Unlike Sydney, Melbourne is holding steady due to economic stability and relative affordability, but supply could be a problem
As the pace of Sydney’s growth begins to slow, Melbourne is stepping up as the rock of the two with a resilient market.
“This comes down to affordability, job growth and population growth,” says Jane Slack-Smith, director of Investors Choice Mortgages.
“Melbourne has also had first home buyer stamp duty incentives, ie $0 up to $600,000 – like Sydney – and discounts of up to $750,000. The difference is that $600,000 will get a whole lot more value than the same amount will buy in Sydney.”
Such incentives have typically helped drive a property market, and this looks to be the case in Victoria. Ballarat and Geelong are other growth areas that could prop the state up should the capital begin to slip – their low prices and considerable returns are certain to bring in investors.
Geelong is also benefiting from the commencement of several infrastructure projects – such as the expansion of Deakin University and Geelong Hospital – to support different industries and remove its dependence on the manufacturing and processing sectors. The commute from Geelong to Melbourne has also been improved by the Princes Highway upgrade and the Regional Rail Link project.
According to Lindy Lear, general manager of Rocket Property Group, beachside suburbs in the vicinity of Barwon Heads and Ocean Grove offer good value and are an alternative to more expensive pockets like Torquay.
“Supply of land is limited in some of these areas, and buyers (and renters) want their properties to be in the best position nearer to special schools, recreation facilities, new shopping centres planned or under construction, so moving quickly to secure available land and house packages at a good price is crucial,” Lear advises.
Demand may overpower supply of housing
As housing stock shrinks throughout the state, however the Urban Development Institute of Australia (UDIA) in Victoria believes incoming supply may not be enough to cover the demand.
“The residential development industry points to a serious housing undersupply. This is cause for major concern from the affordability, liveability and economic perspectives as Victoria’s population only looks to increase on recent projections,” comments Danni Addison, chief executive of UDIA Victoria.
This represents an opportunity for townhouses and units, which are expected to make up the majority of properties in the Victorian housing market. While tenants still aren’t keen on apartments, especially in outer Melbourne, this sentiment could change in the future.
SUBURB TO WATCH
MELTON: Affordability brings strong growth
The home of Melton City’s annual Djerriwarrh Festival, the suburb of Melton is at the centre of its host satellite city.
As an important location in the outer-west region of Victoria, Melton has experienced strong growth over the 12 months to August 2017. Houses saw an almost-20% price increase, whereas unit values were boosted by over 10%. Even then, properties remain highly affordable, with houses coming in at a median price of under $330,000 and apartments selling at a median of just $272,551.
Some growing locations may suffer from low yields, but that’s not the case for Melton. The average return for units is a whopping 6.1%, whereas for houses it’s a strong 4.7%.
Affordability: Melton property prices average at under $400,000
Yield: Houses and units offer high returns of 4.7% and 6.1%
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