VIC Frankston & Carrum Downs, too far from CBD for CG?

Hi guys,

I'm considering the above two suburbs (plus Frankston North) for up to 500k budget. What I like about them is entry price and yields are not too bad. I think there are three main drivers for these suburbs - proximity to water, affordability and much lower price compared to the neighbouring suburbs like Seaford and Patterson Lakes. I have just read that Carrum Downs is also on Margaret Lomas's hotspot list for 2017.

Hot spots: suburbs to watch in 2017 - Money magazine

However, one thing that I don't like about the three suburbs is that they are very far from CBD; 45 min drive by car or 1.5 hrs by train. Is this something that might negatively affect the future CG in your view?

Thanks!

 

I don't think so at all. The "distance from CBD" is something I think is over used a lot. I think the 95% of people living in those suburbs do not give a flying fox about distance from CBD. Demand for those areas are organic,,close to the ocean , improved infrastructure and jobs.

 

Melbourne is currently well into a boom phase. Do you think there's a risk you may be missing out on significant growth whilst you're trying to research all the Melbourne suburbs from scratch from the other side of the country?

 

But how many people living in those areas would be commuting to CBD daily?

Big majority of jobs is still in cbd?

Thanks a lot for your insight.

 

Definitely going through my head daily.

Are you suggesting I just jump in without doing too much research? Or not to invest in Melbourne at all as it's close to peak?

 

Compare last year's sold price with this year's to answer your question. Also check out stock on market. Frankston and surrounds has a cohort of permanent renters.

 

Good point. I need to get this "as close to CBD as possible" issue out of my head lol. I suppose I'm assuming everyone thinks the way I think, and I would definitely not want to commute to work daily 1.5 hrs in each direction.

On a side note, I compared growths of Frankston, FN and CD over the last 10 years. CD underperformed the other two. I'm wondering why when it's just a neighboring suburb that benefits from all the common infrastructure...

 

Because it's just a neighbouring suburb that benefits from all the infrastructure - still hasn't quite made the headlines.
Personally, I would only make a purchase now based on reasonable yields - much easier said than done. There are two of you so will definitely make things easier. I was at 4.5% and not happy with myself.

 

We definitely find it hard to get decent yields even in these outter suburbs. Just looking on re.com yields look much better than they actually are. Median prices reported on the site are much lower than the current ones as the market has moved a lot recently. Therefore yields are lower as well.

I spoke to people on the ground in the mentioned suburbs, and they are super hot. So much demand! Stock is very tight and anything good disappears within days. That's not to say they will stay hot for long though.

 

If Melb was in a slump phase or even early recovery it would be fine to be doing what you're doing. There'd be no rush to buy. It's a massive city though with differing characteristics within suburbs and even streets that you need to be aware of. Whilst you're trying to narrow your search down to an individual property in a hot market you may be missing tens of thousands of dollars worth of growth. You then risk buying at peak and having to hold your ip through years of minimal growth until the next boom. That's assuming your strategy is to buy and hold.
A BA would have been a better option for you because you pay them for the info you're trying to gather.

Whether or not to buy in Melb now depends on your financial situation and strategy.

 

I would say somewhere in the sub 5% range. And that would probably be split between workers and students.

 

if you want a fairly accurate picture of commuters by train you could look to the Census data that is to come out in May/June. Commuting by train during peak from frankston north not including driving/walking to the station should be roughly 1 hour -1hr 15 depending on whether you get on an express service or not. Frankston North and Carrum Downs has both moved significantly in terms of price in the past 12 months. Margaret Lomas included Carrum Downs in her predictions roughly 3-6 months before the area started to move noticeably. I would say that the investment case from a yield perspective is a very different proposition now to 12-18months ago. Rental vacancies in the area has traditionally been very low which is a plus. Frankston North you can get reasonable block size, Carrum Downs is a bit more difficult with smaller block size and more irregular shaped blocks.
If you are looking in the area I would suggest looking at the station upgrades that are going to happen within the next 2 years to see how much of a driver of price they are likely to be. Additionally I would also look to see what actions Frankston City Council are looking to do in the area in terms of works. The area has been touted as a potential hotspot for many years since the Eastlink build and the new Peninsula Freeway, however it never really did anything until very recently.
So I guess you will just need to make an educated assessment on whether there is still more potential growth in the short-term for the area or whether it has run its course for the moment. I wouldn't be comfortable chasing short-term capital gains in this area anymore. But that doesn't mean there's not more to come.

