Blue chip vs bayside Melbourne

Yes gentrification in the more affordable end of the market has assisted the Mornington Peninsula's growth. However the premium end of the market has always been gentrified in suburbs such as Portsea, Flinders, Mt Eliza, Mt Martha and Sorrento. In general, the region is gaining a lot of buyers from the inner ring of Melbourne so I suppose those buyers are gentrifying the area. You can really see the extent of the gentrification at the southern end of Mt Martha with the abundance of new modern houses and the development of nearby Martha Cove with large projects such as 'The Moorings' underway. Also in Mornington and Mt Eliza it is clear to see that the cafes and restaurants have changed to cater for a younger, more affluent and family orientated demographic. The transformation really is impressive.

The Mornington Peninsula has also become a renovation hotspot which has helped the old small holiday houses become modern family homes. In fact, the area has the 3rd highest value of renovations in Australia worth 238m in 2016. The area also has the state’s highest proportion of profit making flips/renovations given 98.2% of projects sell for a profit. Portsea for example has also been a popular place for the wealthy to splash out cash and build ultra modern mansions from scratch. The variety of Mornington Peninsula developments is also providing new forms of living on the peninsula and attracts new business to the area. Availability of large blocks on the beach side of Mornington is also quickly declining as almost every second house in the area is becoming 3 units. This also goes to show the productivity and strength of the construction industry on the Mornington Peninsula along with demand for modern living by the beach.

 

This is exactly what I'm referring to. The prices have already massively increased... we are now In a softening market... combine that with tightening lending conditions and declining buyer sentiment. Apart from seachanging retirees, there isn't really any growth drivers in place to continue the kind of growth you're referring too.
I don't see a stampede of seachangers driving up the market.

 

I understand where you are coming from and appreciate your thoughts. There was a reason I highlighted that Bittern's median price had increased significantly in the past 3 months (3 months is quite recent). Consider the fact that Melbourne's inner to middle ring suburbs had at least 3 years of $200,000 gains annually in the recent property boom. In contrast, the Mornington Peninsula suburbs have only seen this type of growth for almost 2 years and in some cases only this year. Therefore, it seems reasonable to assume that the Mornington Peninsula will have at least another year of sustained growth while Melbourne deflates. The prices have nowhere near massively increased on the Mornington Peninsula as they have in this recent Melbourne property boom. It only appears as if it has rapidly boomed because the current poor performance of the city market.

I agree Melbourne is in a softening market and in some suburbs a catastrophic market with St Kilda's house median declining by half a million dollars in the past 12 months from $1,375,000 to $865,000 today. Tighter lending and rate rises are terrible for Melbourne's city market. However, because the Mornington Peninsula is home to more retirees and the houses were more affordable and still are compared to Melbourne, the mortgage stress will be lower. This further explains the popularity of the area in Melbourne's declining market as it will likely be a safe haven. Not only this but the popularity of inner city buyers selling out of Melbourne and buying something cheaper to reduce their mortgages on the Mornington Peninsula further makes it safer. The market will be far less exposed when compared to Melbourne as will other holiday markets. However, the difference is that the Mornington Peninsula is clearly the preferred holiday/regional market for ex-Melbournians.

There is plenty of growth drivers to support continual growth. I do actually see a stampede of sea changers driving up the market. Very often in the news there are more articles featuring and discussing the change in demand for coastal areas and regional areas. This is the same reason Geelong, Ballarat, Bendigo has suddenly become on the radar of buyers. The affordability aspect is also supporting this change in appeal of different areas outside of the city. Mornington Peninsula will likely remain the most popular as it offers the perfect in-between of regional and urban lifestyle. Interestingly, agents report that a large amount of buyers on the Mornington Peninsula were previously from bayside areas. And its not just the Mornington Peninsula, you can see a shift in demand for coastal living in other markets such as Phillip Island and the Bellarine Peninsula where similar growth rates have been recorded in select suburbs. However, the Mornington Peninsula continues to be the most popular and top performer as a region overall. Also because the Mornington Peninsula has a variety of well established blue chip suburbs it may be more attractive. Lastly, being mostly apart of Greater Melbourne has its advantages.

 

Sorry I was not clear enough but people are so loose on suburbs. When you ask people where they live they say doncaster but it's actually doncaster east which can be a 10km difference

 

The key question is what/who will most likely drive the next up tick in prices

I would say overseas money and especially China money helped by the lower AUD and if trade war occurs the Chinese government will drop some helicopter money which will more likely end up in Doncaster

 

I would expect prices to continue a similar growth patten to this year in which some suburbs may grow roughly 10% or even 20% in others. However, depending on how drastic the Melbourne property downturn is, the Mornington Peninsula could potentially have a higher growth rate in 2019 and record its best growth yet. This is more likely given the delayed cycle of the Mornington Peninsula market should replicate the same 3 year (minimum) growth patten seen in Melbourne in the recent city boom.

