VIC What distance to Melb CBD would you consider too far out for CG potential?

Growing up in Sydney, the first thing I remember hearing about property investing when I was a kid was "buy within 15km of a CBD". Way back then the population was not so dense and the western suburbs were not yet in such demand as they are now (Sydney can't really grow East, North, South), so growth was much higher within 15km of the CBD there.

Obviously this phrase has a lot of caveats and depends on a range of factors (population size, population growth, land availability for development, etc), so I take this advice with a pinch of salt. But having said that, the closer to a CBD, the more scarce land is and if you go far enough out I think that the demand is just not high enough in the medium term to grow at the same rate.

I was wondering how far out of Melbourne CBD people think is too far out in the context of CG potential?
Do you think 30km will have less growth? 40km? 50km?
Or is it different in each direction?
Or is it very much suburb dependant and some suburbs 30km out would be in as much demand as some other suburbs 20km out?

Sorry if this is a bit vague - I am not from Melbourne so I don't know the city and am just looking for peoples thoughts on something I am lacking in.

Cheers

 

North - 41-42 kms
North east - 32 kms
East - everywhere too costly.
South, south-east and south west - as far as you can go (including geelong).
West - 35-38 kms

Keep buying out with a time frame of 10 years.

Regards

 

Melbourne market is pretty simple. The closer to the cbd the better as long as your not in the cbd with all those apartments.
Looking at the map, most people live in the east, the east has always been more expensive to buy in compared to the west but doesn't mean it's growth will be better. The west and north is currently in demand as its more affordable with the huge population increase over the past years.

 

Or close to the bay.
Beachside properties out to Frankston and beyond are doing very well. As are canal front houses.
Marg

 

I wouldn't buy more than 30 km south

 

How close to the city someone can buy is of course also related to budget. Most folks fancy being really close to the city, but budget dictates they'll be buying a bit further out.

 

You, Sir, are missing opportunities of lifetime.

Regards

 

Value for money, risk apetite, rental yield, price point (as already highlighted), immediate growth and equity. All point further out .

Be it sydney or melbourne. With increasing population, outer areas are bound to grow. So are the inner areas but percentage wise, cheaper properties tend to provide better returns imho.

Regards

 

How far is too far?
Sydney-35km
Mel-20km
Brisbane -10km
Adelaide -2km

 

None....

Most property will get good CG if bought at the right price.... actually, the further you go out the more micro markets start popping up.

 

Thanks a lot for the reposes. Very helpful people on here!

Sorry I don't know the term "buying out". Would you mind giving a brief explanation?

Very true. Just trying to get a feel for an area that I am unfamiliar with.

Agreed, but also depends how long until growth and demand reach a tipping point for a specific distance out. Buying 80km out might start to be in demand in 25 years time and that is a bit too long for me to wait. Just an extreme example to illustrate what I mean. But your point is taken. Cheers.

 

There is 3 times as much land (and typically properties) in the second 5km ring (5 to 10 kms from CBD) as the first 5km ring (0 to 5 kms).

There is 3 times as much land (and typically properties) in the second 10km ring (10 to 20 kms from CBD) as the first 10km ring (0 to 10 kms).

There is again 3 times as much land (and typically properties) in the second 20 km ring (20 to 40 kms from CBD) as the first 20km ring (0 to 20 kms).

You can do you own maths for any other distance from the CBD.

Hence, buy as close as you can afford to the CBD.

 

Couple of decades ago I bought a 1970 built flat in St.Kilda East...2 bedder with a large study nook, its one in a block of six. Large bedrooms with huge inbuilt floor to ceiling storage.
It has performed beyond what I ever thought when purchased. I am very happy with it.
But,
About the same time a lot of my family went Coastal, bought in Ocean Grove, Barwon Heads, Jan Juc, Torquay & Port Campbell.
The only one of them who has underperformed me % wise was the one who bought in Port Campbell.
The others have slaughtered me with CG, some embarrassingly so with some of the fibro shacks with scenic views they bought back then.