 

Although these suburbs are in the same general area, the 3 or 4 km between them can make a huge difference. Take Carrum Downs for example. Further from the beach or any major centre than Frankston North but convenient to Eastlink.

On the other hand Carrum Downs has no convenient train station so its commuters must either park at Seaford or Carrum stations or catch an indirect bus which backtracks to Frankston or Kananook (adding 30 - 60 min per day extra travel time compared to someone walking distance to a station).

Carrum Downs has just two benefits. Proximity to Eastlink and the fact it's not Frankston North (and has less of that stigma). If you could afford more than Frankston North then parts of Seaford or even Karingal might be a better deal than Carrum Downs.

Carrum Down's relative underperformance may indicate it being undervalued or a lesser location. I'm inclined to favour the latter. A few km can make the difference sometimes.

 

Nicely summed up, i wouldn't talk down the area too much One more thing Carrum Downs has is the refurbished Shopping Centre with a Kmart, which I'm noticing has prompted a fair bit of developments within the area. The only other shopping centres in the area is the Frankston Shopping Centre and the one in Karingal Hub

The significance is that if you go from the Carrum Downs Shopping Centre along the train line towards the City, the next place that has a general department store is Southland in Cheltenham. Basically the area between these two shopping area are all mainly residential shops with supermarkets dotted throughout the suburbs.

The closest other major shopping centres are: 1. Frankston Shopping Centre, Karingal Hub, Langwarrin and then along the Cranbourne line. Admittedly the Carrum Downs and Langwarrin shopping centres are fairly small in comparison to the others, but it serves its purpose for the local area.

 

Different areas but on the other side of the city, paradoxically Geelong commuters to Melbourne have this cockamany idea of living FURTHER from Melbourne as a preference to commute, as they often eschew the cheaper, closer suburbs.

Many Melbourne commuters seem to prefer buying in new estates in Armstrong Creek, Leopold, even as far as the new estates of Torquay, Curlewis and Clifton Springs and therefore have their trip ranging from a 60-65 minute drive from Armstrong's Creek to maybe even a 75-80 minute commute from the coast.

So yeah it's not always a logical thing, as Corio and Norlane offer a 50-55 minute commute by car or train.

 

Looking at areas like CD, Frankston or even Officer and Pakenham.. While they are 30-45km from the CBD, one also needs to look at what is in between them and the CBD.
You'll see that there are multiple major employment and transport hubs, some of the biggest shopping centres in Aus are located there. There's industrial parks as big a suburbs full of jobs.
So while proximity to the CBD is a consideration, the surrounding area and what it offers is more important.

 

Thanks a lot guys. I learned from you that, even though most of the jobs are around CBD, there are many industrial hubs scattered around Melbourne. Not everyone works in CBD, and many many people can't afford to live close to CBD. Finally the entry price of these outer suburbs means that the rental yield is higher and these properties are easier to hold. Especially important in the light of recent and ongoing APRA changes if we want to grow our portfolios.

 

Ur right one of my friend bought a 782 Sam block in carrum downs but the shape is irregular triangle sort of he paid 525k for three bedder two bathroom house court location though not sure whether price he paid is good or not

 

My SIL bought a house in "The Pines" in Frangers some years ago (circa early 2000's) for $93k and sold it 5 years ago (after subdividing back yard off and selling block) for a bit over $300k for both her house and the land out back. From vague memory I think it was something like $245k for house, $65k for land.

Just here in my sleepy hollow of Dromana (1 hour SE from CBD on the Bay) our last purchase was in Dec 2015 - 785 sq/m for $660k (knock over house on it), and this week $84k per sq/m, and last week a 355 sq/m block was sold for $568k....increase from $84k p/sq/m to $160k p/sq/m approx.

 

Sorry; wrong calc; should be $840p/sq/m to $1600p/sq/m