.

In fact, I think the city is likely to deliver 10-12% capital growth over the next 12 months with houses still outperforming apartments.

As an investor, if you manage to buy the right investment property in the right location, you could be primed to supercharge growth.

What is a property hotspot?

There might be a lot of talk around about certain property ‘hotspots’ which are said to guarantee investment return. Property Hotspot

But I don’t believe in hotspots or investing in an area just because it is expected to be the “Next Best Thing”.

As far as I’m concerned, this year’s “hot-spots” tend to be next year’s “not-spots” and I’m a long-term investor, and base my decisions on fundamentals. I do not gamble.

So my approach to this list of top Melbourne suburbs for 2021 is seeing it as the opportunity to highlight those strong and stable suburbs that have both shown consistent historical growth and also have the right demographics to suggest future long-term growth.

And let’s not forget one of the most vital things to remember…

Neighbourhood is now more important than ever

In the new post-Covid world, the ability to work, live and play all within 20 minutes’ reach of home is the new gold standard desirable lifestyle.

If social distancing and the Coronavirus has taught us anything, it has taught us the importance of the neighbourhood we live in.

If you can leave your home and be within walking distance of, or a short trip to, a great shopping strip, your favourite coffee shop, amenities, the beach, a great park, the recently implemented coronavirus restrictions might seem a little more palatable than if you had none of that on your doorstep.

But the reality is, this concept is nothing new.

In fact, the rise of the 20-minute neighbourhood started long before Covid19.

You will find these are often in the gentrifying aspirational lifestyle suburbs of our capital cities and people will pay a premium to either own a property in these locations or rental property in these locations.

Many of Melbourne’s inner suburbs and middle ring suburbs already meet the 20-minute neighbourhood test.

However very few of the outer suburbs would do so.

Follow the demographics

According to leading demographer Bernard Salt, the coming of the coronavirus has changed the Australian workforce and not just by prompting adaptation to new technology like Zoom calls and triggering a work-from-home movement, but also by rigidly dividing the nation according to skill sets.

The Australian Bureau of Statistics classifies every job according to one of five skill levels with Skill Level 1 being the most skilled.

It is well recognised that the rich – such as people with a Skill Level I job – are getting richer, and at the other end of the spectrum, Skill Level 5 jobs requiring little or no previous work experience (like general sales assistant, kitchen hand) are experiencing no wages growth.

A Skill Level 1 job requires a bachelor’s degree or higher, or the equivalent of at least five years’ training.

People with these types of jobs will earn more income and be able to afford to pay more for their properties.

The pandemic cricket demand for skills in finance (accounting), risk management (solicitors), computer programming and many other skill levels one jobs.

However, the story for the balance of the workforce has been quite different.

So understanding where the skill level one worker lives in Melbourne is critical and be seen in the following graphic provided by Bernard Salt in The Australian.

1

Top Melbourne suburbs for 2021

Whether you are looking for a higher-end purchase or a beginning investor, I think these are the Melbourne suburbs that are set to take advantage of the changing face of the city.

Moving forward, it’s clear to me that for Melbourne, the higher and more affluent suburbs of Melbourne will be where property prices will outperform.

Meanwhile, cheaper suburbs on the outskirts of the city will enjoy a brief uptick thanks to significant population growth but I don’t recommend investing in these areas because I believe that moving forward, the properties in those suburbs will have lower capital growth.

So what are the best suburbs for investment?

Here I’ve broken down what I see are 16 suburbs to watch in Melbourne, listed by the area they are located, with help from data from Domain Group and Real Estate.com.au.

The municipality of Glen Eira

1. Caulfield

Caulfieldnorth2Total population: 5,608

Average age: 60+

Median house price: $1,598,000

Caulfield is a well-regarded suburb that sits roughly 10km south-east of Melbourne’s CBD.

