We need some Melbourne talk.....

[Bandita]

Hi all,

I haven't seen anything posted about Melbourne for awhile, so thought I might get something started.....

Where are people looking, what are they seeing, what's the market seem like, rental yield, etc???

Personally, we're getting discouraged every weekend by more and more properties selling at auction well over the reserve or quoting price - what are other people observing? We have buyers agents looking in the inner east/south east and finding nothing very exciting, with really bad yields. We're looking ourselves in the inner west (just moved to Yarraville and loving the location!) and seeing prices going at auction much, much higher than quoted ranges. The yields aren't so great there either.

The only thing we've been happy with is the property we bought last year in South Melbourne which is now returning 7% in rent, and twice as much in CG (and everyone said to stay away from inner city apartments )

We're thinking of looking further out - have stayed within Zone 1 so far - but we see so much more value in Zone 2 areas - what are peoples experiences who have invested in Zone 2 areas? As renters ourselves, who stick to public transport, we wouldn't contemplate it (still cheap rent in Zone 1 and the monthly pass is so much cheaper, and you can use Zone 2 and 3 on the weekends for no cost), but we don't have a children yet and maybe things would change then.....

My fiance works in Hoppers Crossing, and the area is pretty decent, with nice rent returns - but again, it's about 20-25km out of the city (which living in Yarraville works perfectly - against all traffic for him, and I catch the train into the city) - but for Melbourne, that can be pretty far out I've noticed. Especially with all the vacant land to be built up out there....what are people's thoughts??

What are other people's views on Melbourne - and how far out to venture in the property investment market to still get CG and decent yields?

Love to hear your experiences!!

Cheers,
Jen

 

[Twitch]

Hi Jen, why are you getting discouraged? What you are seeing is typical of a very healthly and rising market, I think you should take that as a sign that you are looking in the right areas for CG, not the wrong ones. I've been active in Hawthorn/Hawthorn East/Camberwell/Surrey Hills area this year and the prices for quality properties have increased very strongly - driven by OOs.

If I had lots of spare income I would love to buy something like a SF Vic in Ascot Vale, Richmond or Hawthorn. SF Vics are timeless and perfect for all but 5+ person households.

You could take the view that this growth will have to spread to the next suburbs out; Burwood, Ashburton, Box Hill South etc.

By the way, a unit in South Melbourne is a unit in a first class suburb, it is not to be compared with a CBD unit. I don't think anyone is saying stay away from inner city units, only CBD ones.

 

[Sultan of Swing]

If I had lots of spare income I would love to buy something like a SF Vic in Ascot Vale, Richmond or Hawthorn. SF Vics are timeless and perfect for all but 5+ person households.

Excuse my ignorance, but what are SF Vics?

 

[The Y-man]

.... more and more properties selling at auction well over the reserve or quoting price .....

I really must get myself off my butt and seriously think about selling our propoerties... However, every suburb I have properties in seems to be a bit stagnant? (Probably because I've been a bit slack and haven't gone out there to "have a look")

Cheers,

The Y-man

 

[Twitch]

Excuse my ignorance, but what are SF Vics?

Single Fronted Victorian Cottage. Here's a nice example because it's also BF (block fronted) .

 

[Sultan of Swing]

Single Fronted Victorian Cottage. Here's a nice example because it's also BF (block fronted) .

Thanks for that.

I'm having trouble comprehending the prices and types of properties there. A home like that here would sell for +- 200k and would be difficult to sell because of the small land content, being -+ 180 m2. I'd be feeling horribly claustrophobic in it.

I recently sold the second highest priced in my area. It sold for 505K. It was an 1850's home with 6 bedrooms, 3 living rooms and 3 bathrooms set on about an acre. It had been used a little as a B&B.

What things are going for there makes my head spin.

 

[Twitch]

Thanks for that.

I'm having trouble comprehending the prices and types of properties there. A home like that here would sell for +- 200k and would be difficult to sell because of the small land content, being -+ 180 m2. I'd be feeling horribly claustrophobic in it.

I recently sold the second highest priced in my area. It sold for 505K. It was an 1850's home with 6 bedrooms, 3 living rooms and 3 bathrooms set on about an acre. It had been used a little as a B&B.

What things are going for there makes my head spin.

Congratulations !

LOL, and that was a compromised example because it is right on the rail line.

