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Melbourne Property: CBD or Fringe

Melbourne to overtake Sydney as largest city in 2053. Source: Australia Bureau of Statistics

MELBOURNE PROPERTY: CBD VS FRINGE

Among all the states in Australia, statistics show that Victoria will have the largest population in the future, driven by massive and rapid growth in Melbourne city (source: CBRE). The Australia Bureau of Statistics projects that Melbourne will overtake Sydney as Australia’s biggest city in 2053.

It’s easy to understand why – spurred by a highly diversified economy and world-class education and tourism, Melbourne has been named Most Liveable City five times consecutively since 2011.

Smart investors looking to net significant rental income from the growing population have been investing their money in various suburbs across this beautiful city.

The key question is, where is the best place to invest in Melbourne?

MELBOURNE CBD: SMART INVESTORS STAY AWAY

Melbourne CBD is an amazing place – organized, pretty, artistic and with amazing walkability scores – and we love it! From an investment point of view, however, property in the CBD is an absolute NO.

Here’s why:

  1. Valuation for property in the CBD has been 20%++ BELOW purchase price

In the CBD, housing projects are confined to high-rise development only, which usually takes about four to five years to complete. The team at CSI Properties (Cornerstone International) has heard from many of those who had previously invested in CBD property, complaints that the banks had undervalued their property by 20% lower (or more) than purchase price. Statistics have shown that the average property price in Melbourne increases by 9.53% each year (source: Australia Property Monitors). This essentially means that the abovementioned properties in the CBD had not only been valuated BELOW its original purchase price, it had also depreciated! Speak to a licensed independent mortgage broker or lawyer for Australian property if you want verification.

  1. The last three years have seen NEGATIVE capital appreciation in CBD property (source: Australian Property Monitors).
  2. The CBD is approaching an oversupply of apartments. There is increasingly higher vacancies as more properties come to completion.

Melbourne CBD approvals for six months of 2015 was 12,516. Melbourne’s high-rise boom currently encompasses 33 towers under construction and a further 39 to be built, according to Skyscraper, Activity Monitor and UrbanMelbourne. Researcher BIS Shrapnel said, “The city is already heading for a glut of apartments. By June 2016, there will be a surplus of 15,000.”

  1. No Exit for the next 10 Years++

Last September, Australian website Domain.com published that investors should “get out as soon as possible (otherwise) it will take 10 to 15 years before you get your money back.” This is due to (i) the oversupply of apartments in the CBD and (ii) Australians generally dislike living in the CBD. In case you didn’t already know, foreigners are not allowed to purchase property in the secondary market. Which simply means that foreign investors looking to exit the market are only allowed to sell to Australians. But Australians don’t like living in the CBD…

 

CBD FRINGE PROPERTY – HIGH RETURNS, GREATER CAPITAL APPRECIATION

Research has shown that investing in property located at the CBD fringe is the most rewarding. We at CSI Properties (Cornerstone International) are supporters of properties located in these locations, based on our own research which is backed by industry experts.

Property located in the CBD fringe are a top choice because:

  1. They are extremely accessible to the city by all kinds of transport including walking, yet removed enough from its hustle and bustle.
  2. Many are located close to areas with lots of green, F&B outlets, entertainment and the arts.
  3. Good appreciation value. If you invest in the right location, you should be able to own seven properties in 10 years, with an initial capital of only RM100,000. Ask us how.

We leave you with a chart of the top CBD-fringe suburbs to invest in:

Melbourne-Fringe-VS-CBD-csiprop
Comparative data of property located at Melbourne CBD-fringe

CSI Properties (Cornerstone International) proudly markets international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: Cornerstone International does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Australian Property: Doomsayer’s Obsession

Economist Steve Keen at the summit of Mount Kosciuszko after losing a bet house prices would plummet 40 per cent. Photo: Andrew Meares. Credit: Domain website http://bit.ly/1T7b9MT

“…we can live without gold, we can even now live without oil, we can live without stocks and shares, we can live without just about everything now, but we can’t live without somewhere to live. There is this whole crowd of people who love to give the property market a hard time as if it is a bad boy for making people money.”

