VIC Frankston 2020

{Note from mods - this thread continues from here: Frankston 2019 [VIC]}


Just been to Frankston, fairly impressed with the activities and population growth
So interesting to see the price differences between South, North and Frankston
Any hope of gentrification of North in let say 10 years?

 

How?

 

Frankston many years ago was the most talked abour suburb in australia promising all sorts of gentrification, a bt like logan talk.

Gentrifcation has started, with the marina project etc.
Prices have gone up a lot, but as far as i am aware prices in the pines (nth frankston) has gone up significantly but has not cleaned up whatsoever

 

Frankston north is a long way from gentrification. Still a lot of commission housing there and many undesirables living there. Would be better off buying in carrum downs in the right area (close to sandhurst).

 

Frankston is a very interesting proposition as it is arguably the only beachside suburb in Melbourne (& Sydney) that remains affordable and has excellent & high quality infrastructure, great beaches and excellent connectivity to the CBD. I have my largest portfolio here and have been investing in Frankston since 2003.

I also speak to the key real estate agents regularly and assess a lot of properties yet to hit the market and so can state with good level of confidence on how things are at various stages of the cycle.

Because of its size (being one of the largest suburbs in Melbourne), the median values offer true representation on how the values are tracking (c 650 sales per annum) against most suburbs that average half that.

2019 has been an interesting year as Frankston came off a high of $600k median (reached in Oct 2017) and dropped to $525k (lowest point) in May 19 and since has strongly rebounded to a median of $570k (as of 30 Nov) which I assume has strengthened further in Dec and by all indications will carry the momentum through this year. I expect it to trace back to the previous high of $600k in coming months with another 5% rise and believe that it will be tracking record highs during Q2 of this year. Overall, the median values dropped 0.6% between Jan 19 and end Nov.

Traditionally, Frankston always (like most outer suburbs) lags behind in growth at the start of each boom cycle and also retracts later during a downward trend vs inner suburbs. The ripple historically speaking takes 3-6 months to spread outwards however given the SD exemptions (for prop below $600k) and now the First Home Owner Deposit Guarantee, will propel the median significantly ahead vs suburbs with higher median values in 2020 in my opinion.

Wearing a 'caution' hat, I must highlight that the supply levels have increased considerably (especially since Oct last year) and whilst I expected $600k high to have been smashed late last year, the increased stock has kept a lid on the growth trajectory. It is still growing but the speed of growth has slowed.

The rental market is quite strong with a c6% increase in rental yields YoY.

Frankston South has had far less fluctuations (surprisingly) in its median and it held firm throughout 2018 and 19. Its median declined only by around 8% vs 15% for Frankston and 20% for Frankston North. This is mainly due to high quality development stock together with 'renovate and flip' hitting the market in increased quantities throughout those 2 years with the new town houses fetching significantly higher prices (at similar or higher median values to existing houses) and keeping the median stable.

Frankston North is comparatively a tiny outpost (c100 sales per year vs 6 times that of Frankston proper) and offers excellent rental yield (perhaps one of the best in Melbourne) and whilst I only hold 2 adjoining prop here (with permit to build 6x3 bedroom townhouses), I believe this will increase the most out of the 3 Frankston suburbs in 2020 as the gentrification slowly takes root. I have never seen as many new build projects (and all estate agents will confirm) in the pipeline and at various build stages (along with within town planning at the council) as I witnessed late last year. The combination of those hitting the market to FHB and investors will accelerate that transition to gentrification and given the current median values and rental yields, I have zero doubt that this suburb will be one of the best performing suburbs in Melbourne for 2020. Whilst gentrification is a 'relative' term, I have seen this suburb gentrified the most (out of other ugly ducklings that I follow) since 2004 (when I first bought here) with boots hanging off power lines in every third house then! Whilst it still appears to be a second cousin of Mt Druitt, it has come a very long way in the last 15 years which I expect to gain speed with ever-developing new stock significantly changing the street scape of this tiny suburb.

(As an aside I hold a significant portfolio in Frankston and building 34 town houses and apartments in Frankston proper which should finish by early 2021 that I aim to keep for the long term and have no intentions to sell so spruiking it has no bearing on my personal situation as some might want to highlight).

