VIC How come melton is still so cheap?

So i have been looking at the overall market for low-value properties around Melbourne and I am surprised to see that melton is the only sub 500k suburb. Mickleham is a suburb slightly closer to the CBD (32km vs melton at 35) (in terms of straightline on a map), with not much infrustructure but appeareantly has a median price of 590k for a 4bed. sunbury 648k, wallan 515k, Wollert 624k. Even lara is at 495k. Melton and surrounding suburbs seem like the only suburbs with sub 500k 4bed houses. Anyone has any insight into why?

 

Melton has always been one of the cheaper outer suburbs of Melb and will most likely retain that position.
Reasons:

• Distance from CBD
• West vs East/South/North
• Lower socio economic area
• Lots of first home builders who want to build rather than buy established
• A large amount of available land surrounding area - ie suburbs arent built to adjoin it yet
• There is a glass ceiling on rents as people will buy past a certain level so hard to drive rent increases in the mid to high end of the market there.

Price increase drivers are a largely based on the cost of building new houses increasing and the cost of new land releases rising per m2
I have had two houses(still hold one) in the area.
First one i sold in 3.5yrs after buying and gained 70% gross(before CGT) - yielded about 7% from purchase in 2006 - sold because needed Kitchen and Bathroom reno - which i wouldnt have got a return on the $$ for and the market was high at that point(dipped a bit the following year or two).
Second one i still hold after 11.5 yrs
has slightly more than doubled in what i pay for it (And i got it fair bit below replacement cost at the time (was 6yrs old). Originally yielded 5.5% with $6K depr pa.
now yields about 3.5% gross only on current value but more than pays for itself on outstanding debt on it,
Dont want to sell due to CGT until i retire.
Hope this helps.
SMTY

 

Thanks for replying! In regards to:

• Distance from CBD
• West vs East/South/North
• Lower socio economic area
• Lots of first home builders who want to build rather than buy established
• A large amount of available land surrounding area - ie suburbs arent built to adjoin it yet
• There is a glass ceiling on rents as people will buy past a certain level so hard to drive rent increases in the mid to high end of the market there.

All mentioned above apply to all areas mention-except "a large amount of available land surrounding are" you are right about that and it does start to make sense. Between melton and rockbank and caroline springs there is a lot of un-used land, so yes thank you for that.
I know the west has a bad rep but the north isn't much better. Cbd distance is similar.
Can you explain a little bit more on the rent glass ceiling and how it effects melton more than the other areas mentioned? Thank you

 

Yes the first 3 reasons are true for most of the cheaper suburbs but are in play here also.
I agree the outer North is not much better.
If i was ranking general directions from CBD in Melb East/South is generally a lot higher in value for the same distance from the CDB as North and West, there will be exceptions though.
The glass ceiling for rents is simply at certain tipping points in most areas like Melton and the others, if you can buy for example at $450 pw mortgage payment vs Rent for $450pw, a lot of the rental demand moves to buying demand, even if a slight downgrade on house value. This tends to put a ceiling on what you raise rent to.
As Melton - gross yields and interest rates tend to track pretty closely together then this has a stronger ceiling effect than a more upmarket area where people can rent for effectively 2 - 2.5% with interest rates around 4% currently.

I've always held the view for these types of areas given the growth drivers - building costs and land costs(council charges etc) that the time to buy is when you can easily buy a newish house below replacement cost and they pay for themelves at 100% finance(whether you finance it that way or not). That being said i have never built out my portfolio anywhere near borrowing or servicability capacity so if a house doesnt grow really quickly it has little downside effect for me in going after other IP's or hitting my cashflow at all.

Hope this helps.

SMTY

 

Have you been to Melton? If not go their and you will find your answer.
Not a sarcastic remark...seriously.

 

I suppose it’s all about perspectives. I went over there for a look from WA last year before I bought a place there and was pleasantly surprised after all the comments I read on line about how bad it was. Also got the back end of the cycle which gave me enough equity to levarage into my next property so was perfect for my strategy at the time.