Here's a first class example of one, the location can't be beat, and the reno is stunning, scary to think what it will go for. http://www.realestateview.com.au/cgi-bin/view.pl?OID=817528&rev=on

 

[DavidMc]

Hi Jen,

I hear you. I told myself that my next property would be the areas you are talking about however I am also finding you have to pay handsomely to get in these, usually much more than quoted prices. I guess that’s the nature of a ‘quality asset’.

This was why I asked one buyers agent who advocates buying quality properties below market value in blue chip areas would I get my $1000 deposit back if I did not proceed with a purchase. He replied that no-one had ever asked him that (which seems strange to me if he’d been in the business for as long as he had said (over 10 years)). I was asking because it was my view that these properties were far and few between. The market is not perfect but it’s good enough so that *very* few of these slip through the cracks.

Which buyers agent are you using? PM me if you like. I’ve been evaluating a few and would love to hear any feedback you have.

I’m even wondering if I should go further out and go for the large 1970’s house/block in the suburbs around Mt Waverley. Even lesser yield however future option to subdivide (and therefore higher growth).


David.

 

[Twitch]

Hi Jen,

I hear you. I told myself that my next property would be the areas you are talking about however I am also finding you have to pay handsomely to get in these, usually much more than quoted prices. I guess that’s the nature of a ‘quality asset’.

This was why I asked one buyers agent who advocates buying quality properties below market value in blue chip areas would I get my $1000 deposit back if I did not proceed with a purchase. He replied that no-one had ever asked him that (which seems strange to me if he’d been in the business for as long as he had said (over 10 years)). I was asking because it was my view that these properties were far and few between. The market is not perfect but it’s good enough so that *very* few of these slip through the cracks.

Which buyers agent are you using? PM me if you like. I’ve been evaluating a few and would love to hear any feedback you have.

I’m even wondering if I should go further out and go for the large 1970’s house/block in the suburbs around Mt Waverley. Even lesser yield however future option to subdivide (and therefore higher growth).

David.

I'm sceptical too. Blue chip areas not only have OOs and investors crawling all over them, they have multiple BAs as well.

If a property goes to auction in a blue chip areas this means you will not get it below market value. Period.

As I see it there are 2 types of opportunity to get quality prop in a blue chip area like Hawthorn/Camberwell/Kew under market.

Opportunity #1 - Getting a property that is planned to go to auction but has not started the campaign.

Jelis Craig is the only agency I know of that do this a lot in those areas, they do private viewings for those who they think are genuine buyers that can basically commit and sign up within 1 or 2 days. Once it is listed on the web it is too late. As a buyer I looked at a couple such properties but passed. I did learn of one after the fact that I think they got wrong and sold $100k under market.

Opportunity #2 - Getting a Jenman listed property

They get very few properties in these blue chip areas, and of those they do most are dogs. However those that aren't have a real chance of being priced below market. The key is you have to secure it even before it hits the web. To act on this type of opportunity keep very very close contact with an agent in a Jenman sales agency.

 

[Bandita]

If I had lots of spare income I would love to buy something like a SF Vic in Ascot Vale, Richmond or Hawthorn. SF Vics are timeless and perfect for all but 5+ person households.

Hi Mdk92,

Oh, I so agree! Don't we wish we could afford one of those right now! Unfortunately, even the ones that are falling apart are out of our price range, so it's a ways off, but we'll get there one day!

I actually am not minding "being discouraged" since I love going out to look at properties anyways, so it's even more of an excuse to see more and more. I just need to get over that wishful thinking that they will get passed in or the price will drop by as much as I'd like.

When we bought our apartment in South Melbourne last year, I wasn't allowed to work yet in Oz, so I was able to spend all the time in the world looking at properties, and would have seen well over 100 I'd say before I found that one - so I know they're out there - and I know we'll find one again (eventually! ).

I'd be interested to hear from anyone looking in the inner western suburbs,
and learn what their experiences have been so far....

Cheers,
Jen

 

[aussierogue]

inner north

About 14 mos ago i bought an unrenovated single fronted victorian (2 BEDDER) in Northcote for 340k. At the time it was listed by an agent that wasnt local, was poorly advertised, was private sale etc. The intial asking price was 370 and 3 weeks later i bought it for 340 thinking it was a bargain.

I rented it out at a measly 235 per week. This was in May 2005.