 

Bought in Frankston Nth 15 yrs ago. It's averaged 10%cagr over that time. Some dual occs appearing over the last few years, considering dual occ this year on mine. One bad tenant requiring vcat removal in that time. Yields on current values are garbage .

 

I disagree. Frankston Nth would be in the top 10 suburbs out of c350 odd suburbs in Melbourne for rental yield vs median values and this with being on large dual-occ blocks! Currently the yield is over 4% vs median. Very few suburbs in Mel would match that.

 

Yield gets destroyed when tenant doesn’t pay rent or damages property.

 

Not to derail the thread, but I’m inclined to think Heidelberg West has more upside.

 

Could you share which part/streets to avoid in Frankston and Frankston north? I am looking at Cranbourne as well

 

It's a good idea to start a new thread for HW if you are inclined to do so.

You won't find a house in HW for (or below) 400K or even 500K that you can still get in Frankston North/Frankston.

 

Margin is too small to IP loan rate and rent Is low end ~$300pw, margin is consumed by rates before insurance and repairs. Other costs put it negative. I wouldn't buy Frankston Nth to neg gear/cashflow, go for better areas if your doing that.

 

Given the proximity to the CBD for HW, if one could find similar value house on dual occ blocks in both locations, I would like to think you would be correct to pick HW over Frank.

I wouldn't have that info with me. It is a very large suburb and the closer one gets to the beach, the better the area gets however the ideal investment pocket for me is within 1 km radius of Frankston station, Monash Uni, Frank Hospital.

Hard to negative gear with 4.5% rental yield with approaching sub 3% int rates but the real opportunity is in subdividing the block as the values continue to improve. I would still take a 4.5% yield over a 2.5% yield any day, given the challenge lies in serviceability for most investors wishing to invest in a large portfolio. Frank Nth, Frank Sth and Frank over the past 30 years have delivered very similar growth in (in percent terms) in values as inner suburbs (Kew, Camberwell, Malvern, Glen Iris), so if the goal is to have a large portfolio, then it makes more sense to buy in areas with better rental yield. Better areas will always offer far less rental yield. My current inner melb portfolio (Kew, Mont Albert, Glen Iris, Doncaster) on current values is averaging 2% rental return.

 

You are preaching to the converted. I've never bought anything under 5% yield. I agree with most of that and Frankston Nth has done well for me. I just think there are much better options in Aust for $400 to $450K, not necessarily in Melb (minimise land tax also), my last two have been in SE QLD
Easy to go negative on 4.5% yield.
Approx 14K rent after agents fees, interest on $450K at 3% is 12K. Rates are approx $2k - council and water, insurance is $1K - you are already $1K in the red before vacancy, and any repairs, reletting fees etc

The main reason i am considering dual occ now is it was always planned and i want to get the depn on the new buildings as im on a high income (for the next few years until i pull back from full time work) and it suits my overall situation.

 

Prices rise in Melbourne's most affordable and liveable suburbs

Good read on Frankston.

 

Another project in Frankston area - Karingal Hub Redevelopment

 

Best areas to buy in frankston

Central. Beach st area. Golf links estate
Golden triangle area, near hospital and Bunnings power centre area.
Long island gould st

 

Bathing box: "Bidding starts at $90,000" - sold for $165K!

Bathing Box 10 Frankston Foreshore, Frankston VIC 3199 | Domain

 

What do you think of this as IP? the current plan sets for 3 townhouses (2bed), 2 Roberta Grove, Frankston VIC 3199 | Domain

 

Central location. I have a 6 unit site a few doors down on Queen St. Ask (c$600k) is similar to a prop without a DA but unless you are ready to build now, no point holding it for long term unless you can get decent rental - Permits will lapse in due course. 2 bed TH in that location would go for c$550k - your build costs will be around $230-$240k/ TH. Likely around 15% margin, not an ideal dev opportunity, but I expect frank values to keep going up (given the activity of late) so in perhaps another 12-18 months, the margin could be >20%. If you can build and hold long term, it might work.