It is one of Melbourne’s best-serviced towns in terms of tram and train networks, which link Caulfield with the CBD as well as neighbouring suburbs such as Elsternwick and Glen Huntly.

Villa units and homes in the neighbouring gentrifying suburbs of Carnegie and GlenHuntly make great investments – they are highly sought after by home buyers and investors

2. Elsternwick

Total population: 10,353

Average age: 20-39

Median house price: $1,950,000

Just 9km from the Melbourne CBD, Elsternwick is a sought-after suburb. Surrounded by lots of good quality schools, the beach, and great amenities, the suburb is highly desirable for families in particular.

3. Ormond

OrmondTotal population: 8,420

Average age: 20-39

Median house price: $1,452,500

Ormond has a high density of owner-occupier properties at around 59% and the suburb’s demographic is split equally between families and single people.

It is gentrifying, has many cafes, shops, supermarkets in close proximity, great schools for both primary and secondary along with superb public transport.

4. Bentleigh and East Bentleigh

Total population: 27,635

Average age: 29-40

Median house price: $1,230,000

Bentleigh East is a high-demand market with good transport links, local schools, and plenty of amenities on the doorstep.

While the suburb mainly consists of established couples and families, it is a gentrifying suburb with many young families moving into the older houses or into the many new townhouses being built in Bentleigh.

It is serviced by good schools, great local shopping, and proximity to both Southland and Chadstone shopping centers.

5. McKinnon

MckinnonTotal population: 6,060

Average age: 40-59

Median house price: $1,640,000

McKinnon has easy access to public transport and is within a short distance to the city.

It has several parks and schools, cafes and shops, and many other facilities within arm’s reach.

Like the surrounding suburbs of Bentleigh and Ormond, McKinnon is gentrifying with many new homes and townhouses being built.

The McKinnon High School catchment zone, which has recently been extended, is a great drawcard for both home buyers and tenants.

Bayside suburbs

6. Brighton

Total population: 23,354

Average age: 40-59

Median house price: $2,900,000

The bayside suburb of Brighton, just 11km from the CBD, is home to some of Melbourne’s wealthiest residents.

With a median house price at nearly $3 million, the suburb has some of the city’s grandest homes.

At the same time, a mini building boom of apartments provides a more affordable option for downsizers and investors.

The area has three railway stations, multiple shopping strips, cafes, restaurants, beaches, and some of the best schools available.

7. Hampton

Hampton2Total population: 13,392

Average age: 40-59

Median house price: $2,150,000

Hampton is another southern suburb with direct access to the beach and a short distance to the city.

With a huge variety of amenities on offer, the area is gentrifying and offers everything needed for singles and families alike.

8. Sandringham

Total population: 10,234

Average age: 40-59

Median house price: $1,844,000

Another high-demand market with bumper property prices to match.

This affluent family-focused beachside suburb is located 16 km southeast of CBD and has easy access to a variety of amenities.

Beaumaris9. Beaumaris

Total population: 13,330

Average age: 40-59

Median house price: $1,710,000

The small bayside suburb of Beaumaris is another high-demand market with an equally high median house price.

The area is dominated by families and is majority owner-occupied at 87% of current properties. Beaumaris has seen a compound growth rate of 5.0% for houses and 5.9% for units.

The municipality of Kingston

10. Cheltenham and Highett

Total population: 22,295

Average age: 40-59

Median house price: $1,050,500

Another family-orientated Melbourne suburb, both Cheltenham and Highett have great parks, schools, shopping, and some of the best golf courses in Melbourne.

They enjoy proximity to the large Southland shopping center and have good train transport to the city.

Parkdale11. Parkdale

Total population: 11,744

Average age: 40-59

Median house price: $1,184,000

Further south, the suburb of Parkdale is another highly regarded beachside area with excellent schools, great sports facilities, shopping, cafes, restaurants, and excellent access to public transport.

