Going by median prices, Melbourne’s property market is certainly in the downswing phase of its property cycle.
July figures from RP Data show a 4.5% fall in overall median values since July 2010, with a 5% fall in median house price and a 2% fall in median unit values. Rental yields are also still being impacted by the rapid price growth in recent years and a solid level of rental housing supply: while they are creeping up, at 3.7% for houses and 4.3% for units across the city, yields are still the lowest in Australia.
However, one of the first lessons that any property investor learns is that there are opportunities in every market – no matter how glum the overall picture may seem. So where are the shining lights in the Victorian capital?
Greville Pabst, CEO of WBP Property Group, highlights that buyers are still willing to pay for ‘quality assets’ – eventually.
“While an increasing number of auction properties are being passed-in, findings show that many of these are still selling following tough post-auction negotiation,” he says. “They are adopting a more cautious and measured approach to buying.”
He comments that the east of the city – traditionally Melbourne’s property heartland – has seen a significant reduction in demand due to affordability problems. The cheaper end of these suburbs are holding up better, though, and may provide options for investors.
“Although the bottom end of the market in this corridor remains reasonably strong, buyers are mindful of quality and not inclined to buy flawed properties,” adds Pabst. “Those in highest demand are located near major infrastructure and transportation.”
In fact, Pabst suggests the west of the city – long derided as the poor cousin of eastern and bayside suburbs – as an area where properties may perform better, particularly the inner west.
“While traditionally less favourable due to poorer infrastructure, the west is vastly improving,” says Pabst. “the local government area of Wyndham, located to the south-west of Melbourne's city centre, had the largest growth of all of Victoria’s LGAs in 2009-10, with the western corridor undergoing strong development to cater to the requirements of the growing population.”
Pabst comments that the affordability issues curtailing activity in the eastern suburbs could work in western suburbs’ favour.
“Melbourne’s western corridor may benefit in spring 2011,” he adds. “As activity heats up gentrified inner western suburbs including Footscray and Footscray West, Seddon, Yarraville and Spotswood are all likely to benefit from increased buyer demand.”
Further out, the Mornington Peninsula is another part of Melbourne which is holding up well.
“[The] Mornington Peninsula has fared well in 2011,” says Pabst. “The market has remained stable with a general view from property owners to hold their assets rather than sell into an unpredictable market.
While local values have been subject to the effects of reduced demand, Frankston and other peninsula suburb values remain largely unaffected, he continues.
“Many locals believe this is due to the positive effects of Peninsula Link, which has seen a new market of buyers attracted by the lifestyle and reduced commuting time to Melbourne.”
Indeed, Frankston’s growing popularity bodes well for the future, with the recent approval of a multi-storey apartment building comprising 89 apartments. Sixty per cent of units have already been sold off the plan.
“This is considered to be the beginning of high-rise Frankston,” concludes Pabst – and will undoubtedly be good news for land values in this still affordable suburb.
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