Deer Park - Write Up

Hi Guys,

Mentioned this in another thread thought I'd post it front page for future searches.

Investing in Deer Park.


Let me first say, I'm personally not a fan of Deer Park as an investment area but I understand that you, as an investor will come to your own conclusions and as such I'll attempt to present to you some facts and thoughts for your consideration so that you can, at the very least, make a more informed decision.

New to investment introduction:
For me and many investors, capital growth is the main prerogative for investing in real estate as it's the only aspect that compounds over time and thus is the most powerful form of wealth creation.

With growth being considered first and foremost it's important to note that it's not "land" that appreciates over time it's the peoples', or the market's perception that appreciates in any given area more (or less) over time.

Market perception is the only thing that moves prices up or down.

Supply and demand is the fundamental mechanism that turns market perception into quantifiable house prices. The more people that want a particular area/street/house/unit the more they'll have to pay to secure it.

Market perception can be manipulated too. For example interest rates are a way of controlling how affordable people perceive properties to be at that time.

When investing it's important to understand whether an area is genuinely growing due to a good market perception or if there are other factors manipulating the capital increments.

Many people now think that they've bought in a great area as their properties have grown well since 2011 when coincidentally interest rates started dropping at the same time. When rates go back up, will those areas still be desirable enough to sustain growth or will they be stunted or even go backwards?

So what does Deer Park have going for it that the market will perceive to be desirable?

First we need to understand who lives there... Who makes up that market?

Demographic
  • 45% Australian born
  • 70.4% Both parents born overseas
  • 59.7% Work Full-Time
  • 43.9% Are blue collar workers
  • 67% Drive
  • 4.5% Catch the train
  • 45.7% Have children
  • 66% Live in 3BR Houses
  • 22% Live in 4BR Houses
  • 67% Own/Buying Houses
  • $384/wk median mortgage
  • $270/wk median rent

Source: http://www.censusdata.abs.gov.au/ce...11/quickstat/SSC20380?opendocument&navpos=220


From this we can ascertain that the majority of people here find this area desirable if they:
Have immigrated;
Are blue collared workers;
Don't need to commute into the CBD;
Want a good sized house;
Want somewhere to raise children (consider schooling, parks, children activities);


So what are the types of things that will make this area more desirable to existing residents:

Local blue collar jobs;
Good schools;
Safe environment for children;
Stable area for family;
Supermarket for family food;
Cafes/Restaurants;
Adult activities;
Good roads;
Access to services such as hospitals;
English learning services.

Also consider, what would everyone else (outsiders) want in an area?
I won't list these here as there are many things.

What does Deer Park have now to ensure that desirability stays?
One Secondary College
Four Primary Schools
Jobs at nearby factories/industrial areas (e.g. Orica)
Coles Supermarket
Restaurants/Cafes (Ballarat Rd & Brimbank)

Source: http://en.wikipedia.org/wiki/Deer_Park,_Victoria , http://www.brimbank.vic.gov.au/Homepage_Links

What is happening to increase desirability?
Please note this is for all of Brimbank:
  • $16.9 million on road works
  • $5.28 million on sports facilities
  • $2.1 million on sustainability projects
  • $1.3 million for playgrounds, parks and gardens
  • $1.76 million on traffic management
  • $23.75 million on community facilities
  • $4.94 million for walking and cycling pathways
  • $0.89 million on town centres
  • $0.23 million for drainage rehabilitation


What is working against desirability?
  • Maximum security female prison
  • Chemical production and storage
  • Pacific/Australia/Deer-Park
  • Crime (Prisons mean prisoner's families may move close by):
  • Low population growth: 3.48% Growth from 2015 - 2045
Sources:
http://en.wikipedia.org/wiki/Dame_Phyllis_Frost_Centre
http://www.abc.net.au/news/2014-01-27/man-found-dead-on-road-in-melbourne/5220018
http://www.abc.net.au/news/2014-12-14/fatal-crash-linked-to-discovery-of-body-in-deer-park/5965966
http://www.police.vic.gov.au/content.asp?a=internetBridgingPage&Media_ID=72178
http://www.orica.com/Locations/Asia-Pacific/Australia/Deer-Park#.VRlAPfmUeVo


What else will effect future house prices?
Zoning and planning
Land Supply
Housing Supply: http://profile.id.com.au/brimbank/building-approvals / http://forecast.id.com.au/brimbank/residential-development
Job creation
Infrastructure & development: http://www.heraldsun.com.au/leader/...-melbournes-west/story-fngnvmj7-1226928478665


GROWTH SUMMARY
If future projects go ahead there may be a glimmer of hope for great growth in Deer Park. There's been talk of an electric rail line but the area is such a safe labour seat it's unlikely that will move forward. Also gentrification of industrial areas is being considered but this won't be ratified until ~2017.

Currently there are no major projects, population growths or substantial increments in accessibility and lifestyle amenities to move this suburb from a cheaper working class family area into a suburb in which the whole market finds desirable.