 

* Poor labour market - few local jobs in Melton - people must go long way outside municipality to find jobs
* Poor local higher education. No selective state high schools.
* No major hospital
* Only public transport is infrequent v/Line trains & buses. New estates don't even have that.
* Drab main street - it's all at Woodgrove
* Hot with beach ages away
* Limited govt investment

Even Wyndham (next cheapest) scores way higher on all of above.

 

from memory Melton doesn't even have a "metro fire brigade", it's serviced by country fire authority "CFA" albeit on a paid basis not volunteer.

the biggest issue in my opinion for melton is the media coverage of its ethnic community, people love a good bandwagon so it'll never improve.

 

Did you know that Springvale and beyond is CFA? What are you implying ?

 

I used to live in Toorak for 18 years from 1989 till 2007 in a rental property till I moved to Melton and bought my first residential property in 2008 for $160,000. Now it is worth $550,000. I bought my first IP at Kurunjang which is next to Melton in 2012 for $265,000. Now it is worth $518,000. In my own experience, it is a great suburb and my properties have done well in terms of price appreciation. When i moved from Toorak to Melton, many of my friends said to me that is a wrong move for me but honestly it has been great for me, people are very friendly, fresh and clean air, next to main highway, train station and shopping centre.

 

That’s been an excellent move, financially speaking. You’d probably be the only person ever to make that particular move from Toorak to Melton - which is a shame, considering that it greatly improved your quality of life!

 

I went through Melton / Kurunjang all of 2 weeks ago....not having been there for 5 years I was shocked at how much it had changed...I couldn't even find my normal route as it was pretty much unrecognisable. There were signs of new businesses going in everywhere and the main shopping centre was massive now...having been a regular visitor there every few years I was very impressed from where it came from 8-9 years ago...the population is very different there also... Once the trains have been electrified it will grow even more in popularity....

 

Melton South
35 km from the city centre and boasting excellent transport links to the city and Docklands, and easy access to the airport, Melton South is one of the fastest growing suburbs in Melbourne. With 11 new suburbs slated for the Melton area, its auction clearance rate increased over 400% from 2016 to 2017.
7 hottest suburbs for capital growth in Melbourne

 

Also look at the houses being sold in those average prices, ie Mickleham I’d suggest is majority very new properties (lots of new or recently constructed H&L packages) v Melton which would include some more established older houses as well as some newer constructions.
Look deeper into the numbers to ensure you are comparing apples with apples.
Good luck!

 

Melton has no electric rail and I wouldn't call 400k cheap for Melton. If I had to buy something in Melbourne it wouldn't be something in the lower end. They've been overinflated by fhb, migrants and mum/dad investors after the 2015 rate cut.

Far more A grade properties in the outer suburbs on bigger blocks that have been ignored. All the low end homes were snapped up in bidding wars and queues of 50 people and the better owner occupied estates have hardly moved.

 

People, I understand that melton is not the best area. I know it's 1. Far from the cbd
2. Lower socio-economic level
3. Low infrustructure
4. Not much jobs
5. No electric train line
Etc
I know why it's cheaper than say sunshine, my question was why is it cheaper than the suburbs listed above since they ALL have the issues that I just mentioned (sunbury has an electric line). Only some of you actually anwsered the question properly.

 

Yep looked at similar houses both on same land size both 4x2x2 one in melton south one in micklaham the only difference is the one in micklaham has got wooden floor boards.
You can have a look for yourself:
17 crystal rd, melton south 4x2x2 on 350m^2 sold for $467,500
13 Hollington drive, mickleham 4x2x2 on 350m^2 sold for $510,000
Really not sure why the mickleham house sold for more.

 

Without knowing the area at all and purely basing my reply from the above comments I'd suggest stigma? Human behavior is a funny thing in property. Not everyone is a logical thinker.

 

I think you are right.

 

The other surburs have a higher demand versus supply.