IN 2010, Steve Keen undertook a 224-kilometre walk from Canberra’s Parliament House to the Snowy Mountains’ Mount Kosciuszko wearing a T-shirt with the words, “I was hopelessly wrong on house prices. Ask me how.” The walk was the result of a lost wager – the economist had made a bet with Macquarie Bank analyst Rory Robertson that home prices would fall 40% from peak to trough in a year.

Contrary to Keen’s prediction, capital city house prices in Australia rose by 12.1%, hitting a new high, as demand from first-home buyers sparked a revival at the lower end of the market.

In 2014, American economist Henry Dent forecast a fall in house prices of at least 27% in Sydney and Melbourne over the next several years. Macroeconomic researcher Lindsay David followed suit with his prediction of a housing bloodbath in the same year.

UK-based economist Jonathan Tepper is the latest in a line of doomsayers touting the proverbial Australian housing bubble and the property market crash of between 30% and 50% in values.

“Australia now has the highest level of household debt to GDP in the entire world,” says Tepper, following his well-publicised research ‘expedition’ in Sydney’s Western suburbs.

It’s fascinating how his predictions are based on a rather unrepresentative sample of the entire Australia. Equally fascinating is the forbearance of Australian industry experts and how they have patiently swatted away predictions by doomsayers time and again.

AMP Capital chief economist Shane Oliver said: “In a way I think it is a bit of a joke, this sort of story has been wheeled out almost continuously now since 2002, 2003. We had a big run up in property prices then and it did become a bit bubbly around that time and of course various people were inclined to think that property could crash. Then as the years rolled on I began to realise and I think most people in Australia realised, that the Australian property market is a lot more complex and a lot more stable than people give it credit for and the reason prices don’t crash is because we don’t have an oversupply like America did at the time of the GFC.’’

Real estate expert Andrew Winter said commentators who expressed this kind of “drama” about the market were forgetting what the commodity was.

“This commodity is property, residential property, and that is where all the calculations fail. For the simple reason is we can live without gold, we can even now live without oil, we can live without stocks and shares, we can live without just about everything now, but we can’t live without somewhere to live. There is this whole crowd of people who love to give the property market a hard time as it if it is a bad boy for making people money.”

Truthfully, there is much to be considered in the life and times of the Australian property market – not just prices in Sydney and one or two suburbs in Melbourne.

Things are going well Down Under, overall: the RBA has highlighted lower unemployment, above-average business conditions and stronger business lending, noting expansion in the non-mining parts of the economy had strengthened during 2015. The facts speak for themselves; research has shown that the Australian population is slated to increase over the years with Melbourne leading the way.

CSI Properties (Cornerstone International) spokesperson Virata Thaivasigamony chuckled at the recent prediction made by Tepper, joking that doomsaying helps make headlines and drive newspaper sales.

“Australia has one of the highest population growth trends, superseding a good number of developed countries in child birth rates. Its capital appreciation rates are unlike Singapore, Hong Kong and Malaysia – there are no steep fluctuations. The last 50 years have seen Australia’s appreciation rates on average rise at a steady 7% thereabouts, which I would attribute to population growth. And with population growth comes increase in demand for housing,” he said.

But as they say, there are two sides to a story, just like there is always more than one story. Ultimately, the decision lies in the hands of the buyer/investor. As always, we strongly advise investors to research the market: do some reading and/or call us for obligation-free consultation and advice so that you can make informed decisions. At Cornerstone International, we place great value on research and strive to offer viable investment projects backed by research.

For now, let us leave you with a darkly humorous parting shot: predicting when the property bubble will pop is bad for your mental health, according to the Sydney Morning Herald J

CSI Properties (Cornerstone International) proudly markets international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: Cornerstone International does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260