Why Buy in Melbourne?
Taking the top spot as the worlds most liveable city for almost a decade in a row it’s no wonder hundreds of thousands of people are flocking to Melbourne every year from across the country and the world. Home to some of Australia’s greatest suburbs, the country’s largest shopping centre and the worlds most comprehensive tram network, the city of Melbourne won’t leave any new resident or investor disappointed.
The property market in the city is flourishing more than ever, growth is strong, job growth for residents is leading the nation and housing and apartment prices are rising steadily. Analysts are touting the mass influx of national and international migrants as the major driver of the city’s high housing demands and growing prices.
Melbourne’s current median house prices are just over $880,000 and apartment prices are at an affordable $506,000. In the past 5 years, the city has experienced a 55% increase in home and apartment prices, which is great news for investors, and this trend is set to continue into the future as the population boom continues.
Established Suburbs for Investors
The more costly established Melbourne suburbs are some of the best in the world with their network of efficient public transport, high-speed internet infrastructure and a myriad of dining and shopping options. Though, these suburbs come at rather high prices and are a less friendly option for families and first home buyers.
Property investors looking to purchase houses should be looking towards Melbourne’s fastest growing suburbs to purchase an investment property. The suburbs of Arthurs Seat, Middle Park and Frankston North are all currently experiencing off-the-charts growth of 48%, 49% and 38% respectively. Apartments in the suburbs of Bundoora, Northcote and Moon Ponds should be the top picks for investors too, with 27%, 26.3% and 26.2% rises in value over the past year all reaching prices of over $507,000.
Head out of the inner suburbs and the story remains particularly similar with regards to massive sustained growth in home prices. The suburb of Clayton, more than 20km from the city has seen unstoppable growth since 2008, with a 210% increase in house prices to reach a median price point of more than $1.3 million. Similar price growth has been experienced in the outer suburbs of Blackburn South and Doncaster East also, making the outer suburbs an exceedingly enticing option for investors.
Investors looking to purchase and rent out their properties in the outer suburbs won’t be let down either, as SQM Research is outlining that suburbs as far from the city as Donvale and Blackburn receiving above-4% yearly increases in rental returns.
New Estate Developments
The inner suburbs aren’t the only suburbs seeing population and property price growth off the charts. Melbourne’s fringes are experiencing never-before-seen increases in size and vale, and that means countless new suburbs and estates for both first home buyers and investors to choose from. All of these new developments have a typically low crime rate, are great for families and have all the standard services and leisure options of the inner suburbs. More than 200,000 people are expected to move into Melbourne fringes over the next 2 years, and an expected property growth rate currently sits at 17% YoY.
A number of new schools, shopping centres, and other services are planned to crop up in the fringes too, further boosting investment returns and home values.
Sitting on Wydhamvale’s fringe, Jubilee gives buyers a great suburban lifestyle with all of the amenities required to live a healthy and happy lifestyle. Direct connections to Melbourne city means professionals with jobs in the city will have an easy commute. The community is perfect for families as there are plenty of amenities like water parks, sports courts and park space.
Just 30 minutes north-west of Melbourne, Aldo Estate is built from scratch to offer buyers a great lifestyle that is tailored to meet the needs of everyone. The estate is surrounded by great leisurely country clubs, wineries and also features cafes and coffee shops. Aldo Estate also offers buyers great off-the-plan deals, saving first home buyers money.
On Melbourne’s southeast fringe sits Lochhaven Estate. As one of the city’s newest estates, it is designed for young families with lower budgets who don’t want compromise. The estate has easy access to Cranbourne’s city centre, as well as the neighbouring farmland and schools. The location makes the estate quiet, safe and leisurely, a perfect place for first home buyers or those looking for a modern no-compromise estate.
All of Melbourne’s inner suburbs are looking at a growth rate of at least 12% over the next two years, with an average median house price of more than $1 million. That means investors within the inner suburbs can be looking at annual gains of more than $120,000 across the board.
Outside of the inner city in suburbs 30km or more from the CBD things are also looking up, with almost all suburbs across the cities northern suburbs and far south suburbs all losing at gains of more than 10%. Clyde, Tooradin and Frankston in the city’s south have capital growth rates of more than 12% and up to 19.8% in Clyde’s case. Making gains of more than $100,000 a year on a property below $600,000 is certainly possible in these outer regions of the city.
Cheaper Suburbs & First Home Buyers
First home buyers have a different set of requirements to investment buyers. The main requirement being affordability, the livability of the area and the amenities. Typically these areas aren’t within the inner city or the inner suburbs, but rather new suburbs or the estates on the outer fringes. All of which are more affordable, have family-friendly neighborhoods and a far more relaxed lifestyle.
