VIC Why is nobody talking about Melbourne?

Discussion in 'Where to Buy' started by ej89, 12th Oct, 2015.

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  1. Gypsyblood

    Gypsyblood Well-Known Member

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    Haha spot on
     
  2. Cactus

    Cactus Well-Known Member

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    There seems to be a lot of this fear popping up on the forums lately. Melb cooked. Same thing happened last year about Sydney at same time of the year but it went on to grow strongly for another 12 months and doesn't appear to have stopped.

    I have no problem with your tentative opinion (or others who have posted similar comments, not referring to the doom and gloomers here) but no one has addressed the immigration, state migration and strength of the job market in Melb.

    Where are all these new population going to live? Will they buy? Will they rent? What will 6% interest rates do to this pressure on the market?

    My take... Either property will continue to rise in price through 2017 & 2018 or rents will rise. There is not that much over supply other than dog box apartments.

    I'd be more worried about markets that have lower net migration or changing economies.

    Melbourne and Sydney are spending their stamp duty money back into the economy on infrastructure projects.

    Don't get me wrong, I appreciate the collective wisdom of the posters that are being tentative, and they appear to be putting their money where their mouths are, and I understand the fear when the market has been running for this long the cycle the end must be nigh, but is it?

    I bought a development site in August that I will settle in April and it's probably increased 5-8% ($70-100k). Now I'm looking to live in the finished product so profitability is only part of my goal. But I believe whilst it's getting harder to find good sites that stack up, it's still possible.
     
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  3. Whiteman

    Whiteman Well-Known Member

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    Below is what Pete Wargent has to say about Melbourne and its prospects on his site about 2 or 3 days ago.

    In summary there is a current and possibly continuing population explosion coming in Melbourne that will soak up any short term oversupply of apartments.

    Pete Wargent blog

    Melbourne population explodes

    It's more than three years now since I first started writing about a looming oversupply of apartments in the capital cities at Property Observer, so this is hardly a novel observation.

    And by 2014, I'd even started quietly hyperventilating about the coming high rise bust.

    Seemingly everyone now at last knows that there is an oversupply in the post.

    The Reserve Bank of Australia (RBA) recently reported that a total of 16,000 apartments will be completed in inner Melbourne over the next two years, creating fears of a glut of high rise stock.

    As at the end of June 2016 there were 66,671 dwellings under construction in Victoria, including some 46,676 attached dwellings, with the completions just beginning to flow in (apartment commencements in the state actually peaked all the way back in Q3 2015).

    The contrarian in me takes the view that when everyone has become certain of something, maybe it's time to look at a few alternative angles.

    For example, there's one potential problem with the calculations of apartment oversupply - they tend to assume that population growth doesn't increase to absorb the supply.

    Yet in Melbourne the population is not only increasing, it's positively exploding!

    Build & they might come

    In regional Victoria population growth ex-Geelong has all but ground to a halt, while Greater Melbourne has become a veritable magnet for migrants from overseas, from interstate - from Western Australia and Adelaide, in particular - and from the state's own regional centres.

    I must confess Melbourne is not my favourite of the capital cities, so it's a bit of a mystery to me.

    Obviously, this dynamic must be driven by strong employment growth. It's certainly not the beaches or weather!

    Over the year to June 2016 the state population increased by an unprecedented +123,131.

    Compare this to some of the historic annual increases in Victoria's population, such as the year to March 1994 (+7,754), or the year to December 1997 (+33,252).

    Absolute population growth in FY2016, wasn't just a bit faster than the long run average, it was on another planet at well over double the long run average.

    [​IMG]

    The wrap

    If numbers of this magnitude are sustained, while a temporary oversupply of certain property types and in certain locations is of course possible - largely new high rise apartments - in aggregate, even with an industry operating at close to capacity the notion of an 'oversupply' becomes all but obsolete.

    After all, the present population growth rate of +2.1 per cent per annum implies that the state population would increase by more than 1.4 million over the next decade!

    Given that so many new apartments apparently sit empty owned by mainland Chinese investors anyway, I'm not sure what difference over time 16,000 inner city units will make to the established homes market in the face of these almighty numbers.

    Of course, the main risk to this argument is that the rate of population growth slows down, particularly as and when the residential construction sector fades (population growth only runs as high as this when sufficient jobs are being created to sustain it).

    There is also the apparent risk of non-settlement, but the government has relaxed the rules to allow failed new apartment settlements to be resold to other non-residents.

    Don't get me wrong, I'm not saying new, high rise apartments are a good investment. They aren't, and never have been.

    But looking at the astonishing growth in international students in this month's figures, it's at least worth considering whether developer Tim Gurner's argument that parts of suburban Melbourne are becoming undersupplied (widely treated with derision) may have a grain of truth in it.
     