....hours from the CBD too.

Closest to the CBD is comfortable, but isn't any guarantee of best % returns.

 

Pretty simple really the east is built up and prices have moved, infrastructure has been built in the west and the development has begun get in early before people work it out.

 

Geez, if you are going to go that far from the Melbourne CBD, I know a whole stack of people who bought in a little town just a bit further away and they have all had fantastic growth. And a lot of them were even born 47 years ago.

In case you haven't heard of that little town, it is called Sydney .

 

Distance from the city is just one factor affecting CG, and a somewhat subjective one at that. Land in cbd fringes like west melbourne have rocketed (for example a building on a sizable lot sold in 2001 for $3.5m and last changed hands in 2015 for $35m) while apartments have not. The best performing suburbs in melb have been around 15-20km east, more than doubling gains of fitzroy at 2km out.

If a market is cooked, no amount of proximity is going to help you. Its about finding what is in demand, with limited scope for future supply.

I am making a guess that the question is trying to probe what is an acceptable distance to still be considered commutable to the city, and influenced by city price movements. That is very subjective, and in a boom will expand over what it would be in a market contraction. For example Lalor and Thomastown are getting a lot of headlines, but only a few years ago when sentiment wasnt so good, people didnt want to touch these "outer suburbs". Likewise fringe towns like macedon have benefited quite well from the current boom, so really all youl end up getting is personal opinions as there really is no hard set distance of CG.

 

Thanks for the reply JL

Yeah it takes time to learn the suburbs of a new city, so I am trying to bite of smaller chunks of information to digest first, but point taken that specific areas tend to be more affluent and will tend to always grow faster due to the higher demand. I don't see myself being to afford those areas any time soon though.

There is a lot of talk of Sydney being "cooked" as you put it, and some signs that it is slowing already with people speculating about a long period of either correction or levelling off.
Do you think the Melbourne prices are considered to be as crazy as Sydney, because if they aren't then there is probably less of a chance of a correction, or a smaller/shorter one, which would mean there is less risk in just going ahead when I have finance available for a long term B&H strategy.

 

^^ This. However those are not the only well performing suburbs . When I first read the post I read the word "east" as "out".

 

I think a slight mis-interpretation - surge demand and affluence are not interchangable. Perth being a great example, where the most affluent suburbs have seen some of the largest price falls.

Stable demand sets a stable price, and surging demand causes a surge in price. So its about picking what area will likely surge - Mount Waverley surged because of a huge increase in overseas migration from Asia which favoured this area.

Another consideration is that we are at a peak of population and jobs growth, interest rate easing, and new dwelling underbuilding. Prices right now are adjusted for these conditions, so to hedge a purchase on capital gains is to say that these factors will continue, with the same demographics, for another 5 years.

IMO any investment that is made in the current market should account for down-side risk in all these areas; what if the rental market balloons and rents fall 10%, interest rates go up 1.5%, and population and jobs growth fall back?

Melbourne houses wont reach Sydney prices because of supply/demand - Melbourne builds more hoses than Sydney so they are not as much of a constrained asset.

There is a lot of factors that go in to this question. In short i would say that IMO no, Melbourne is not as crazy as Sydney. Price point is one factor, but the main one to me is that jobs stopped growing in Sydney and population growth is slowing. Melbourne is still finding its peak for both of these. However, Melbourne's population and jobs surges were both bigger than Sydney, so a correction may mean Melbourne's demand could fall harder. It's anyone's guess how this will play out.

I think what's key to note though is that prices cannot go up exponentially for ever. Sydney has gone from in line with other states to double them. I highly doubt that it will now repeat that and triple them. There is a lot of un-predictability in the market right now, but the one thing becoming more widely accepted is that we are nearing or at peak. As an investor, you need to make the call - is it that important to get a foothold that you are willing to buy at a market peak?

 

Good considered post.