Victoria Property Report
National Overview Across Australia, the property market has been proving that there is no such thing as a single national housing market. In some states, prices are climbing rapidly; in others, the growth is slower or even stalling. The challenge for beginner investors and rentvestors, who may have limited funds to invest, is to identify those suburbs that are affordable yet have good long-term growth prospects and plenty of tenant appeal. This quarter, we aim to pinpoint those locations. WHAT IS A RENTVESTOR? A rentvestor is someone who purchases a rental property as an investment while renting another property in which to live. The challenge of affordability has caused a rise in the number of rentvestors to 3% of first home buyers nationally, according to industry research. Additionally, many a would-be first home buyer has switched from planning to be an owner-occupier to taking the first step on the property ladder as an investor. The research found that 13% of first home-buyers nationally are opting out of buying an owner-occupied home, and instead choosing to purchase an investment property while living in the family home. This figure rises to 24% in New South Wales and 20% in Victoria home to Australia s most expensive state capitals....research found that 13% of first home-buyers nationally are opting out of buying an owner-occupied home, and instead choosing to purchase an investment property while living in the family home. Other investors may be tapping into their home equity for the first time in order to become a landlord. Whatever the case, the common thread is the need to buy in an affordable location with decent capital growth prospects. And infrastructure often holds the key. PROXIMITY TO TRANSPORT IS ESSENTIAL In Sydney, our most expensive housing market, the south-west growth corridor offers affordable house and land packages that allow investors to maximise depreciation claims on newly built dwellings. This region is the beneficiary of major infrastructure projects that are reducing travel times to the CBD and creating employment opportunities. In Melbourne, pockets of value exist for investors and rentvestors willing to look beyond the city centre. Noble Park is one such suburb, close to all the services and amenities of Dandenong and well served by two train stations. 2
In Adelaide, the outer suburb of Seaford is an affordable alternative to neighbouring suburbs, and it ticks all the boxes for local retail outlets, an electrified rail link to the city and proximity to the beach. LOOK FOR TENANT APPEAL Hobart has been a quiet achiever recently, enjoying one of the fastest rates of capital growth across Australia. With tight vacancy rates, a controlled housing supply pipeline and the benefit of a flourishing tourism industry, suburbs worth a look include South Hobart, Moonah and Warrane, where the ripple effect of rising prices in nearby postcodes will propel values upwards. In Western Australia, locations within 10 kilometres of the Perth CBD offer potential for long-term investors. In particular, Fremantle offers the benefit of waterfront living, while Cockburn Central features excellent shopping and employment opportunities that appeal to tenants and will help to support long-term price appreciation. In Darwin, prices have cooled over recent months, but the city has longterm growth potential thanks to continued defence activity and the investment commitment of Chinese company Landbridge. In Queensland, as Brisbane spreads outwards, Ipswich offers some of the city s lowest price points, with a median house price of $250,000. Along with affordability, investors and rentvestors can enjoy the tenant appeal of proximity to public infrastructure and transport, and high rental yields of 5-6%. I invite you to read this report to discover where the best opportunities lie for investors and rentvestors around the nation. Brendon Hulcombe CEO - HERRON TODD WHITE 3
Victoria MELBOURNE Despite values across Melbourne rising rapidly in recent years, pockets of value with the potential for growth are still available for investors and rentvestors. NOBLE PARK Noble Park, 25 kilometres from the Melbourne CBD, is close to all the services and amenities of Dandenong, as well as Parkmore Shopping Centre in Keysborough, and Monash University. Noble Park has stayed more affordable than some of its neighbouring suburbs Springvale, Keysborough and Clayton primarily due to its reputation for having a lower socio-economic population. It has a median house price of $599,000 and median apartment price of $390,000; and annual price growth of 8% suggests it is on the right path to changing the perception of the suburb. Investors are currently enjoying rental yields of 3%. These properties are very affordable and provide a good platform for beginner investors and rentvestors to enter the market. On the plus side, Noble Park is served by two train stations Noble Park and Yarraman and is easily accessed by the Princes Highway and M1 Freeway. A recent zoning change to residential areas near the train station has created more opportunities for high-density development. This provides investors with an opportunity to buy into an asset class that hasn t previously been widely available in this suburb. DOVETON Houses are the most popular asset for Doveton investors due to the low median price of $395,000. Apartments are scarce, and the median price is an affordable $310,000. A development at 34-36 Hawthorn Road, Doveton, offers eight 2-bedroom apartments, each priced around $300,000. Doveton was originally created as a housing commission estate in the 1950s and many of the original concrete construction dwellings are still standing. These properties are very affordable and provide a good platform for beginner investors and rentvestors to enter the market. Many of these original dwellings are being knocked down to make way for multiple townhouses, and as the area gentrifies, the potential capital gains on original dwellings seems promising. 4
