Melbourne’s top investment hotspots revealed as buyers target affordable family housing

The tipped top ten Melbourne suburbs for investing are scattered across the city, with a heavy bias toward family suburbs where houses are tightly held, according to a new report.

Houses in family suburbs where long-term owners are unlikely to sell in the next downturn dominate the top ten list for greater Melbourne investments, according to analysis by Convergence Buyer’s Agents.

Co-founder and head of investment, Sky Hammer, says the city is a two-tier market, making city-wide averages misleading.

There is strong demand for affordable homes, while the top end is struggling.

“Affordability is driving this, and the prestige market going in an almost complete opposite (direction),” he told Australian Property Investor Magazine.

The Melbourne market was entering a “new phase of its property cycle”, with relatively constrained supply levels and investor competition shifting to “higher affordability bands”.

“The result is a bifurcated market,” the report states.

“While premium segments remain subdued, well-positioned family suburbs will strong owner-occupier appeal are beginning to outperform”.

The analysis focuses on homes in the $800,000 to $1.2m price range, which Mr Hammer says is the typical client request, and has listed a “top ten” suburbs for capital growth.

It is based on factors including rental yields, vacancy rates, affordability, hold periods, the proportion of owner-occupiers, and the percentage of a suburb’s total stock that is currently on the market (see full top 10 table at end of article).

Steve Douglas, Executive Chairman of SMATS Group, said he expected Melbourne to perform, while the Perth and Brisbane markets were expected to cool.

“Melbourne is emerging and is my pick for the city moving towards the strongest market, based on its relative value and the strongest population growth in the country,” Mr Douglas said.

“Expect Perth and Brisbane to cool from double-digit to mid-single digit growth, more from buyer fatigue than anything, but to stay strong and positive.”

“Melbourne offers buyers the best value and opportunity at the moment among the capital cities in a general sense, but this only applies if you are buying quality housing stock – there are areas and inner-city unit stock that presents less capital growth potential.”

Melbourne’s south singled out

Suburbs around Frankston in the city’s south, including Frankston itself, dominate the list.

They include Seaford, Langwarrin, Sandhurst, Cranbourne North, to Frankston’s east.

Agent Michelle Stephens, of OBrien Real Estate Carrum Downs and Langwarrin, says the area had seen strong capital growth, much of it driven by interstate buyers.

“Interstate investors have been the driving force, in Carrum Downs, Langwarren and Seaford — the whole region,” Ms Stephens told API Magazine.

The suburb of Chelsea Heights, a 10-minute drive to Frankston’s north, comes in at number two on the list.

“Chelsea Heights has delivered consistent long-term growth (77 per cent over 10 years) and remains tightly held, with a 12.68-year average hold period,” says the report.

“An 87 per cent owner-occupier ratio reinforces strong family appeal and reduced investor volatility. 

“Stock on market remains limited at 0.27 per cent, while 20 days on market suggests continued buyer competition in this segment”.

Outer suburban property investor appeal

In third place of the Convergence Buyer’s Agents top ten list is Greenvale, in Melbourne’s north, to the east of Tullamarine Airport.

“Greenvale stands out for its exceptional long-term growth performance (102 per cent over 10 years) and high owner-occupier ratio of 88 per cent,” notes the Convergence report.

The median house price is $1.08 million, the median weekly rent is $522, and the suburb has seen capital growth of 9 per cent over the past year.

Local agent, Frankie Azzopardi, of Ray White Glenroy, agreed the suburb presented good investment opportunities, and expected growth to continue, “depending on where you’re buying”.

“Growth, infrastructure, there’s always things happening here,” he told API Magazine.

Fellow local agent Ghizlaine Digby, Principal of Ghizlaine Digby Property, said the suburb was attractive because of the variability of product, including large blocks. 

“Greenvale is a good postcode because you can still get big blocks…and we’re about 25 kilometres from the CBD.”

“They call it the Toorak of the north”.

Ms Digby said Greenvale was popular with relocating families.

“We have people that come from Lalor, Reservoir, and even Essendon, who are renting in those areas but cannot purchase there,” she said.

“They come and purchase their family home in Greenvale”.

Yet buyer demand was “not strong” and supply was an issue.

“There is demand but we have lots of supply,” Ms Digby said.

“There are many blocks that have been subdivided that are now up for sale.

“We still have demand, but there’s a lot of competition at the moment.”

Taylors Lakes, west of Tullamarine, is named at fifth place on the list.

“Taylors Lakes remains one of the most tightly held suburbs in this cohort, with an average hold period exceeding 13 years and a 90 per cent owner-occupier ratio. Stock on market is exceptionally low at 0.13 per cent,” states the Convergence report.

“Although days on market are slightly higher, limited new supply and long-term family occupancy provide structural support”.

Boronia, in Melbourne’s outer-east, also makes the list.

“Boronia has delivered 54 per cent growth over 10 years and remains tightly supplied, with stock on market at 0.21 per cent and inventory at 0.62 months,” the report states.

According to the report, several structural shifts were shaping the Melbourne market.

Stock levels were long-term averages; hold periods were elevated “reflecting tightly held, owner-occupier-driven suburbs”; and investor competition had “shifted toward higher affordability bands”.

Interstate buyers were also a key factor.

“People are rentvesting,” Mr Hammer said.

“People in Brisbane, Sydney and Perth who can’t afford to buy are coming to Melbourne.”