Analysis: Five expert-chosen 2012 Melbourne hotspots under the microscope
In September 2012, five Melbourne hotspots were tipped by Advantage Property Consulting’s managing director Frank Valentic, for Property Observer. He explained his reasoning and the type of property he'd look to purchase in each area.
We’re now nearing the end of February 2014, and we’re turning our attention back to these hotspots to see how they performed over the past year and a half.
You can read the original predictions from 2012 in this article here.
The five suburbs picked:
Thornbury
Spotswood/Newport
Box Hill
South Yarra
Frankston
The reasoning:
Valentic explains that he aims for the more affordable areas that allow more people to access the properties. He wrote that “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.”
It is this ripple effect that had him picking many of the below suburbs.
These were his predictions:
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.
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.
See over page for how they stacked up
How did the five hotspots perform...
1) Thornbury
In Thornbury, units performed at 14% median price growth – a great result. Although they didn’t bring in the 21% growth that he cited they had seen per annum previously, the area clearly stacked up as he had predicted.
He was also wise to select units over houses as, according to RP Data, houses saw a 3.8% uptick – far overshadowed by the result from the units. Median asking rent currently sits at $300, a 3.6% yield.
Valentic pointed to the availability of apartments and flats well below the median price, but pointed to older-style cottages on good-sized blocks as where popular purchasing is to be had. Interestingly, units in Spotswood increased by 1.7%, and in Newport actually dropped in median price by 4.6%, where houses in both performed strongly – at 4.2% and 11.2% respectively.
3. Box Hill
Pointing to a ripple effect from Camberwell and Surrey Hills, his suggestion for units and apartments that have remained affordable is a successful one, with a significant 15.6% increase. He pointed to relaxed planning controls, promoting and allowing medium density development as something that would encourage this, as well as its position as a commercial centre and transport hub.
Houses in the area, which he did not suggest, did not fare particularly well – dropping 6.5% in median price over this time.
4. South Yarra
Inner “blue-chip” South Yarra, where Valentic said prices had fallen dramatically, there was a 2% overall uptick for units. A quick comparison of the noted one-bedroom units listed currently, compared to those that sold in February 2012, do suggest that the increase was more marked among this type of stock – however, it can be a tricky assessment to make due to the large number of pricier new apartments in South Yarra.
Houses in the area, which sit above the million dollar price mark and therefore did not fit the criteria, saw a whopping 28.5% increase.
5. Frankston
Frankston’s performance was a little lacklustre. It saw a 1.2% uptick for houses and a 2.4% uptick for units. Valentic suggested both due to the early-2013 Peninsula Link opening that was set to cut down travel time, as well as the future development of a local marina and the ripple effect from neighbouring suburbs. It will be interesting to see whether this pans out to see stronger growth.
You can read his thoughts here around the strategy of picking suburbs that will perform.
Whose picks would you like us to take a look at? jduke@propertyobserver.com.au