The suburb faces socio-economic and language barrier challenges, also higher murder and rape crime rate problems which will repulse the single female market. (Compared with Melbourne's highest single female population areas). Council is working on this problem with community facilities.

There is lack of transport into the city which will deter younger people who wish to have nights out and also CBD commuters (although the V-Line does run regularly http://ptv.vic.gov.au/timetables/linemain/1728).

The council is actively trying to make the area more appealing for children so there may be more scope for young families who want to own a house rather than renting. This area will not attract people who desire private schooling however (1.2% currently attend private institutions).

There is scope for gentrification and subdivision to occur in three GRZ3 areas which may increase nearby RZ1 area house prices: http://services.land.vic.gov.au/maps/pmo.jsp
Housing approvals in Deer Park however are not as exciting as Sunshine and Sunshine West (both of which are better for renovate/development investors).

There are high risks to capital growth in Deer Park. These risks are mainly the huge amounts of available land available for developement in neighbouring Derrimut and Ravenhall which could easily over saturate the stock levels of residential real estate as the population growth is not growing aggressively.

In summary this area would be expected to perform worse to equal with Greater Melbourne in the range of 1-3% for units and 1-4% for houses over the next 5 - 8 years.



What to buy
If you want to purchase in Deer Park buy what the majority of the market wants to live in as a home. In Deer Park that primary market desires 3 bedroom houses.

  • 90.4% (4,845) of properties in Deer Park are detached houses;
  • 6.1 % (325) are units.


If you're considering buying a unit here, stop. Think about this:

When it comes to resale time you only have a niche or minority of the local population that would consider purchasing a unit as a home. Having a large pool of potential home buyers is key in attracting future emotional results during the sales cycle for extra profit.

Also, only 14 unit transactions occurred over the last 12 months
(source: http://house.ksou.cn/profile.php?sta=vic&q=Deer Park)
This means a unit in Deer Park is more illiquid real stock than in other areas like St Kilda where units are traded regularly.

Source Investopedia: "The state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value. Illiquid assets also cannot be sold quickly because of a lack of ready and willing investors or speculators to purchase the asset. The lack of ready buyers also leads to larger discrepancies between the asking price (from the seller) and the bidding price (from a buyer) than would be found in an orderly market with daily trading activity."

In short, it is more likely to be difficult to sell that unit quickly or to have an outstanding recent comparable sale to get a good bank valuation from in the future.

TLDR; (Too long didn't read); If you're certain you want to invest in Deer Park only buy a 3 Bedroom house.


Look for a decent brick house (again 3BR) on the North Deer Park side near Coles and North Deer Park Primary. Make sure it's in the Residential Zone 1 planning scheme. Good example streets to consider are: Amelia Ave and Ambon Ave.

The train station at this point in time is irrelevant as only a minority commutes.


I hope this helps anyone considering this area.
 
Good write up Jake.
However, not sure I agree about the prison part.
Prison is no where near deer park, it's out in ravenhall.

Should I not buy buy in parkdale/Brunswick because of the prison there or in Maribrynong because of the detention centre there? Both of those areas seem to be going swimmingly..

I think the rest of your post was spot on however clutching at straws with this part.

Thanks for your input Jake.
 
I grew up and went to school here (western side). It seems like the suburb got good CG in the 90s but pretty much everywhere did at that time. My parents sold their house in 2004 for just under 300k and the current value is about 350-360k which I'd say is pretty below average CG for that timeframe.

Most commuters travel to Sunshine or Albion station rather than getting the V-Line to the city as it's more frequent.

A lot of the industrial employment that was quite prevalent is the western suburbs in general in the 80s and 90s is also in the process of disappearing.

Units (apartments) are quite rare but villa type properties are reasonably popular for rentals over there.

A relative had some IPs here about 10 years ago but sold as he got sick of the constant repairs needed due to the tenants not looking after the properties well. I'm not sure if this would have improved by now.
 
New poster here, great write-up. Is there any chance you can do something similar for Sunshine/Albion?

Sorry for semi-hijacking this thread :)
 
The best thing about Deer Park is the shops on the corner of Ballarat Road and Station Road, some good take away/restuarants there. That's about all I have to say that is positive. I used to live there as a kid (near Brimbank Central) and it was the best decision my parents made to move away, just before it turned to a rougher area.

I don't see any appeal whatsoever to buying there except that it is cheap, very cheap. Houses sub 400K are rare within 20km of the CBD, that factor alone could drive up CG, it probably will. I wouldn't rule it out on the cheap factor alone, but once prices go up similar to neighboring suburbs, there's not much else going for the suburb as Jake pointed out to keep it rising.
 
Good write up Jake.

Should I not buy buy in parkdale/Brunswick because of the prison there or in Maribrynong because of the detention centre there? Both of those areas seem to be going swimmingly..

Thanks GreyGhost.

First, with prisons and prices, I'd like to point out that it's mostly about market perception. Have you ever heard of a young family saying "Great, there's a max security prison, I'd like to live there."?

