Melbourne - HOTSPOTS

Hi Guys,

Here's an inside scoop. Property Observer, one of Australia's best sources for real estate news is gathering info for Spring predictions. I've been asked to supply some of our favorite areas but I wanted to give you the insight first.

So without further ado:

Albert Park features some of Melbourne’s most prestigious, heritage listed property. St Vincent Gardens is surrounded by multi-million dollar houses and whilst the top end of the market has softened recently apartments in the area have experienced double digit growth at 13.5% (source: APM). Albert Park attracts aspiring young professionals aged 25-39 (source: ABS) who can’t afford to purchase houses here but want to live in the area. Therefore demand is quite strong and consistent and vacancy rates are low at 2.4% (SQM)


Kew East is an excellent area for a family or conservative investor to buy an attached or detached house in. Kew East is slightly more affordable than Kew, is 9km from the CBD, within a few kilometres to excellent schools, universities, shops and a multitude of transport options. Due to the suburb’s inhabitants being mainly 35-49 year’s old the suburb is rather resilient to mortgage stress and market corrections. The year of 2011 saw Kew East grow by 8% (source: Residex) where most of Melbourne saw negative growth. Current clearance rates are also trending above average at 63%; showing that the market here is healthy.


Carlton is an excellent area for investors. Units here are still good value for money, which has seen this sector experience 15.9% Capital Growth over the last 12 months (source: APM). The population mainly consists of 20-29 year olds (source: ABS), who are attracted by the university district, proximity to the CBD (2km) and lifestyle attractions such as Lygon Street’s cafés and restaurants. Due to these fundamentals, vacancy rates are below Greater Melbourne’s average currently sitting at 1.1% (source: SQM Research). Carlton in recent months has also seen an increase in online interest (source: realestate.com.au) and when coupled with a 77% clearance rate this could suggest that the area’s growth spurt is not over.


Collingwood is only 3km from the CBD and units here sell for around $500,000. The suburb has plenty of life with most people being 25-39 and as such has an excellent rental market. Vacancy rates here are 0.3% and units attract reasonable yields. The area has seen good capital performance for units over the last year at 4.1% (APM). Online activity for the suburb has sharply increased over the last three months and this is starting to be reflected in the clearance rates which are now above Melbourne’s trend line.


Fitzroy has seen a retracement over the last 12 months which has created some good buying opportunities in the low to mid $500K range. This suburb is ideal for savvy investors who are able to understand what properties have enough character to attract the trendy 30-39 year old tenant market. Right now we’re seeing the right properties in good streets fetch excellent results and now that the suburb has become more affordable the clearance rate has shot up to 77% which is one of Melbourne’s highest results.


Coburg North is an area a statistical/technical investor would look to. Fundamentally there isn’t any main driver promoting growth but with this said the suburb has shown remarkable resilience to the down turn with units growing 3.5% over the last 12 months and the long term trend being 15.2% over 10 years. There are some great buying opportunities for villa units and town houses in this area as they’re still somewhat undervalued.


Oakleigh apartments have shown amazing growth over the last 12 months. This segment has seen 16.5% growth for properties that are within the $400K-500K band. Clearance rates are high at 76.6% making Oakleigh a mini hot spot. Surrounding suburbs are also performing well but it is critical in these locations that you purchase apartments that tick all of the boxes as substandard properties are less likely to deliver quality returns.

Be sure to check out http://www.propertyobserver.com.au/news/ if you've not already. They're a great source.
 
You can buy a unit/apartment in NY, Manhatten actually, just off Central park for under 500K and that is for ~70 sqm.

How is it then, that ~500k+ for comparable property, is considered good value in Melbourne exactly? :cool:

Or are we really that special, that with all our land and so few people, that a single modern world city with over 1/3 our national population, can actually be more affordable? We might be "special", but not in the manner most people believe. :(
 
You can buy a unit/apartment in NY, Manhatten actually, just off Central park for under 500K and that is for ~70 sqm.

How is it then, that ~500k+ for comparable property, is considered good value in Melbourne exactly? :cool:

perhaps, a couple of points.
Firstly Australia is the best country in the world on so many measures.
Secondly Melbourne is one of the greatest places to live in Aus on so many measures.
Thirdly, Melbourne is very large relative to many cities. In one recent claim, it has it as 8th largest in the world.http://www.theage.com.au/victoria/the-outer-limits-20100315-q9un.html
What happens when a suburb is so desirable and there is that much money and demand from so many people?
We are also a reasonable densely populated city. see here...http://mams.rmit.edu.au/j4oa4rdaow29.pdf

Of the 72 US cities with a population larger than 500,000, only 8 have a higher average density that Melbourne

So there you go. All reasons why a great suburb like Albert park will continue to grow and why im selling a couple of flats to buy a house in the suburb.
 