Come july 2005 1 street way i went to an auction for a similar type house advertised for 320 plus. There was only one bidder at 310k and got passed in. I could not believe it. Next day in the paper it sold for 310 - the vendor needed to sell. Needless to say i thought i had done my dough and cldnt believe i missed this opportunity.

14 months later I have been offered 400k for my little single fronted victorian and due to rental shortages i have increased the rent to 270 per week, with the house 4 doors down very similar able to get 300k per week (new tennats).

So in 12 months in Northcote my house has experienced significant cap growth and income growth.

The house is inbetween two major tram lines and 3 minutes from a rail line.

Most houses in Northcote (and now thornbury - fantastic suburb) go very quickly. There were approax 100 people at one auction at the weekend where the house wnet for 15 pct above reserve..

 

[Bandita]

Hi aussierogue,

That's exactly what we're seeing too! In the past 1 1/2 years or so, we've seen 3 interest rate hikes, and no effect on demand. In fact, it only seems to get stronger.

The rental shortages have been very helpful in improving our yields on existing IP - but in purchasing a new IP, not proving so useful as prices have increased just as much. We're finding this in most of the inner suburbs - every direction!

Our others finding your yields on existing IP's increasing substantially over the past year or so? Is this occurring in the outer suburbs (Zone 2 and 3) as well?

Cheers,
Jen

 

[the_captain]

I would also agree with those peoples comments on SF Victorians in the suburbs mentioned. You wont get one in Ascot vale fully rennovated for less than $550K (in a good street).

I have also seen strong demand and high turnouts at auctions.

We have also seen strong growth in our portfolio with 1 of our places in Ascot Vale doing $35K in less than 12 months on bank val. It would sell for more than that on the open market.

I just hope I can buy 1 or 2 more before its too late

 

[DavidMc]

I just hope I can buy 1 or 2 more before its too late

Well, I guess the big question is will this trend continue or will things drop or flatten again?

I guess we just need to take a long term approach. I don't think we should be ashamed of paying a fair market price, but I we need to determine 'fair value' as well.

Has anyone used Steve Navra's Rental Reality on the Melbourne market? I'd be really interested to know what the results are.

 

[Bandita]

Has anyone used Steve Navra's Rental Reality on the Melbourne market? I'd be really interested to know what the results are.

Hi David - can you explain more about what this "Rental Reality" is?

Cheers,
Jen

 

[DavidMc]

http://www.invested.com.au/Articles/RentalReality

 

[Rixter]

Hi David - can you explain more about what this "Rental Reality" is?

Cheers,
Jen

Hi Jen,

This will explain it all for you.

Hope it helps.

 

[StanZ]

Well, I guess the big question is will this trend continue or will things drop or flatten again?

Hey David,

in the areas we've been actively looking in - prices have continued to grow steadily over the last 6 months - as mentioned before most property purchases are driven by owner occupiers and also BB's are coming in to buy townhouses for way above the expected figures because of convenience and proximity of amenities.

i believe that for the areas that have strong fundamentals and the areas in teh imediate vicinity - the upward trend will continue for as long as affordability is there.
put it this way - Melbourne median price right now is in the 300s along with Brisbane, Adelaide, Darwin and Canberra - yet Melbourne population wise is many many times bigger and i dont think that will change in a hurry.

thus even though noone has a crystal ball - common sense seems to suggest that Melbourne is going to rise further - Residex predicted roughly 8-9% growth for the next 5 years for Melbourne along with a number of other commentators ...

just some food for thought,
cheers,
stan

 

[Bandita]

Thanks Rixter and David,

Guess I've been doing that all along - which is why I'm not too happy with the yields I'm seeing on all the properties I've been looking at. But I know one will come along that all the numbers stack up.

Is anyone finding locations in inner (Zone 1) Melbourne that's showing rentals around the 5% yield mark? I've noticed a recent surge in rents in the past few months, which may help matters, if prices don't shoot forward as well......

Cheers,
Jen

 

[The Y-man]

Is anyone finding locations in inner (Zone 1) Melbourne that's showing rentals around the 5% yield mark? I've noticed a recent surge in rents in the past few months, which may help matters, if prices don't shoot forward as well......

Cheers,
Jen

Our 1BR in North Melb probably comes close to that yield (if not higher).

You'll probably find Parkville and Carlton similar.

Prahran yields are lower (higher number of vacancies), but I still feel you'll get an ok deal.

Cheers,

The Y-man