I'd suggest there are substantial differences in market perception between a maximum security prison when compared with a minimum security children's detention centre or refugee centre too. Aside from surface perception there are deeper, long standing issues that correctional centres can make to an area and its desirability.

A junior detention centre for example won't necessarily attract families to move to the area due to the shorter periods of imprisonment terms. A maximum security female centre on the other hand that houses all of the females (and mothers) who are a part of the 25% of incarcerated prisoners who are sentenced for 5 or more years arguably has a higher chance of attracting loved ones to settle nearby.

These relatives may also be more prone to dysfunctional personal issues as well as crime. See the crime statistics posted previously.

There are also ongoing issues after the prisoner is released back into society so if they stay in the local area there's a generational issue that lingers.


Implications for the Transition From Prison to Home


"...The implications of these psychological effects for parenting and family life can be profound. Parents who return from periods of incarceration still dependent on institutional structures and routines cannot be expected to effectively organize the lives of their children or exercise the initiative and autonomous decision making that parenting requires."

"...the experience of imprisonment has done little or nothing to provide them with the tools to safeguard their children from the same potentially "destructive experiences"


So for me I am of the opinion that certain types of correctional centres inhibit market desirability of areas and therefore any potential for outstanding growth.

Sources:
https://www.sentencingcouncil.vic.g...Victoria's Prison Population 2002 to 2012.pdf
http://aspe.hhs.gov/hsp/prison2home02/haney.htm
 
Thanks GreyGhost.

First, with prisons and prices, I'd like to point out that it's mostly about market perception. Have you ever heard of a young family saying "Great, there's a max security prison, I'd like to live there."?

I'd suggest there are substantial differences in market perception between a maximum security prison when compared with a minimum security children's detention centre or refugee centre too. Aside from surface perception there are deeper, long standing issues that correctional centres can make to an area and its desirability.

A junior detention centre for example won't necessarily attract families to move to the area due to the shorter periods of imprisonment terms. A maximum security female centre on the other hand that houses all of the females (and mothers) who are a part of the 25% of incarcerated prisoners who are sentenced for 5 or more years arguably has a higher chance of attracting loved ones to settle nearby.

These relatives may also be more prone to dysfunctional personal issues as well as crime. See the crime statistics posted previously.

There are also ongoing issues after the prisoner is released back into society so if they stay in the local area there's a generational issue that lingers.


Implications for the Transition From Prison to Home


"...The implications of these psychological effects for parenting and family life can be profound. Parents who return from periods of incarceration still dependent on institutional structures and routines cannot be expected to effectively organize the lives of their children or exercise the initiative and autonomous decision making that parenting requires."

"...the experience of imprisonment has done little or nothing to provide them with the tools to safeguard their children from the same potentially "destructive experiences"


So for me I am of the opinion that certain types of correctional centres inhibit market desirability of areas and therefore any potential for outstanding growth.

Sources:
https://www.sentencingcouncil.vic.g...Victoria's Prison Population 2002 to 2012.pdf
http://aspe.hhs.gov/hsp/prison2home02/haney.htm

Solid post Jake.
However if this is totally accurate there would not be as many young families in Burnside, Caroline springs and Taylors Hill as they are closer to the site than Deer Park is.
Im not saying those areas are poised for good growth, but given they are new areas they have definitely filled up none the less.
 
Interesting to read diff schools of thought.

While I appreciate Jake's analysis, my only point is whether a buyer with $400-$450k budget has much choice?

With such a budget, one has to look at the areas such as Deer park for houses or areas such as Gelnroy etc., for units. What other choice one would have, if the objective is to have a CG over a period 10-15 years?
 
Interesting to read diff schools of thought.

While I appreciate Jake's analysis, my only point is whether a buyer with $400-$450k budget has much choice?

With such a budget, one has to look at the areas such as Deer park for houses or areas such as Gelnroy etc., for units. What other choice one would have, if the objective is to have a CG over a period 10-15 years?

Choices are limited when the buyer limits his/herself to a certain criteria, for example, a 3 BR house for $400-$450k.

He/she would have a broader range to choose from if the criteria is loosen up a bit, maybe instead of a house, consider units/apartments. Maybe instead of 3 bedrooms, live with 2 bedrooms.
 
There are many places where you can get a unit for 450k. I doubt CG in Deer Park would be significantly more than inflation unless you buy particularly well. Look elsewhere IMO
 
Hi

Hi,

I live in Deer Park and have grown up in the area:
Here are my points why I live here something that don't come up on Sats:

1) A newly created dog park, where people from other suburbs have been coming due to the size and people with the same interest.
2) A beautiful walking and bike track - Have a look Millbank drive
3) I live on Milbank drive and honestly have some beautiful views.
4) V line train which is much more comfortable vs metro trains (Mind you less junkies)
5) Good sized homes where they still have character.
6) large shopping centre
7) Only 20 minutes to drive to the city
8) One school - Yes I agree but there are plenty of near by schools any way
9) great people
10) Orica site is closing there site and that site will be turned into a place of cafes, restaurants.

I own three properties there and have done well out of it :)
 
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