Melbourne suburbs face 'bubble' risk amid interstate investor frenzy
New research revealing the city's most affordable pockets within 10km and 20km of the city's CBD has also revealed pockets where buyers from Sydney, Brisbane, Adelaide and Perth are buying as much as 80 per cent of homes for sale, sight unseen — with experts advising first-home buyers to 'go somewhere else'.
Ray White head of research Vanessa Rader said Melbourne might be facing a similar scenario to Perth a few years ago, when the Western Australian capital was regarded as undervalued by interstate investors — sparking a significant surge in interests in the city'saffordable inner areas.
'The Melbourne market has done it tough for the past few years, but there's an upside,' Ms Rader said.
'It is probably well placed to recover, and given the size of the market and particularly population growth, I can see why investors are looking there.'
Cohen Handler buyers advocate Nicole Jacobs said concerning interstate investor activity was creating 'suburb bubbles', where excessive competition was likely to rapidly drive prices up beyond sensible growth margins.
'They are coming through advocacy firms and buying sight unseen,' Ms Jacobs said.
'These interstate advocacy groups can have 300 people on their books.'
Ms Jacobs said while Melbourne seemed 'really cheap' compared other capitals including Sydney and Brisbane, it also had strong fundamentals that would support future gains — which was likely a part of the allure for interstate buyers.
'But bubbles pop when people have to sell,' she warned.
With the prospect many of the interstate investors might not fully understand tenancy laws and property investor tax obligations in Victoria, Ms Jacobs said the best case scenario for affected areas was that they flatline for a while once the investors moved on.
For first-home buyers facing this situation, Ms Jacobs advice was 'go somewhere else'.
Ray White economics research has revealed those hoping to get the best mix of affordable housing and reduced drive times that come with an address within 10km of the city centre are best headed for areas like Sunshine and Braybrook, where typical house prices range from $726,000 to $846,000.
But with swarms of interstate investors pursuing the suburb, Sunshine-based Douglas Kay director Peter Kay said interstate investors were buying up to 80 per cent of homes listed and regularly driving sales $50,000-$150,000 higher.
'Pretty much for the last four to eight weeks it's been overwhelming with interstate inquiry seeking support and that's also turning into purchases,' Mr Kay said.
The agent said 'very aggressive' interstate investors, many in a 'more comfortable position' after significant home price growth in other capitals in recent years and foregoing building inspections and other crucial checks, were in direct competition with first-home buyers.
'Some are flying down on auction day, inspecting it on the day, and becoming the winner or being the underbidder,' Mr Kay said.
'It's probably driven by the fact that we are the most affordable within that radius of the CBD.'
Efforts to establish Sunshine as a rail superhub were also a factor, he said.
Mr Kay said the situation was similar to just over a decade ago when wealthy internationals would fly in to visit family, and leave after buying a couple of properties.
'Interstate investors are the modern international buyer,' he said.
Sunshine-based loan broker Brian Hocking said investors were definitely fighting first-home buyers in the area — with a lot of the market entrants 'going through the ringer and getting out bid' by investors who 'have the capacity to come in over the top'.
Ray White analysis shows the next best bets within 10km of the CBD are Campbellfield and Broadmeadows, where prices range from $572,000 to $621,000, making them the most affordable areas within 20km of Melbourne's CBD.
But YPA Gladstone Park director Luke Albioli said he'd watched five interstate bidders on video calls compete with one local at a recent Broadmeadows auction.
'I'd never seen anything like that,' Mr Albioli said.
'But, if you looked at it on a radius of the city basis, to get a house in the mid $600,000s – to them, that looks like excellent value.'
He added that while Broadmeadows had been an initial point of higher interstate investor interest, it was now starting to spill over into neighbouring suburbs such as Westmeadows.
Eric Norris was the only Melbourne bidder at the Broadmeadows auction and said while he'd claimed the keys, it had been his fifth attempt to buy a home in the suburb — after being outbid by interstate buyers in prior sales.
'It was definitely disconcerting initially, as it was hard to get a read on them,' Mr Norris said.
MOST AFFORDABLE AREAS FOR HOUSES WITHIN 10KM OF MELB CBD
Sunshine West — $735,679
Sunshine North — $783,113
Braybrook — $858,254
Altona North — $962,221
West Footscray-Tottenham — $997,730
Footscray — $1.005m
Avondale Heights — $1.012m
Keilor East — $1.017m
Coburg North — $1.026m
Oak Park — $1.079m
Locations reflect medians for statistical area level two, which may not match exactly with local suburb boundaries
Source: Ray White Economics
MOST AFFORDABLE AREAS FOR HOUSES WITHIN 20KM OF MELB CBD
Campbellfield-Coolaroo — $580,059
Broadmeadows — $629,919
Deer Park — $680,649
St Albans – South — $699,052
St Albans – North — $704,015
Laverton — $713,262
Ardeer-Albion — $741,355
Thomastown — $744, 866
Gladstone Park-Westmeadows — $771,729
Tullamarine — $776,136
Locations reflect medians for statistical area level two, which may not match exactly with local suburb boundaries
Source: Ray White Economics
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