Rental yields in Doveton are a healthy 5.4% and capital growth is trending at 4% annually. Investors need to be aware that the suburb does not yet have a train station. CRAIGIEBURN Located 26 kilometres north of Melbourne s CBD, Craigieburn is the beneficiary of some key infrastructure projects, including the $1.7 billion Humex business park to be constructed on the Hume Highway. Humex, which will comprise 150,000 square metres of retail, office, medical, hotel and entertainment space, is due for completion in 2018. Craigieburn Leisure Centre is also nearing completion. With a median house price of $450,000 and a median apartment price of $320,000, affordability is a big factor behind Craigieburn s popularity. Despite strong price growth over the past two years, dwelling values are still well below the Melbourne median of $610,000. The Sikh temple on the Hume Highway is a drawcard for the Indian community, and other appealing factors include good rental returns, with a gross yield of 4.7%, and the generous retail amenities of Craigieburn Central. With a median house price of $450,000 and a median apartment price of $320,000, affordability is a big factor behind Craigieburn s popularity. GEELONG Grovedale, located a 10-minute drive from Geelong and 20 minutes from Torquay, holds appeal for investors and rentvestors as it is highly affordable, with a median house price of $418,750 and a median unit price of $340,000. Prices are starting to rise in response to buyer demand. As a guide, Grovedale values rose by 7.4% in 2016 compared to 3.7% for the greater Geelong area. An established suburb, Grovedale is close to the retail outlets of Waurn Ponds and Belmont, and enjoys proximity to the Geelong CBD, and nearby Deakin University and Epworth Hospital. Bus services link Grovedale with train stations in surrounding suburbs such as Marshall and Waurn Ponds. CASTLEMAINE With increasing lack of affordability in Melbourne, investors are looking beyond the state capital. Castlemaine, 120 kilometres from Melbourne and 40 kilometres from Bendigo, has been a key beneficiary of this. The median house price in Castlemaine, currently $425,000, has risen 10.2% since the end of 2015, while today s median apartment value of $337,500 is 6.25% higher than a year ago. Factors contributing to long-term capital growth in Castlemaine include ongoing upgrades to the train services to both Melbourne and Bendigo. 5
BALLARAT Ballarat s growth hinges largely on its proximity to Melbourne, though it does have a diverse economy, with the agricultural, food manufacturing and education sectors being key employers. Importantly, these industries are believed to have long-term sustainability. Houses continue to be the most popular choice in the Ballarat market; however, several centrally located apartments that have come onto the market have proven popular with both investors and tenants. A 3-bedroom, 1-bathroom house in Ballarat set on a 600-square-metre block tends to be priced at around $350,000. It is an affordable entry price for many investors and rentvestors, and yields are in the order of 5%. The suburbs of Soldiers Hill, Golden Point and Ballarat East are all becoming more popular because they are located near the CBD. Dwellings tend to be Victorian period homes with original features, and it is expected that developers are likely to renovate these. Investors who keep an eye on the market can pick up unrenovated character homes for under $300,000 with plenty of scope to add value through renovations. The greenfield estates of Ballarat have not experienced high capital growth, due to the increased supply of properties. The new Insignia estate in Alfredton is perhaps one development that shows promising levels of capital growth, though this is largely because of the limited number of allotments available. SHEPPARTON With a population of 67,072, the Shepparton region accounts for onequarter of Victoria s agricultural production. Property investment in the region is on the rise following the release of new land subdivisions, and many builders are offering incentives to encourage investors into the market. The availability of land means houses are more popular than apartments, and the median house value in the Shepparton area is $270,500. The Victorian State Government has made a significant investment in the regional V/Line rail network, of which Shepparton is a major hub. Additional infrastructure projects that will support the appeal and value growth of the region include the $168 million redevelopment of Shepparton Hospital, the $34 million Shepparton Art Museum project and a $21 million new sports precinct. 6
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