VIC Melton South vs Werribee vs Geelong

@Adi, if you're still looking in Melton South then you might be interested in this:

8 Creek Street Melton South Vic 3338 - House for Sale #128652258 - realestate.com.au

 

How about wyndham?
Seems the population growth in wyndham is more than geelong

 

Wyndham near the train station is popular with renters but I think the prices are too high for any good value buys and there is still so much land there (manor lakes / mambourin).

Melton you can still buy established and get reasonable return. I wouldn’t build, but if you find a nomination sale from someone who just can’t go through with It. Melton still has a reputation- I’ve dealt with my worst eviction there (3 police cars, had to sit in my car for my own safety) and, more recently, got to deal with bikies (Rebels in Bandito territory interestingly enough) and a tenant arrested for arms offences.

Rockbank is seen as nicer, has a train station, closer, plenty of development to come, Bacchus Marsh Grammar has opened this year... but the entry point is high. Still worth looking at if you can afford something walking distance to the station.

 

I remember couple of years ago Wyndham Vale prop prices were 570K on average and now its 100K down

Any long term future growth prospects?

 

I think the goal is 150-180k off, then flat for 10 years, then growth again, you need to watch what everyone else does, wages growth, return & how loose money is at the time....

 

Statistics you have to be careful of- does it include land sales? Town houses, units... There is a large amount of town houses going up / being sold off the plan, you would expect these to be much cheaper than a good sized house on
600msq+

I haven’t seen any bargains on the market unless something is wrong with it (fire damage for example) so prices haven’t dropped that much. I’ve only seen a slow down in growth- so people who bought after the initial spike (got in too late) aren’t managing to get a massive bonus trying to flip in 2 / 3 years of ownership. (Werribee in the bird cage is a good example of this)

I’d leave Wyndham as a long term growth strategy now. Like Dabbler said, 10 years. I don’t think it’s a bad investment area, it’s just not a short term one that suits some investors higher risk strategies.

 

Thank you for your feedback @Michelle Evans . Something to think about we bought roughly 3 years ago and it is a house (4/2/2) on approx 550 sqmtr. Rent is approx 380pw.

Good point about type of accomodation as some of those are 2 or 3 bedders and look like house but can be town house (i have seen some 4bedders too-looks good from pics not sure about any damage)

I had a look at planning website and wyndham website-it doesn't show much other than that 2017-2021 plan that I believe is nearly finishing up. Few upgrades coming towards Tarneit and Tagurina.

When we generalise the investment as 10 years or more does it mean the potential for property price to be around 700K or still around 550-600K?

I understand no one has a crystal ball to answer the above however someone with local knowledge be able to give ball park and then it is easy to decide as selling for 480-520K now and after paying all fee,loan and CGT -leftover can be invested in something that has better potential or paydown PPOR

VS

Waiting for another 8 years or so to get that extra 90-150K if property price gets to 600-700K?

 

A few financial people I've spoken to over time basically say properties double in value over 10 years unless they're in a very special / unique situations. My own PPR in Bacchus Marsh is on point to do this, and looking at the general data for house values... it's a generalization but for standard homes, its not far off. Will be interesting to see if it happens in the next 10 years.

 

The problem is that without crazy amounts of wage growth this can't logically happen "in general". Doubling every 10 years is over 7% yearly growth which is way higher than wages growth. If you extrapolate that out for 30, 50 and 100 years you eventually get to the point where nobody could possibly pay off a mortgage with their wage. At some point it's got to end.

 

Yes and no. Here are my thoughts.

Roughly speaking, prices do double every 10 or so years in Metro areas, regionals are a different story. This will continue the same trajectory as long as there is constant demand (which there is for the foreseeable future). Wages growth is a big topic lately but I personally don't think this will affect prices in the long term. When I was a kid, my parents bought their first house in Sydney for $140K, then about 8 years later we moved to Melbourne where my parents pay was only about 15% higher, they purchased a house for $560K, today their pay is again about 15% higher and they have a property portfolio of ~$2M net. (17 year timeline)
Their wages have only really increased approx 30% and at the time of their first purchase, it was a stretch to buy a 140K home, now they are fairly comfortable.

You don't need wages to increase at the same speed as housing, the cost of debt has reduced dramatically in recent years and there is still room for it to drop (I believe RBA interest rates in Aus will fall to 0.5% in the short term and possibly down to 0% or negative if there is any world financial crises')

And then comes inflation, at roughly 2.5% pa that comes to approx ~35% over 10 years compounded, so by default prices should increase at least 35% over 10 years (if the property market is absolutely flat for 10 years straight) as the value of money is constantly on the decrease. This is why prices have to keep going up in my opinion.

Lastly, there are now mortgages with 40 year rates, meaning the repayments are lower making it more affordable. This is yet to become common but it will happen shortly.

Melbourne/Sydney are already world cities and lots of people from all over the world want to live here, people with lots of $$$ so there will always be those that can afford, as for the average folk, there will always be 'affordable' houses to buy on the fringes of the city/interstate/regionals.

Imagine going back to the 1970's and telling your grand parents that their $30K house will be worth $1M by 2019, they would tell you the same things as people say today, 'it'll never happen, houses are unaffordable now, interest rates, wages growth etc...'

All just my own thoughts

 

The big problem with this is that ability to pay comes down to wages and, as you say, interest rates.

Let's do the maths for your suggestion. Even if we have strong growth of 4% so $100k income now becomes over $700k in 50 years time, if you're right about house prices doubling every 10 years then even a cheapish $500k home will be $16M in 50 years. So you've gone from a house 5x a decent income to over 22x a decent income. Stretch that out to 100 years and that house is over 100x income. In 200 years the same house is over 2000 times the same yearly income.

So unless we're having people living and working for thousands of years or wage growth to match housing growth, the idea that house prices can double every 10 years becomes very silly over the long run.

And the historic evidence bares that out. Yes if you look at the past 30 years where we've have a massive drop in interest rates and continual solid wages growth housing has doubled about every 10 years. But before that Australia has had plenty of times where house prices have stagnated for long periods of time. Wage growth is now stagnating, interest rates can't drop much further and at some point Australia will go through a recession. When these sort of things happen (and yes it's a when not an if) the "double every 10 years" idea will look laughable since it's so obviously unsustainable. The question is just whether we go through a long period of comparative house price stagnation like Japan or through a much shorter crash like Ireland, the USA and countless others.

Just please don't buy a house now thinking price doubling every decade is going to happen continually. If you pick the right place and buy and sell at the right time you could still make very good returns but housing overall cannot just keep increasing like it did from 1998-2017. Thinking it can is a complete misunderstanding of exponential trends.

 

I certainly wouldn't be putting money on houses doubling every 10 years, but, it has been what multiple financial advisers have suggested - I presume they're only talking about the immediate future, not 100 years from now.

It is interesting to think though how my grandparents purchased their first property (100 pounds apparently... my grandfather is known to tell a few stories though) I should get the address and find out what it's worth now!

 

I completely agree that this cannot continue forever as that is just silly, but I do believe that for the next 20-30 years this trend will continue due to the explosive population growth throughout the world. Eventually population growth will slow down as there will be huge social pressures around the world and I just don't see how our planet will be able to support so much consuming life.

20-30 years is still half a life time so considerable growth still to come, obviously not everywhere and in every demographic. I am only referring to investment grade real estate.