Investor activity high in growth suburbs: RP Data's Melbourne weekend auction preview

Investor activity high in growth suburbs: RP Data's Melbourne weekend auction preview
Investor activity high in growth suburbs: RP Data's Melbourne weekend auction preview

Research by RP Data comparing the level of property ownership between owner occupiers and investors at a suburb level in Melbourne reveals some clear and interesting trends.

The results show that ownership for investment purposes in the Melbourne detached housing market is strongest in the growth suburbs. In many of the cities growing outer suburbs investor ownership accounts for more than three in every 10 properties.

When ranked by level of ownership by investors, the top three suburbs are Point Cook which has 41.9% of all houses owned by investors, followed by Tarneit with 40.9% and Truganina at 39.8%.

In each case, median rents are below the Melbourne average of $444 per week and yields are in excess of the metropolitan average of 3.3%.

In Point Cook the median advertised rent is $380 per week and the indicative gross yield is 4.3%. In Tarneit the weekly rent is $315, the yield is 4.4% and in TRUGANINA the rent is $320 per week and the yield is 4.7%. Clearly investors in these areas are motivated by the yield.

Only time will tell how these suburbs will fare from a capital gains perspective as they are still experiencing a high rate supply with many new properties being built and sold. Coupled with this is the short length of ownership making it difficult to draw strong conclusions on capital gains into the future.

At the other end of the spectrum are the areas with the lowest proportion of investor ownership and highest level of owner occupiers. RP Data’s research shows that less than one in 20 houses in the suburbs of Narre Warren North, Wonga Park, Launching Place, Park Orchards and Montrose are owned by investors. Like many other suburbs with a very low level of investor activity, these places tend to be in the outer eastern or north eastern suburbs.

In the unit segment of the market, the suburbs with the highest levels of investor ownership are often those with significant and large developments with suburbs such as Travancore, Kingsville, Carlton, Elwood, Notting Hill, Hawthorn and Melbourne topping the list. Each of these areas has more than seven in 10 units owned by an investor.

If you are looking at this data with a view to investing in residential property it is important to appreciate that just because investor concentration is high in these areas it does not mean these are the areas likely to deliver the best return on an investment. When making investment decisions, great care and attention to detail such as using the correct research is imperative.

There are 922 auctions scheduled this week in Melbourne compared to 868 for the same time last year.

Auction volumes remain high despite the season.

Based on settled sales in the first quarter of this year, the suburbs with the highest number of house sales were mainly in the growth areas, suburbs with a high supply of new homes, such as Pakenham with 185 sales, Berwick with 139 sales and Frankston with 134 sales. Whilst not a growth suburb, Glen Waverley was fourth at 117; largely the result of it being a large suburb.

We also saw a contraction in the average time on market for houses sold at private sale from 39 to 35 days. This was coupled with a rise in vendor discounting to – 5.6% from -5.5% over the previous week.

Key data

  • Clearance rate week ending 8 June: 62.4%
  • Melbourne auctions expected week ending 15 June: 922
  • Melbourne private sales time on market week ending 8 June: 35 days (houses)
  • Melbourne vendor discounting market week ending 8 June: -5.6% (houses)
  • Listings being prepared for market are 1.1% higher in month ending 8 June (seasonally adjusted)

Robert Larocca

Robert Larocca

Robert Larocca is Victorian housing market specialist for CoreLogic RP Data.

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