12. Mordialloc

Total population: 8,166

Average age: 35-45

Median house price: $1,013,000

Mordialloc is considered to be a great lifestyle suburb with very limited shortcomings.

The beach is within close distance, as are cafes and restaurants. The suburb is 24km from the city and has easy access both by car and train.

The area also boasts great schools and childcare options.

Eastern suburbs

Surrey Hills13. Surrey Hills

Total population: 13,606

Average age: 40-59

Median house price: $1,795,000

Melbourne’s affluent eastern suburb of Surrey Hills has a high $1.75 million median house price.

The family-orientated area has a great focal point being Union Road shopping village which has great cafes, organic stores, and other shops.

Older villa units make great investments in Surrey Hills, especially when renovated.

14. Mount Waverley

Total population: 33,625

Average age: 40-59

Median house price: $1,300,940

Mount Waverley is another very family-friendly area where locals are mainly older couples and families with some younger single people.

The area has a relaxed lifestyle with lots of parks, schools, golf courses shopping, and access to public transport.

15. Box Hill

Box HillTotal population: 11,395

Average age: 25-35

Median house price: $1,540,000

Like much of Melbourne’s middle ring of eastern suburbs, Box Hill, 14 kilometers east of the city center, has become much sought-after by Asian and international buyers.

It’s a diverse suburb with good shopping and great schools.

16. Glen Waverley

Total population: 40,333

Average age: 40-59

Median house price: $1,310,000

Glen Waverley is orientated around young families and professionals.

The area enjoys a low crime rate and sits in the catchment for some of the best schools in the city.

The suburb sits just 19km south-east of the CBD, is residential in nature with substantial areas of commercial centered around the Glen Waverley Railway Station.

A little closer to the City and offering access to The Glen Shopping Centre, Glen Waverley Golf Course, and Central Reserve.

Changes in Melbourne property prices over the past two years

Despite the economic shock to the Covid-19 extended lockdown in Victoria, Melbourne’s housing market defied the odds with any price decline being short-lived.

By the end of 2020, the median hit a new record high of $936,073 which is $28,000 above the previous record in early 2020.

Dr. Nicola Powell, Senior Research Analyst at Domain explained:

“First-home buyers became active, utilising incentives, low mortgage rates and a deeper savings pot as Covid restrictions reduced discretionary spending.Melbourne Elwood

Upsizing buyers were enticed by cheaper credit and altered their wish-lists post-lockdown.”

Over the past two years, 91% of Melbourne’s suburbs enjoyed house price growth as buyers continue to be attracted by affordability, with price growth even spread across outer areas.

All suburbs that Domain mapped in the North East of Melbourne rose annually, while 97% of suburbs in the West (Niddrie and Maddingley the exceptions) and 95% of suburbs in the South East (apart from Sandhurst and Dandenong) also enjoyed a price hike.

By December, Blairgowrie took the title as the suburb with the largest property price increase across Melbourne with a 24.8% rise.

Although substantial price rises were also recorded in Portsea, Flinders, Ventnor, McCrae, and San Remo on the Mornington Peninsula.

“[The data shows] lifestyle and holiday locations are beginning to accelerate in price as working remotely becomes normalised and international borders remain closed,” Dr. Powell said.

Suburbs including Bacchus Marsh, Capel Sound, Darley, Diggers Rest, Manor Lakes, Mickleham, The Basin, Werribee, Wollert, and Yarra Glen, have also continued to show annual growth over the past two years.


NOW READ: The 15 Best Suburbs to Invest in Sydney in 2021

icon-podcast-large

Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.

icon-email-large

Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


About

Bryce is a property development specialist, having successfully sourced, project managed and completed hundreds of development projects for Metropole’s clients, helping them create substantial wealth.Visit Metropole.com.au


'The best suburbs to invest in Melbourne in 2021' have no comments

Be the first to comment this post!

Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*


Copyright © Michael Yardney’s Property Investment Update Important Information
Content Marketing by GridConcepts