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.
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.
