Zero vacancies: 20 suburbs where renters are in ‘desperate’ mode
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The Melbourne market will continue to perform for investors this year and beyond if you know where to buy.
Blogger: Cate Bakos, director, Cate Bakos Property
Last year’s recorded Melbourne median house price of $630,000 registered more than a 16 per cent annual growth figure – no mean feat for a city that also recorded growth in the prior year, after negative growth of nearly 5 per cent during the 2012 downturn. What is interesting about Melbourne as opposed to Sydney (which is in the media now for its huge rate of capital growth) is that Melbourne has experienced five years of 15 per cent-plus annual growth since the year 2000.
So while we Melburnians can excitedly point to a more consistent capital growth pattern, like any location, there are markets within markets. Certain suburbs, certain property types and varying categories of buyers are driving growth in Melbourne currently – and 2015 is shaping up to be an even more buoyant year for capital growth than 2014, particularly now with unrivalled low lending rates on offer to investors, upgraders and first home buyers alike.
In the first quarter of 2015 we have had some very strong quarterly growth figures recorded, but like any speculator will point out, sometimes the suburbs which have performed strongly may have hit their short-term potential for now, and could have the growth rates return back to their ‘normal’, while others which have shown only a glimmer of outperformance could be poised for some exciting short-term exceptional growth in the coming year.
Recording close to 20 per cent median house price growth for just one quarter seems like a ridiculously strong figure, but Mountpulls no punches. A mixed array of emotions clouds this middle-ring eastern suburb’s reported growth, as Chinese buyers have been well documented in the media and are tagged as a strong reason for this otherwise quiet suburban locale’s growth. Is this suburb poised for continued growth? Quite possibly – provided overseas migration and foreign investment legislation doesn’t change. Understanding the cultural and spiritual reasons why this hilly and leafy middle-ring hotspot has trumped Melbourne’s quarterly data is imperative for any buyer staking a claim in this highly competitive market.
Bentleigh/Beaumaris recorded exceptionally strong growth also – a combination of the delightful Bayside address combined with great schooling and fabulous family homes on offer. While Beaumaris is appealing to many families for the zoned schooling and easy beach access, Bentleigh trumps the suburb in my opinion for outperformance based on commuter amenity with rail services and a wonderfully eclectic shopping strip along Centre Road. Bentleigh has been the poor cousin to , but she’s rapidly finding her place in the prestige market and easier access to the M1 makes Bentleigh a worthy contender for my short list.
Essendon, in Melbourne’s northwest, was a star performer in the house market and was the seventh-strongest growth suburb for the quarter, with over 15 per cent growth recorded and a median house price eclipsing $1.1 million. Being just 10 kilometres northwest of the CBD, Essendon has an important place on the growth ladder for a wider range of reasons than most suburbs. First, Essendon boasts some beautiful Victorian, Federation and Edwardian architecture; and, unlike it’s inner-western counterparts, the grandness of Essendon’s preserved houses makes it a stand-out for any period property lovers.
More importantly, though, Essendon is home to some of the city’s finest private schools and for parents in the inner west familiar with the lack in their own neighbourhood, this pretty suburb offers a multitude of expensive schools for parents to choose from. Finally, the CityLink tollway makes commuting a breeze. Essendon’s unit market, however, is not to be greeted with the same enthusiasm. An over-abundance of higher-density units has adversely affected Essendon’s vacancy rate and it is now a suburb which investors should think twice about when buying units.
The inner-west’s Newport comes in at number six for reported quarterly growth – and justifiably. Newport deserves its place on the 2015 hotlist for as many reasons as Essendon. Being only seven kilometres from the CBD, Newport would arguably be one of the easiest commuter suburbs in the city. Newport station has four lines all intersecting and branching out; and during peak hour an express train can shuttle workers to and from work in no time. Best of all, Newport is undergoing an exciting gentrification and is no longer just known as the home of the power station, but is the Yarraville/Seddon upgrader’s suburb of choice when looking for a period family home on larger traditional-sized blocks of land. Being at the base of the Westgate Bridge, good things are in store for both Newport and Spotswood as these locales grow and find their place in our government’s masterplan.
Preston and Coburg North share equal place on the house-market ladder; poised for growth as Brunswick East and Fitzroy North’s overflow heads northbound for family buyers who are priced out of the area. The market, combined with the influence of great dining make these two suburbs exciting hotspots for me for more than just 2015.,
Not featuring in the outperformance stakes for this quarter is Footscray – in my opinion, one of Melbourne’s most undervalued and exceptionally interesting suburbs poised for rapid regentrification. Footscray has been performing steadily lately and I feel it will take Melburnians by surprise in the next few years. Home to some very new and quirky eateries, cafes and bars, and being just four kilometres from the CBD, Footscray is one of Melbourne’s best-kept secrets and can’t be stigmatised for ever.
For the unit market, I am excited about’s growth prospects heading into the next few years. The cattleyards were developed between 1980 and 1990 and although the units and townhouses are now quite dated, the “land to asset ratios”, combined with fabulous rental returns, tight vacancy rates and easy access into the city make Kensington an exciting proposition for any investor. The Arden-Macaulay Plan offers a hint of what’s in store for Kensington.
Down the bay some 30 kilometres from the CBD, Chelsea has featured in the top 10 unit markets for the quarter and with good reason. Chelsea offers rail, good local shopping and an undeniably beautiful beach. The arrays of dated villa units are representative of good value and offer surprisingly good rents for the area.
And finally, my 10th places goes to a regional house market just an hour’s drive from Melbourne. While not making headlines on the recent growth reports, Geelong’s ‘West’, as the locals call it, has performed steadily and strongly in the face of the local manufacturing downturn featured in recent news. Geelong West is rapidly becoming home to young cashed-up professionals (singles, couples and families alike) and many of these buyers are making the sea-change from Melbourne and commuting via train back to the CBD. It is this evolution of Geelong which is giving it a place on 2015 list.
Top 10 Melbourne suburbs for 2015
6. Coburg North
10. Geelong West