A handful of Melbourne’s outer areas are showing resilience, despite dire warnings of oversupply issues gnawing away at price growth.

Adrian Foster, director of Hockingstuart Frankston, says that demand has climbed steadily in certain outer city areas over the first half of 2013, with especially strong signs emerging in Melbourne’s south-east.

“We’ve seen annual growth of up to 7.5% in suburbs like Langwarrin, Frankston and Frankston North,” Foster says.

Foster adds that these are among fringe areas of the outer city that have been shielded by the excessive supply of units still coming onto the market within the inner-city.

“Investors are starting to consider outside the traditional inner-city developments… at the moment there’s 25,000 new apartments scheduled to be released in or near the CBD.”

Something to consider is that Greater Melbourne’s south-east remains a popular region for first homebuyers, and has started to attract some investors too as the local population grows and job markets develop outside of the CBD.

Spearheading a list of south-east growth drivers is a $110m development at Port Hastings on the Mornington Peninsula, announced in April. The project is expected to create hundreds of jobs over the next four years, spurring economic growth in the area.

That the area remains fairly popular already can be seen in consistent population growth over the last decade that has caused many suburbs in Melbourne’s south-east to double their population.

Foster says the recent introduction of the Peninsula Link, a 27km stretch of freeway connecting Carrum Downs to Mount Martha, is likely to draw even more people to the area, with recent REIV figures placing Frankston, Mount Martha, Frankston South and Langwarrin in the organisation’s top 20 growth suburbs.

“Suburbs like Langwarrin and Frankston are attractive to investors because housing is more affordable and amenities and infrastructure are already in place. The opening of the Peninsula Link has given the area a huge boost with many residents no longer being subject to a long commute into the city,” Foster says.

The inner city

As select outer suburbs perform reasonably given the Victorian economy’s subdued outlook, Next Hot Spots director Andrew Peterson points out that city-wide property market as a whole still faces staunch challenges.

“Melbourne’s oversupply of housing has attracted plenty of comment in the press and amazingly enough they keep building. One of the areas of greatest concern is around the CBD, Southbank and Docklands. A quick search of property for sale in these areas throws up large numbers of units on the market at a significant discount to their relatively recent sales prices,” Peterson says.

As price growth in these city regions languishes, other areas are holding out. Hockingstuart Brunswick director Rob Elsom has been selling properties in Melbourne’s inner-city for 15 years and says activity has been improving over the first part of 2013.

“We’ve seen strong demand in areas like Thornbury, predominantly from investors and families who have been priced out of nearby suburbs like Northcote,” Elsom said.

“People find Thornbury attractive because it’s still affordable and well serviced by public transport, schools and other amenities. Buyers don’t want to over commit because there’s still some insecurity about the job market, but they also recognise that with low interest rates, the stars have aligned to create better buying conditions.”