Limited supply, investor demand, low interest rates and a strong economy keep the Melbourne market going strong
Melbourne has the formula for sustaining growth down to a fine art as low property stock combined with high demand keeps this capital moving forward.
“The current market is driven by a shortage of homes as well as the increasing number of Chinese buyers,” says Glen Coutinho, director of RT Edgar.
“This shortage, plus low interest rates, is driving prices up. General economic conditions are healthy, with low inflation.” Coutinho points to stability and good opportunities for education and employment as further reasons for the state’s popularity with overseas investors, since there is likely to be sustained demand from tenants.
“For investors to make money, they must buy with a 10-year vision. Having a home/land is the key to growth. There is and will continue to be a shortage of homes in good areas,” Coutinho explains.
“Suburbs in tight supply are generally the eastern suburbs and Bayside, as well as private school belt areas. The riskier investment will be buying off plans or buying in suburbs without infrastructure.”
With the population growing at a rate faster than infrastructure is being built, however, the government will need to implement more projects to keep up with the demand, especially in terms of public transport.
Market takes a break
Melbourne’s population growth is attributed to the state’s ability to generate more jobs than anywhere else in Australia.
“With immigration accounting for 55% of Australia’s population growth, 36% of our new migrants are moving to Melbourne, with many of them being at the household formation stages of their lives,” says Michael Yardney, CEO of Metropole Property Strategists.
While most of these migrants will start out as tenants, they will eventually move on to buy properties of their own, adding to demand. The implementation of the First Home Owner Grant has also enabled new buyers to come in and snap up apartments, strengthening this market.
However, as with Sydney, Melbourne is also beginning to show signs of a slowdown after several strong years, even though it remained the second-best property market in the country.
“Melbourne is the only capital city where auction clearance rates remain above 70%, but there seems to be less depth to the market, with fewer people at open for inspections and fewer bidders at auctions,” Yardney reports.
“Prices are stabilising after more than five years of strong growth, and 2018 is likely to see much more moderate price growth in the range of 3–5%.”
SUBURB TO WATCH
CASTLEMAINE: Goldfields suburb maintains steady performance
Established in 1851 during the height of the gold rush, the suburb of Castlemaine combines affordability with good returns to draw buyer interest.
Units in particular seem to offer solid prospects – the median value is under $350,000, and the rental return is 4.6%. With Castlemaine’s rising popularity as a tourist destination, now could be a good time to capitalise. Following 8.2% growth in the year to October 2017, the median house price also shot up to over $461,000, with an average yield of 3.8%.
Castlemaine is home to a bustling fi ne dining scene as top chefs make their way to this scenic spot. The suburb is known for produce, as well as its local arts scene.
Affordability: Both houses and units are reasonably priced despite the suburb’s many amenities and accessibility
Education: Castlemaine is home to several primary schools and the Castlemaine Secondary College
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