VIC Where is Melbourne on the property clock?

Hi all,

My partner and I are thinking of investing in real estate. We live in WA and don't know much about property which makes it harder. We are only familiar with Port Hedland and Perth markets but both are unfortunately a disaster to invest.

What are your views on Melbourne RE? Is it too hot now and hence too late to jump in? My view is that being the most livable city in the world, with strong population growth, will always make a good investment.

 

Hi @Realist35 welcome.

It would be beneficial if you start reading threads on Melbourne property market. The Victorian market is as diverse as NSW, QLD, WA etc. It appears many on this forum have gone into Qld market for bargains at the moment and some are looking into Melbourne, Adelaide and even Tasmania.

If you don't know much about property investment, best to educate yourself here than jump into the uncharted waters.

Why are you investing outside WA?
What do you hope to achieve by investing in property?
What's your life/financial circumstances?
What's the end goal?

Usually, these questions are thrown at newbies and same questions revisited by the experienced ones. Enjoy the forum!

 

Thanks Larry. I'll keep reading about Melbourne market here.

We don't have our PPOR yet as we live in a company provided housing. So I won't need to buy a PPOR as long as I have this job. However the situation can change, in a year, or in 15 years..

We have around 300k deposit which we were saving for a house in Perth, as we know one day we will move to live there. So basically we have two options:

1. To keep saving for a place in Perth and buy a house once the market there starts recovering (by that time, say in 2 years, we would be able to buy it outright), or
2. Invest now in Melbourne and hope for some decent capital gains.

I think the first option is safer; if I lose my job and hence the free housing I will just move into our own house in Perth. The second one is riskier as if the above scenario does happen I would need to keep paying off a mortgage on a Melbourne property and plus rent in Perth.

I started thinking about investing in Melbourne after reading the latest population growth predictions (population to double in the next 15 years). Surely that would drastically impact on house prices?

 

@Realist35 - What lead to the decision to choose Melbourne? Melbourne has been growing for a few years now.

I'd look at Brisbane.

How much will your 300k be worth in 3 years time with inflation and property markets (say in another city than Perth) growing? (Given Perth market is quite sick right now)

 

Hi MsAli,

I was just reading these days ABS statistics about population growth. Melbourne is now the fastest growing capital in Australia. The population will boom over the next 20 years. Melbourne also has reputation as the world's most livable city. I thought these would be very good drivers for the house price growth in the future.

 

Correct. Though Melbourne has been growing for quite sometime now. I'd figure my purchasing criteria first up. If Melbourne offers the rental return you're after then why not....

 

Hi Realist35

Thinking of where Melbourne sits on the property clock is too general for me. Melb is full of sub markets with differing levels of activity. Some have risen and peaked, some are still rising, some are abit flat with potential..
It depends on budget and what strategy you employ..
Currently you can spend 350k and still be within 25-30km of the city in Melb and close to neutrally geared.
Given a mid-long term cg strategy, and with the predicted population growth in Melb you can't go wrong with something like this.

 

You have a very large deposit so my immediate thought is diversify and buy 2-3 IP's. For your savings and allowing a buffer you could comfortably buy 3 for around the 450k mark.

Obviously the big kicked is needing to be able to service all these loans which is something you will need to discuss with a good investment focused broker.

I live in Melbourne and am somewhat biased but believe it will comfortably be the best performaning city over the next 20 years. That however is not to say that each suburb will perform well. Much research and education will be required to get it right.

 

Some parts of Melb have been growing for 3 years.. Some outer suburbs only 1 yr. Some not even moved yet.. Melb will keep moving until everywhere becomes unaffordable imo. Just like Sydney.

 

Thanks for comments guys.

It seems that some of the big Australian institutions are very bearish on Melburn growth over the next 3 years. Actually they are bearish on all capital cities:

Oversupply to hit most capital cities by 2019

Sydney, Melbourne house prices to flatline in 2017, says NAB

 

This would suggest to me that you might not have the best job security in the world. I could be wrong, only going by the original post.

If that is the case, leveraging up, may not be the best way forward. What will you do if you lose your job or don't have an income for a few months?

I've seen lots of my mining friends leverage up then have to sell everything once the money stops.

A single IP in Melbourne is a great idea (get some tax advice first)...but I wouldn't go nuclear and get 3 or 4 IPs just yet.
After I'd bought the IP, I'd keep the rest available as cash so you can buy a place outright in Perth once your situation inevitably changes.

This may not be the most efficient financial decision, but emotionally it will help. A lot.

You will have so many more options for work and family (kids?) not being tied to renting or a mortgage.

Worth remembering, but If you go into the Perth market as a cash buyer in the current market you should be able to get the deal of a lifetime.

 

its not easy when there's information overload out there. You can easily make a decision on today's performance but tomorrow's performance is a best guess today. I would ask, could you gain more return on your 300k now?

 

Well I guess if NAB and Bis Shrapnel are right with their predictions, sticking 300k in a high interest savings account (for example ME bank's 3.1%) would give me better returns..

 

You're absolutely right Hammer. I work in mining and don't have very good job security. I could be here for the rest of my career but things could change overnight. That's why I'd prefer to play on the safe side.

Reading this forum further looks like Brisbane is another place to consider. Quite a few investors on this forum seem to be very optimistic when it comes to Brisbane.

In any case, if I do decide to invest (Melbourne or Brisbane), would you suggest using a BA for the process? From my understanding they are very expensive (around 10k mark) but on the other hand I don't know anything about the mentioned markets.

 

I'm no where near qualified to give you advice on which market and whether to use a BA or not....sorry.

By the sounds of things though...youre in a very privelidged position. I'd be hanging around this forum for a few months or so and reading lots of books - Before I made a decision.

Don't forget there are other options too. LICs, index funds, start a business. Many ways to skin cat.....

Where does your partner stand in all of this? What do they want to achieve?

With that much cash behind you, there is no rush! Lucky you!

 

True, but how often is bis shrapnel correct?

 

BS shrapnel more like it

 

Any educated investor would know any report based upon "city oversupply" is very narrow minded. This is a no brainer and easy pickings for a headline storey or report.

If your looking to invest in Melbourne and your research takes you to Southbank or Docklands then you have rocks in your head. Dig deeper though and you will see some truly undervalued suburbs with brilliant amenities and CBD access, on decent blocks for under 500k.

These suburbs for anyone with a buy and hold long term outlook IMO cannot lose.

 

agreed - it would take something crazy to happen to lose investing in Melbourne especially where you can get into the market for around 500K and have a decent property within 20KM to cbd.

 

What are you saying

The once unliveable suburb that people now won