Hotspots: Villages like Elwood and Richmond better for investors than Docklands: WBP

Hotspots: Villages like Elwood and Richmond better for investors than Docklands: WBP
Hotspots: Villages like Elwood and Richmond better for investors than Docklands: WBP

Period flats and houses close to Melbourne “villages” such as Elwood, Kensington, South Yarra, Prahran and Richmond Hill offer great investment potential, according to Greville Pabst, chief executive of property valuation and advisory firm WBP Property Group.

Speaking at the WBP Melbourne Property Outlook breakfast, Pabst said Melbourne had been built on villages and that being able to walk to the village to get a coffee was very important when looking at a potential property investment.

He says that “1960s and 1970s flats in low density are going to perform well. The high rises will struggle to perform”.

“In suburbs like Elwood, Prahran and South Yarra we are starting to get some really good results such as a two-bedroom 1960s flat in South Yarra that sold at auction recently with two strong bidders for $713,000.”

Pabst says he is also seeing competition for good-quality one-bedroom flats in East Hawthorn and South Yarra with prices approaching $500,000.

WBP is forecasting growth of between 2% and 6% for established houses and units within 10 kilometres of the Melbourne CBD in 2012.

However, the outlook for modern units in places like Docklands is poor, with WBP forecasting no price growth in 2012 and a potential drop of 5%.

“Investments must have high land value and an element of scarcity. Owning one apartment out of 200 in Docklands has no scarcity value,” Pabst says.

“You also have to think about the underlying land value,” he adds.

WBP Housing performance predictions for 2012

 

Lower Limit

Upper Limit

Modern units / apartments (legitimate resales)

 

-5%

0%

Established units/apartments

 

+2%

+6%

Prestige market ($3.5m +)

 

-5%

 

Prestige market ($2m - $3.5m)

 

-4%

+2%

Established houses: 10km of CBD (under $2m)

 

+2%

+6%

Established houses : 11 – 20km of CBD (under $2m)

 

0%

5%

Holiday / leisure market

 

-10%

-5%

Mortgage-belt (under $500k)

 

-2%

3%

Development sites

 

-5%

0%

 

Pabst provided examples of actual sales to show the merits of investing in period properties within villages instead of cookie-cutter units in suburbs with less history.

WBP advised on the sale of a 1960s two-bedroom flat in this block (below) on Tennyson Street in Elwood.

The flat sold for $632,000 in May 2011, having previously sold for $475,000 in 2008, equating to annual growth of nearly 10%.

The flat is close to the St Kilda Botanical Gardens among a “leafy streetscape” and is within walking distance of the St Kilda shopping strip that begins at the intersection of Barclay and Acland streets.

Pabst contrasted this with a flat on Newquay Promenade in Docklands, which sold for $540,000 in 2010 having  been purchased for $495,000 in 2005 – annual growth of just 2%.

“You’re better off putting your money in the bank,” he says.

Furthermore, Pabst says the higher corporate ownership costs on this particurlar unit made it unviable as an investment

In October 2009, WBP advised on the sale of this three-bedroom Edwardian two-storey home. It sold for $780,000 having previously sold for $270,000 in 1998, representing annual growth of 10.12%

Pabst contrasted this with the 2012 sale of this three-bedroom house in Derrimut (pictured below), for which WBP acted as vendor’s advocate. The property was bought for $330,000 in 2004 and sold for $335,000, representing annual growth of 0.2% over eight years.

“She (the vendor) could have bought a flat in South Yarra that would be triple that value now,” says Pabst.

WBP also advised on the sale of a top-floor one-bedroom flat in this low-rise complex in Rowena Parade in Richmond Hill, which looks out of the MCG.

The unit sold for $468,500 last year, having previously sold for just $79,500 in 1998, equating to annual growth of nearly 15%.

In contrast, a Docklands apartment in this complex (below) on Bourke Street sold for $422,000 in 2010, having previously sold for $410,000 in 2007. This equates to annual price growth of 0.25%.

Pabst says investors need to burrow down not just into the suburb but into street level and even go as far as considering one side of the street versus the other.

“In Richmond, we don’t like to go south of Swan Street because of freeway noise or too far north of Bridge Road because the streets are narrow and as you get closer to Victoria Street you compete with restaurants for parking,” he says.

 

 

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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