Pieman..... a couple of "realities".

NY, whilst having a mere 8.2 million in "high urban density" is surrounded by 13 million urbanites..... as per your quoted reference. That really makes Melbourne a little fish, with comparatively lower urban density pressures. Yeh?

As for your reference of "8th largest city in the world", how about you read your reference??? "8th largest by geographical size" which debunks your supply demand assertion even further when you consider that by population, Melbourne is not even in the top 65!

Nice try pieman ;)
 
Pieman..... a couple of "realities".

NY, whilst having a mere 8.2 million in "high urban density" is surrounded by 13 million urbanites..... as per your quoted reference. That really makes Melbourne a little fish, with comparatively lower urban density pressures. Yeh?
fair point, but can you buy a little victorian house like in Albert Park in downtown Manhattan, with a swimmable beach nearby for under 1m?
 
fair point, but can you buy a little victorian house like in Albert Park in downtown Manhattan, with a swimmable beach nearby for under 1m?

What kind of comparison is that??? Manhattan is the CBD on steroids!!! Albert Park is NOT even in the Melbourne CBD..... :rolleyes: let alone anywhere near population pressure of over 20 million! Can you buy a little victorian house in Melbourne CBD??? Good luck with that!

But, to appease this unrealistic comparison of a inner city suburb of mid-sized city to that of the CBD of a mega-city.... try looking on zillow.com You find comparable areas to Manhattan with prices well under $1M.... and they have a demand "back pressure" of over 20 million people in a smaller geographical area!

BTW, I am "returning" to Melbourne next year..... and it is overpriced IMO, compared to other larger cities around the world, that have greater land/population pressures.
 
You can buy a unit/apartment in NY, Manhatten actually, just off Central park for under 500K and that is for ~70 sqm.

How is it then, that ~500k+ for comparable property, is considered good value in Melbourne exactly? :cool:

Or are we really that special, that with all our land and so few people, that a single modern world city with over 1/3 our national population, can actually be more affordable? We might be "special", but not in the manner most people believe. :(


-Australia has generous tax concessions for landlords
-Every Australian wants to own a home
-Large superannuation companies moving into property investment
-High immigration levels to Melbourne which increases demand for property
-Supply vs demand (not building enough homes to meet rising population)
-High wages in Australia
-Possibility Melbourne is currently experiencing a housing bubble
-The US has many many 'mid sized cities' that people can choose to live in
-GFC hit US property prices very hard

There are many reasons, but these are just my opinions. And admittedly I know next to nothing abut the US market...
 
Jackbac, its like chalk and cheese - this might help

• Unemployment has stayed over 8% for 42 straight
months …
• The average family home is still falling in value …
• Profits at many major corporations still stink — and
they’re getting more rotten almost by the day …
• U.S. economic growth is still grinding to a near
standstill …
• And now, as America approaches the precipice of its
great fiscal cliff, the stock market looks for all the
world as if it’s a massive bubble about to burst!
Worse, the middle class — the very backbone of the U.S.
economy — is getting eaten alive:
Ø Household income is plunging: The U.S. Census
Bureau just reported that real median household
income has now fallen for the fourth straight year.
Ø Income has fallen so low, in fact, that when you
adjust for inflation, the median family has the same
income today as it did in 1967 — 45 long years ago!
Ø The income gap is widening alarmingly: The Census
Bureau is also reporting that the movement of
income away from the middle class has just hit a
record high.
Ø Typically this kind of increasing disparity in income
occurs just before economic calamities — and
today, it’s more extreme even than before the 1929
stock market crash and the Great Depression!
Ø U.S. poverty is at all-time record high levels: Finally,
as if to add insult to injury, the Census Bureau also
reports that a staggering 46.2 million Americans
now live in poverty!
 
