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Five potential Melbourne hotspot suburbs

Thursday, October 04, 2012

Five potential Melbourne hotspot suburbs

By Frank Valentic
Wednesday, 05 September 2012

We’re all aware Melbourne is facing a shortage when it comes to affordable housing, especially if you have your heart set on buying within 20 kilometres of the CBD.  However, there are still some affordable hotspot suburbs that fall well below the average Melbourne median price and will make it easier to help secure your next property. From the outset, you need to know how much you can really afford to spend, as this will dictate the properties available to you.

At Advantage Property Consulting, we are regularly trying to locate hotspot suburbs and have assisted over 2,000 clients in achieving their dream of owning a property.

So what is a hotspot?

A hotspot can best be described as an area that has not attracted the same level of attention as traditional blue-chip locations. They are often identified as areas that are underperforming, usually within close proximity to more popular suburbs.  When an area becomes too expensive for people to afford, they usually move to these neighbouring suburbs that are more affordable, causing a positive outward ripple effect.

What are some important things to look for before buying into a hotspot area?

Pick a diamond in the rough Choose a well-positioned property that represents good buying value.  An unrenovated property can often be purchased under market value, offering the chance to improve and increase equity over time. If it is well supported by strong infrastructure and lifestyle amenities, then the chance of gaining a good investment return is higher.

Follow the ripple effect outward If you’ve been priced out of a more expensive inner-city suburb, look to its surrounding areas to try and pick up a bargain.

Choose an area with good quality stock/dwellings For example: buying a period-style apartment in a block of four versus buying an apartment in a high-rise precinct where you are the owner of one of 100 similar apartments. Period homes tend to fetch better prices and are in much higher demand than other property types.

Easy access to employment opportunities It is important to have easy access to a diverse range of employment opportunities near your property.  This will attract reliable tenants/investors to the area and offers better growth potential over the long term.

Look for areas with solid or expanding infrastructure Having good, reliable access to nearby arterial roads, highways and satellite cities will always add more value to a suburb.  Look out for planned developments in the area as well as new infrastructure improvements such as freeways, as this often indicates the area is on the up.

Don’t always go for the cheapest property Focus on what comparable properties are actually selling for in the area to figure out if a property is overpriced, has met the current market or is at under market value.

Focus on the property not the hotspot You are buying a property, not an entire suburb. The key is to identify potential for capital growth and rental returns. If it is well positioned, then the desirability factor increases.

Look for signs of the next “Williamstown or St Kilda” and trust your intuitio Look for a feeling or indicators that a suburb is on the move. Lifestyle features such as being close to the water, bars, restaurants and retail outlets will always add substantial money to your investment.  It is not unusual for unwanted locations to become hotspots over a 10- to 20-year period, so think long term.

With these key factors in mind, here are five potential “hotspots” in Melbourne worth taking a look at:

1. Thornbury

Thornbury has shown an impressive 21% growth per annum over the last 22 years.  Units and flats are still very affordable with an average median price of $432,000.  Located just seven kilometres north-east of the CBD, it has easy access to transport, an attractive lifestyle vibe and is very family friendly. The ripple effect from more expensive suburbs such as Northcote, Fitzroy and Carlton has caused Thornbury to become a more financially viable and affordable alternative. It has all the right features and qualities of a prime suburb, making this an ideal entry-level suburb for first-home buyers and investors.

2. Spotswood/Newport

Positioned just seven kilometres west of Melbourne’s CBD, both Spotswood and Newport have shown steady growth of 14% per annum growth over the last 22 years.  It is one of the few affordable inner-city suburbs left in Melbourne. Apartments and flats are still available well below the $535,000 median. It has very good transport connections to the CBD, with a new multi-line train station, nearby Westgate Freeway, Western Ring Road and City Link arterials. Neighbouring satellite city of Footscray is close by.  You can still find older-style cottages on good- sized blocks, proving popular with first-home buyers and investors.

The ripple effect from wealthier suburbs such as Williamstown and Yarraville has caused both Newport and Spotswood to become future hotspots.

3. Box Hill

The ripple effect from Camberwell and Surrey Hills has put Box Hill in a good affordability category. The median price for units and apartments is still relatively affordable at $467K.   Located 14km east of the CBD, it is a major commercial centre and transport hub.  It has excellent access to Maroondah Highway and is home to the local Box Hill Hospital.  In addition to all the wonderful amenities, it is also a growing satellite city with the local council introducing further relaxed planning controls to help promote and build medium density development.

4. South Yarra

The reason why we have chosen to include the inner “blue-chip” suburb of South Yarra is that prices have fallen considerably.  You can now buy one-bedroom apartments well under its median price of $620,000. This holds great appeal to those seeking an affordable entry in to a highly desirable location. Located just three kilometres south-east of the CBD, you can’t go wrong with the close proximity to trendy Chapel Street and Toorak Road.  Established infrastructure such as The Alfred Hospital and Swinburne University are also nearby.

5. Frankston

Located 41 kilometres south of the CBD, Frankston is slowly becoming a major commercial, retail, educational and transport centre. This satellite city will have the Peninsula Link opening in early 2013.  As a result, you will see travel time cut by up to 40 minutes between Carrum Downs and Safety Beach.  The median price for a home is super affordable at $350,000, and apartments can be purchased at less than  $270,000.  Close to the beach, the future development of a local marina will also add significant value to the area.  The ripple effect from neighbouring Mount Eliza and popular Mornington Peninsula suburbs (Portsea, Sorrento and Flinders) is offering potential buyers a much more affordable option.

In summary, you can still make money in a flat market.  Boom suburbs always happen for clear reasons, and picking one before it becomes popular, is one of the simplest and quickest ways to make money in real estate. In fact, if you remember the following winning formula –purchase at the right price, in the right place and at the right time, you will no doubt reap good financial rewards.

With this in mind, make sure you choose under-performing suburbs and stick to affordable areas under Melbourne’s median price.  Do your due diligence and research thoroughly before you buy.

What other strategies can you use to make money in the current flat property market?

Find distress sales Chase vendors who need to sell quickly due to divorce, finance issues and impending deadlines due to other purchases or commitments.

Buy wholesale, not retail For example: Buy a whole block of flats in a group syndicate and purchase in the $1 million to $6 million price range, as this will reduce your competition.

Add value with subdivisions Buy properties that need to be subdivided.  This will simultaneously increase the properties’ value instantly.

Add value with renovations Buy “ugly ducklings” that need internal and external renovations, as this will add instant value and equity.

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