Seek out the blue-chip Melbourne property investment suburb. And at under $400,000 it's not expensive: Mark Armstrong

Last Saturday a great piece of blue-chip real estate went under the hammer in Melbourne, but most of the market was completely unaware. The majority of people think if it’s blue chip it must be expensive; however blue chip really means an asset that has constant demand and price stability regardless of the price point.

Which property?  15/7 Sutherland Road, Armadale.

This property was nothing flash. It was one-bedroom apartment in a very tired condition, some might say dilapidated, but it did appeal to many buyers in the market. While the crowd was not huge the auction was very competitive with six bidders competing before it finally sold for $375,000.

You can watch auction highlights here.

This is not a one-off result in this street, as in June this year another one-bedroom apartment at 12/48 Sutherland Road, Armadale, sold at auction for $386,000.

When we dig a bit further we find these types of properties have not only held their own but have excelled in a sluggish market. In August last year a one-bedroom apartment in the exact same block at no 48 that was similar in every way – top floor, car parking, same floor plan and in good condition – sold for $345,000. The investor who secured this property last year has experience a 9% gain in 12 months.

This example illustrates the fact that even in a market where property values are falling some are still growing.

Many people view the median growth rate as a definitive indicator of what the market is doing. However while the median growth is a good indicator of long-term trends it fails as a useful tool when selecting an individual asset. This is because the median represents the midpoint of growth rates over a series of properties. Logic suggests that half the properties in the market will out perform the median while the other half will under-perform.