Here is the growth that I see now. Interestingly the more affordable suburbs in the area are the worst performers for growth. For example, the western port bay side of the region which is home to a lot of cheaper suburbs is growing by $60,000 this year on average. The more rural and inland area is also not doing as well. Note that there has been very few listings in this area and there is a lack of data on these more rural suburbs. So how well the area is performing can't really be determined. Nonetheless, these suburbs are not in decline like Melbourne suburbs and the area has still gained on average $200,000 growth since early 2016.

One the Port Phillip bay side of the Mornington Peninsula it is completely different. This could be because this side is home to the most popular beaches and premium suburbs which are more established and developed. These suburbs are also more like Melbourne because this side has higher density. The more affordable end including Rosebud, Mccrae, Rye, Tootgarook, Capel Sound, Safety Beach and Dromana have recorded $100,000 growth on average this year. These suburbs have also increased by at least $200,000 since early 2016.

All the high growth is primarily in the premium and more expensive suburbs. This makes sense seeming the area is attracting inner city buyers which have gained a significant uplift in equity due to the recent Melbourne property boom. Even the most expensive suburbs in the area likely appeared undervalued and affordable to these buyers. These suburbs include Portsea, Mt Eliza, Flinders, St Andrews Beach, Mt Martha, Sorrento, Fingal and Shoreham. This list interestingly includes the top 7 most expensive suburbs on the Mornington Peninsula. The growth rate in these suburbs ranges from $300,000 to $815,000 since early 2016. You will also notice the majority of these suburbs are also located towards the more expensive Port Phillip bay side of the Mornington Peninsula.

Overall the gap is widening between the cheaper end of the market and the more expensive end. There is also a clear favoured area of the Mornington Peninsula for greater growth but again this may be due to more amenities and quality of living. So the greater growth is appropriate.

 

Unless you are (I suspect) a REA heavily spruiking the Mornington Peninsula in every current and old thread that you can drag up that is an even half-related topic.

 

No. I simply enjoy analysing the market and identifying trends. I know the suburbs really well too. I've commented on a variety of threads as I'm seeking to help as many people interested in the area understand it better.

 

Always interesting to hear points of view from people in local markets but I think to expect 20% or even increasing growth above this this year and even more next year in these areas is completely unrealistic (in like for like sales). There are long term trends with regard to downsizing and baby boomer retirements etc and people having sea / tree changes which do impact the MP but the current environment does not encourage people to splash cash with no regard to values. Clearly if actual stock is changing (old houses being demolished and mega mansions being constructed) then sold that is a change in a market in a particular area but that fine detail can skew performance figures and isn't a good guide to like-for-like property transactions.

 

Again I think this is not accurate. I think if you dig into this you will find detail in the data about what has actually been sold does not reflect a " catastrophic market" - these numbers cannot represent like for like property sales - unless you believe median St Kilda property prices have actually declined by nearly 40%......

 

Thats why I said growth cannot be determined for the entire market as some suburbs will perform better than others. As you said specifically where construction activity is will perform the best. Most expensive suburbs in the market have already grown by a lot along with a few affordable ones too. Portsea increased $730,000 in the past 12 months. Flinders increased $260,000 in the past 12 months. Fingal increased $440,000 in the past 12 months. It is for this reason it doesn't seem unrealistic to assume that the areas will perform around that % next year. A lot of the more affordable suburbs around $500,000 - $800,000 have also already exceeded a 10% growth rate in the past 12 months. So it is realistic. Nevertheless, the market looks very likely to continue growing.

 

You are right this why it is also worth looking at clearance rates, overall demand or excessive stock. It is only concerning because St Kilda isn't the only suburb declining substantially. Also the fact the whole local area is in decline is also of concern (inner east has declined by 6.3% and inner south has declined by 4.5%).

 

From investing perspective - Bayside will be great investment.

However, property prices all over Melbourne have shot up a lot. I hold one in Frankston that I bought in 2013 and it's gone up by 70% approx..

If interstate is not an option, bayside Melbourne is great to consider. Some of the outer bayside suburbs could provide better yield and similar growth prospects too ... Carrum, Frankston/Frankston South e.t.c..

Cheers,
Jazz Sidana