Some of the best suburbs for affordable homes and homes perfect for first home buyers are generally around 50km from the CBD and have low crime rates. Domain named Millgrove the best suburb in Melbourne for buying the most affordable homes in the city, with the lowest crime and high livability, though the suburb is fairly old and doesn’t meet the requirements of a lot of young families.
The more common first home buyer locations are in the Airport Precinct as they offer direct routes and transport to all across Melbourne and also feature newer homes and safer neighborhoods. The suburbs of Attwood, Gladstone Park and Westmeadows all top the list for great first home buyer locations.
The state government has noted that families are typically choosing outer suburbs and newer fringe suburbs to get their foot in the market as house and land packages can come in at under $500,000 and there are still schools and plenty of services in those areas.
Millgrove on the outskirts of Melbourne gives buyers an open and airy country feel but with an easy connection to the city via the Warburton Highway. The area is typically older and more tired than the inner suburbs, but its $600,000 lower median dwelling cost makes it attractive for first home buyers. Typical median prices are just $370,000 and capital growth is fairly high at 8.7%.
Just opposite the airport, first home buyers can get into the market in Attwood, as it is a lower cost option but can still offer great returns at 6.3% per annum on a $560,000 home. The area is safe and great for families with children as schools and shops are easy to access. Homes in the area are also typically new, and new developments in the area are expected to keep capital gains and renter demand high.
Gladstone Park, connected to Attwood, should be another northern suburb for investors and first home buyers to look at. It offers affordable and new-build homes, along with easy city access and access to schools, green space as well as shopping centres and of course the airport. With average dwelling prices sitting at $630,000, first home buyers will be eligible for certain grants, and the suburbs high 11.3% capital growth rate means over the next 12 months homes in the area could earn over $70,000.
Craigieburn and Mickleham on the northern outer fringe of the city, offer a great lifestyle. Connected to farmland in the East Grasslands, the area is perfect for young families and investors with its massive growth prospects and high rental and buyer demand. Homes in Craigieburn are looking at median prices of just $525,000 in 2018, where Mickleham is even lower at $515,000. The best part about these areas are the capital gains seen, and expected, over the next year. Craigieburn is looking at a 9.4% growth rate in 2018, whereas Mickleham is seeing a staggering 20.4% growth. The area is predicted to be another super-growth area for Melbourne as more and more estates developments are unveiled in the area, bring shops, cafes, lakes, green space and schools with them.
Best Suburbs for Apartments
Buyers looking for apartments in Melbourne either as an investment property or as a way to downsize from their current home should know that as of 2018 there is speculation of a deep oversupply of apartments across the entire CBD, and particularly in the Docklands district. Although this promotes a drop in prices and an entry point for first home buyers, it has raised a red flag for investors who now don’t have large increases in rental prices to profit from.
As expected though, the majority of high growth and the best investment opportunities for apartments in Melbourne are in the CBD and surrounding inner suburbs of Southbank and Port Melbourne, which are projected to have stable growth into the future, particularly Port Melbourne with a 3.4% annual increase on $770,000 apartments.
The top locations for investors buying apartments in Melbourne are the CBD, St Kilda and Southbank as well as Port Melbourne – with the Docklands being more reserved for first home buyers due to its market saturation. All of these suburbs do have tremendous growth opportunities in the future though and particularly The Docklands which is currently at a low point in the market and has great rental yield.
Melbourne City’s apartment median price now sits at just $460,000 due to this potential oversupply, making 2018 a great year for first home buyers to enter the market a little easier.
The 2018 Outlook
Melbourne’s 2018 through 2020 property outlook is fairly positive, with most analysts expecting great investment returns for investment buyers, as well as deals and affordability for those looking to buy into the city’s apartment boom (find out how much you can borrow). The dips in value are also projected to be boosted by the continued growth of the city as it heads towards a population of 5 million people.
Growth in the outer suburbs is changing the city’s dynamic and making the fringes generally a really pleasant place to live and are causing unexpected price spikes and investment opportunities in the fringe estates and older suburbs of Croydon and Craigieburn.
Alan Oster of NAB as outlined that although the Melbourne market has shown signs of cooling, there is still an expected 5% growth in rental yields and house prices for 2018. The flood of first home buyers into the cheaper suburbs of Broadmeadows, Ardeer, and Taylors Lakes are pushing median prices higher and counteracting the cooling market — great news for investors.
As for apartments, the worrisome oversupply seems to be limited to a few small pockets throughout the entire city, mainly the Docklands, which has seen a small reverse in apartment value of -0.2%, but rental yields and profits still remain high.
Over the next 12 to 18 months Melbourne is predicted by NAB to increase its average house price by 5.5% and a further 3.4% in 2019, a positive stat for investors looking to purchase new homes. Apartment prices, however, are predicted to decline by 2.4%, making entering the market for first home buyers and students more affordable in the coming months.