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  4. 380

    380 Well-Known Member

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    Agree with you on migration, jobs etc..

    See our previous posts - I have posted extensively covering those points.
     
  5. melbournian

    melbournian Well-Known Member

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    I think there is still lots of potential in Melbourne in selective suburbs etc and it has not reached even the heights of Sydney property type growth. Of course if you go to glen Waverley, mt Waverley, doncaster, bentleigh and try to buy a dev sites. the numbers will be high and difficult to justify a gain.

    But there are many suburbs where you can pick winners. I myself bought a number of sites and have seen growth. I attend auctions religiously and am on the ground as opposed to looking solely at numbers and can say demand is definitely not lacking in the suburbs that I go to.
     
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  6. 380

    380 Well-Known Member

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    Are you referring to development sites?
     
  7. melbournian

    melbournian Well-Known Member

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    yes both as ips and dev sites.
     
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  8. LukeR

    LukeR Well-Known Member

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    Where are you looking at the moment?

    I work at a development company myself (just a junior) and sometimes are amazed by the prices people pay for Dev sites... Not to mention discussions with other developers about numerous sites just not stacking up
     
  9. sash

    sash Well-Known Member

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  10. MTR

    MTR Well-Known Member

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    booms dont last forever average is around 3 years. If they went forever we would all be billionaires
    Sydney west did drop back late 2015, I know I was playing in this market, we then had interest rate drop and the market rebounded. Interest rates at historical lows big win for investors

    Where today, well interest rates are rising let's see what the next 12 months holds.

    Melb is still the safest market IMO, however FHB cap is 600k
     
    Last edited: 21st Dec, 2016
  11. MTR

    MTR Well-Known Member

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    yep play it smart lwhat was lower end is now long gone look further out
     
  12. MTR

    MTR Well-Known Member

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    so you have 18 month timeframe from build to completion
     
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  13. Perthguy

    Perthguy Well-Known Member

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    Its probably because "Melbourne" is a huge market. For example, my parents just went unconditional on a place they sold in Ringwood. The got a good price but not an amazing price. Its a development site but the response to it wasn't very strong. This could be because the local market has cooled or because its too close to Christmas, only time will tell. So they would say the Melbourne market has cooled but they would be wrong. There are other areas that are still strong but we are biased by our experiences. People watching mid ring east or north east might say the market is cooked but what about other areas? Still going strong?
     
  14. Cactus

    Cactus Well-Known Member

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    It always cools between now and Australia Day. Many people are already away on holidays. Others are so busy they have no time to think about buying.
     
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  15. Cactus

    Cactus Well-Known Member

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    Which is why I remain confident in my strategy of buying in growth areas and building new. This is the stomping ground of the immigrant and will continue to see upward pressure on pricing.
     
  16. Cactus

    Cactus Well-Known Member

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    I don't disagree it won't last forever. I'm not saying it will. I'm just highlighting how the population growth appears to be a very significant trend. I see this as having a strong push for continued growth in 2017 & 2018. Interest rates are not rising at any significant level. I don't believe 6/7% interest rates will kill property growth and I can't see us being higher than this anytime soon, certainly in 2018. If anything a result of the $600k cap and rising interest rates will force growth further out into the outer growth areas where my holdings are.
     
  17. MTR

    MTR Well-Known Member

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    finger crossed, no one has a crystal ball. I love the Melb market, go you beautiful thing:)
     
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  18. Big Will

    Big Will Well-Known Member

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    Not quite in a 1 year timeframe but people are still making money.

    63 Bungay Street, Watsonia -

    Aug 2012 sold for 720k - Sold Price for 63 Bungay Street, Watsonia VIC 3087 Australia - PropertyPriceHistory.Com

    2013->2015 - Demolished the house, sorry I don't know when.

    Sept 2016 sold for 1.2M (assuming both blocks) - 63 Bungay Street, Watsonia, Vic 3087 - Property Details

    Dec 2016 (2 months later) - under contract for a childcare centre

    63 Bungay Street, Watsonia, Vic 3087 - Hotel/Leisure Property for Lease #502166694 - realcommercial.com.au

    I don't know what the sold price is but it will sure be interesting to know how much for 2-3 months.
     
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  19. GetRIDof5CENTpiece

    GetRIDof5CENTpiece Well-Known Member

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    Correct and generally higher interest rates mean strong economy/GDP growth. So with rising interest rates you should see moderate/strong capital growth.
    Rents should also rise proportionately. I am not afraid of rate rises.
    Speculators - mortgaged to the max are... rightfully so.
     
  20. Danny370z

    Danny370z Well-Known Member

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    Whats everyones thoughts on cranbourne north? With recent train upgrades and the skybridge going ahead (pending court hearing now) do you still see growth?