My husband and I were discussing NY apartment prices just recently too. It is actually cheaper to buy an apartment in Manhattan than in many parts of Canberra (and Melbourne and other Australian cities). As for the comments saying it's not a house, it's only an apartment. Why would you even bother buying a house in Manhattan? I certaintly wouldn't. I probably would only use it for sleeping. We visited last year and I thought it was a great city. Everything was open late, the subway system is amazing and everything is really good value. I remember one instance where we went to a Thai restaurant in the Hell's Kitchen neighbourhood and had 2 entrees, 2 mains, drinks, a shared dessert (inc tip) for ~$20. I couldn't believe it. That would buy one plate of food over here. It's funny because you would think their rent and other costs would be higher. I would love to move there but I work in a really competitive industry and think it would be quite difficult to get a good job over there.
 
Everything was open late, the subway system is amazing and everything is really good value. I remember one instance where we went to a Thai restaurant in the Hell's Kitchen neighbourhood and had 2 entrees, 2 mains, drinks, a shared dessert (inc tip) for ~$20. I couldn't believe it. That would buy one plate of food over here. It's funny because you would think their rent and other costs would be higher. I would love to move there but I work in a really competitive industry and think it would be quite difficult to get a good job over there.
The difference I think you'll find is the hourly rate for the staff over there.

Typically, the waiters are on minimum wage (or near it) which was about $5.75 when we lived there from '05-'08. Then they get tips on top of that, which are now averaged out over all the staff in many places, but this is funded by the customers; not the owners of the restaurant.

I don't think they have penalty rates for w/ends etc either. I could be wrong on that, but I can't remember hearing of it from those waiting staff we knew there.

Compared to here where the waiters would be on probably at least double this as a wage as a minimum, plus all the penalty rates involved?

We don't normally tip here in Aus, but the cost to the Restaurant owner is fixed, so the cost of food needs to be higher; unless it is yer family business where all the kids work there too - like our local Indian restaurant..
 
The difference I think you'll find is the hourly rate for the staff over there.

Typically, the waiters are on minimum wage (or near it) which was about $5.75 when we lived there from '05-'08. Then they get tips on top of that, which are now averaged out over all the staff in many places, but this is funded by the customers; not the owners of the restaurant.

I don't think they have penalty rates for w/ends etc either. I could be wrong on that, but I can't remember hearing of it from those waiting staff we knew there.

Compared to here where the waiters would be on probably at least double this as a wage as a minimum, plus all the penalty rates involved?

We don't normally tip here in Aus, but the cost to the Restaurant owner is fixed, so the cost of food needs to be higher; unless it is yer family business where all the kids work there too - like our local Indian restaurant..

I think it would even out once rent and everything else is taken into consideration. If you use eating out (even take away) as an indicator, Australia is among the most expensive places in the world (if not, the most expensive). Just like a lot of other things really. I think it's because people have gotten used to paying it and stores and other businesses are used to charging those prices. Most of the cost of living indexes published also prove this fact with many Australian cities being in the top 10.
 
I think it would even out once rent and everything else is taken into consideration. If you use eating out (even take away) as an indicator, Australia is among the most expensive places in the world (if not, the most expensive). Just like a lot of other things really. I think it's because people have gotten used to paying it and stores and other businesses are used to charging those prices. Most of the cost of living indexes published also prove this fact with many Australian cities being in the top 10.

Exactly! But try getting that message through to the keyboard warriors that haven't ever experienced it first hand, let alone lived it.

The naysayers always try the old "apples & oranges" argument but still insist on using supply/demand fundamentals as the basis for such high prices....:rolleyes: In one regard they are right, 20+ million more densely populated is vastly different to ~4 million in Melbourne. Supply/demand fundamentals dictate that the city with the lesser population & more land area should be more expensive because we are so very special and distinctly different from the rest of the planet. :rolleyes:

For those that are well travelled abroad and have lived or stayed in other countries for an extended period, we get it. For those that travel by Google, it seems that the realities of the real world are often lost in translation somewhere in cyberspace.

I am not suggesting that Australian property prices are about to crash. I simply am not, but I do acknowledge that the cost of living pressures are unsustainable in the mid-long term and something has to give. Either inflation, stagflation or big wage increases to lower the cost of living (which would be worse in the long run anyway). BTW, if China continues to falter and Labor keeps pushing mining operations offshore, our little pipe dream will became a fond memory. The fragile state of our special case reality is often completely glossed over and this can be realized by simply looking at EVERY other developed country in the world. What has been happening over the past decade? Then realize we are at the whim of these countries because that is where our paycheck stems from.....
 
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