Melbourne

The Smartline Report – July Edition

The month in review: Melbourne

By Herron Todd White
July 2016

CBD, City Fringe and Inner to Middle East
The residential market in Melbourne and inner eastern suburbs has remained steady over the 2015/16 financial year, however recent restrictions on money leaving China and foreign investors borrowing in Australia has created some uncertainty in the market. With some banks stopping lending to foreign borrowers, the apartment market has begun to flatten and there are concerns about oversupply with an excess of 10,000 apartments to be completed within the city of Melbourne in 2016/17. $500,000 will not buy you a lot of housing within the CBD or the inner east, however there are some options. $500,000 in the Melbourne CBD can get you a 2-bedroom 1-bathroom apartment with a car space. A little further out in the city fringe, you can comfortably get a 1-bedroom 1-bathroom apartment with a car space for under $500,000. Further out, for under $600,000 you can get a good sized 2- to 3-bedroom unit in Box Hill or Blackburn in Melbourne’s middle east. We have been unable to find a single sale of a detached dwelling in the Inner to middle east under $500,000. It is unlikely that these types of properties will still be available at this price point in the short to medium term. A rental return between 4% and 5% is likely for CBD and between 3% and 4% in the inner to middle eastern suburbs.

Outer Eastern Suburbs
Within the outer eastern suburbs, $500,000 can in general enable investors to purchase either a 2- or 3-bedroom house with a rental yield between 3.5% and 4%. In Bayswater for example, a 2-bedroom house can be purchased for on average $456,000 (www.realestate.com.au) and achieve a weekly rental of $310 per week. Similarly, Boronia and Moorolbark still have 2-bedroom houses with an average selling price of $482,500 and $462,500 respectively. In comparison, in the newly established Harcrest Estate, located in Wantirna South, sub-400 square metre lots are selling for just below the $500,000 mark or $1,300 per square metre.

For investors looking to benefit from higher returns, Monbulk which has an average purchase price of $500,000 is perhaps one of the more profitable options, with average rental yield of 4% and demand for properties remaining high. The reason for this is the generally lower supply of properties available in the suburb as well as its reputation as a leafy familyfriendly suburb, also popular with retirees.

Units are perhaps another area to consider for investors wanting to strong arm their way into suburbs which have arguably a better location and are closer to amenities and access to public transport. For example, in Croydon, unit and townhouse prices are on average $465,500 and rents achieved approximately $350 per week, resulting in a gross yield of 3.9%. However, once service charges and other costs are taken into consideration, this figure is likely to be somewhat reduced. Units in Ringwood are also on average selling for $500,500 and rent for $343 per week. Given the extent of development that has taken place within the suburb in recent years, most notably the redevelopment of Eastland Shopping Centre and the train station, investors may regard this as a good investment for future capital growth, especially with annual growth for units for the period 2014-2015 being 10.6%.

Western Suburbs
There has been continual demand for land and new houses in the outer south western region of Melbourne. Areas such as Truganina, Tarneit, Wyndham Vale and Werribee are providing first home buyers with relatively affordable properties. In May 2016, RP Data reported the median house sale price in Truganina was $450,000, Tarneit was $410,000, Wyndham Vale $359,500 and Werribee was $352,250. First home buyers with a budget of $500,000 will find these areas highly desirable as $500,000 can buy you a 4-bedroom house. Although these suburbs are located between 27 and 36 kilometres from the Melbourne CBD, nearby railway stations provide access to the surrounding suburbs and Melbourne’s CBD.

Closer to the CBD on the western city fringe, Footscray and Maidstone provide affordable options for first home buyers to enter the market for a budget of $500,000. In May 2016, RP Data reported the median unit sale price in Footscray was $395,000 and Maidstone was $320,000. These areas provide good transport links to the Melbourne CBD and are growing in popularity.

Northern Suburbs
Buying property in the northern suburbs of Melbourne for $500,000 or less depends heavily on proximity to the CBD. For detached dwellings in the inner suburbs such as Brunswick, Brunswick East, Northcote and Thornbury, it is almost impossible to buy under $500,000. Apartments on the other hand become more affordable.

Newly built, 1-bedroom, 1-bathroom apartments with one car space can be purchased for under $500,000. Apartments in the partly complete Ettaro development (pictured) on Brunswick Road in Brunswick East have been sold off the plan for around the $400,000 mark. The development comprises 400 apartments with a mix of 1-, 2- and 3-bedrooms and offers great common facilities such as a swimming pool, bowling green and outdoor cinema.

Unit median prices:
• Thornbury – $455,000
• Northcote – $495,000
• Brunswick East – $524,500
• Brunswick – $495,000

Outer northern suburbs such as Broadmeadows, Meadow Heights, Roxburgh Park and Craigieburn offer an array of detached dwellings for under $500,000. The median house prices in these suburbs are all under $500,000, however the quality of property is generally low. New housing estates in Craigieburn, Mickleham and Greenvale offer the purchaser the opportunity to own a new house for under $500,000. This is appealing to first home buyers and to purchasers who are searching for more space for their money. For investors, properties in the outer suburbs could see more growth as new infrastructure such as schools and public transport are constructed.

For detached dwellings in the inner north, the entry-level price point is between $600,000 and $700,000. At this price, you can purchase a rundown dwelling on a small parcel of land. On 27 February 2016, 20 Beith Street, Brunswick (pictured), sold for $650,000. The dwelling was hardly liveable and was situated on a 141 square metre piece of land.

South Eastern Suburbs
If you are willing to sacrifice proximity to the city then head to the outer south east. $500,000 will get you quite far. Suburbs such as Cranbourne, Officer, Pakenham, and Clyde North provide many options for buyers with a $500,000 budget.

In these suburbs this budget will cover a newly built 4-bedroom home on roughly 500 square metres of land in one of the newly released estates.

A new wave of double-story townhouses on smaller blocks in Cranbourne is just starting to hit the market. One of these will set you back around $350,000.

Original double-brick dwellings in Frankston North have seen growth over the past six months and $500,000 will buy you plenty of house on a decent sized block, with close proximity to the beach.

Between Hampton Park and Langwarrin there are plenty of opportunities to purchase either a house, townhouse or parcel of land in this price bracket.

www.smartline.com.au

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.