As an influx of residents props up Melbourne, Geelong makes a splash with its affordability and accessibility
Population growth is incredible in Melbourne, but the high price tags make buying into this market a struggle.
“Housing affordability has become an issue for some segments of the market. As is normally the case at this stage of the cycle, more expensive properties which are more subject to discretionary spending are the weakest segment of the market,” says Kate Forbes, national director of property strategy at Metropole Property Strategists.
However, she says that while Melbourne’s property prices are likely to fall a little further, “they will be underpinned by a robust economy, Australia’s strongest population growth, and the influx of 35% of all overseas migrants”.
Low yields also suggest that investors should be careful.
“In the Melbourne marketplace, you can buy a great, affordable property for the quality that you get; however, the rental yield is still quite low. The fact that it’s almost cash flow negative inhibits quite a few purchases,” says Damien Lee, head of acquisitions at Caifu Property.
Nonetheless, the demand is strong enough for Melbourne to still be a great investment despite the low returns and the slowdown.
“It’s absolutely scary how many people are still moving to Melbourne, which is a good thing. They’re just trying to play catch-up on the physical property supply side of things versus the population.”
Regional areas stumble
By contrast, regional Victoria’s overall push may be going south, with the smaller pockets reaching oversupply more quickly than the capital.
“Regional Victoria has gone a little quiet – we don’t hear too much about that any more. It’s had its run,” Lee says.
However, some areas are taking the opportunity to re-establish their reputations, like Geelong, which was considered a ‘rough’ town at one point.
“With the new highway, the new train line proposal, gentrification and a new greenfield space, that transportation network all the way down to Geelong will start to come alive,” Lee says.
Already, Geelong is starting to hit its stride given the ease of commuting to Melbourne and its more reasonable prices.
“In Geelong, you can find a four-bedroom house on a nice block of land at only $500,000 – prices have grown quickly and are still growing fast because it is a commutable distance from Melbourne,” Multifocus Properties CEO Philippe Brach points out.
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EUMEMMERRING: Dandenong suburb benefits from development
A suburb close to the Dandenong region, Eumemmerring is enjoying remarkable growth that shows the strong potential of suburbs beyond the metro.
Units in particular performed admirably, with values shooting up by almost 30% in the August 2017–18 period. Despite this boost, the median price is just slightly over $450,000, making it reasonably affordable. The performance of the rental market reflects demand – the weekly median rental rate soared by an incredible 15.3% to $340 in the year to June (passing houses at $320), while offering a good yield of 4.3%.
The efforts to revitalise Dandenong have had their effect on this suburb, creating excellent access to conveniences like public transport and sports facilities.
Rent: Rental rates went up a staggering 15.3% in the year to June 2018
Location: The suburb’s position close to Dandenong gives residents easy access to amenities
Can you afford to buy in this suburb? Find out how much you can borrow