The Smartline Report – April Edition

The month in review: Melbourne

By Herron Todd White
April 2016

Outer East
Within the outer-east, fringe suburbs can be considered to be Kilsyth, Boronia, Mooroolbark and Bayswater North. Affordability is certainly one of the main factors driving a movement of purchasers from the inner-eastern suburbs to those on the fringes.

The average price for property aggregated through Ringwood, Ringwood East, Mitcham and Wantirna for the December 2015 quarter was $858,250. By comparison, the neighbouring fringe suburbs averaged 43.8% lower at $596,750 (source: REIV). The difference can partially be explained by the availability of good quality schools within the innereastern suburbs which has traditionally attracted more families and increased competition, thereby increasing average prices. While the middle eastern suburbs provide convenience in terms of access to the city and amenities, the resulting properties tend to be smaller. On the other hand, properties in the fringe suburbs tend to be on larger lots of land and offer purchasers further opportunities and scope for future development.

Although the fringe suburbs may appear to offer good value for money, capital growth rates show that these suburbs may not represent a good short term investment. Bayswater and Boronia for example recorded capital growth of only 1.6% and 2.3% respectively in the 12 months to March 2016. By comparison, in the same period, Ringwood grew by 7.6%, while Wantirna South grew by 9.8%. However from an investment point of view, rental demand for properties in the fringe suburbs has been high which has resulted in respectable yields of over 4%.

In the long term it would seem reasonable to expect the price gap between the middle eastern suburbs and the fringe suburbs to narrow as developers consider the abundance of large lots available in the fringe suburbs and therefore attract more potential purchasers who may have previously excluded such suburbs from their search criteria.

Outer North
The fringe dwellers of Melbourne’s north are in suburbs such as Greenvale, Craigieburn, Mernda and Doreen. These suburbs are situated within Melbourne’s outer ring. When looking at affordability in the north of Melbourne, middle suburbs such as Northcote, Brunswick, Thornbury and Preston are all having an impact.

Quarterly median house prices in the inner north:

• Northcote – $1,106,250
• Brunswick – $925,000
• Thornbury – $1,017,000
• Preston – $812,000

An increasing amount of home buyers are looking for more affordable properties in the north. Compare these median prices in the inner north to that in the outer ring of Melbourne.

Quarterly median house prices in the outer north:

• Greenvale: $655,000
• Craigieburn: $420,000
• Mernda: $455,000
• Doreen: $480,000

Some of these outer north suburbs have experienced good growth in median prices in recent times. Greenvale had a quarterly change of 17.8%, and Mernda showed a change of 9.7%. Home buyers or investors need to be aware however that median prices are not always a true reflection of the growth of a suburb. Greenvale for example has recorded some high priced sales in recent times, which affects the median price.

1 Lamark Court, Greenvale – sold for $1.285 million on 23 October 2015 (land area 4,094 square metres, 4-bedrooms, 3-bathrooms, 4-car garage)

Weekly rent for 3-bedroom houses in Craigieburn is $330, with a yield of 4.8%. Mernda is $333, with a yield of 4.6% and Doreen is $350, with a yield of 4.4%. With a great amount of new housing development occurring in the outer north of Melbourne, it can be said that the oversupply will keep prices stable or even see them decrease in the short term.

The outer north is more a long term proposition. The area will become more favourable with an increase in infrastructure such as public transport, schools and town centres.

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2016. Australian Credit Licence Number 385325

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DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.