Investors warned to avoid buying in Melbourne
Investors are being warned to steer clear of the Melbourne market, with poor yields and an oversupply in the foreseeable future making other areas more attractive.
Pointing to a large number of potential land releases across Melbourne, and the mass of units still in the pipeline, wHeregroup buyer’s agent Todd Hunter told Property Observer that he is steering clear of Victoria’s capital.
“It was heading into an oversupply about five years ago,” Hunter said. “[Properties] are only achieving 3% to 5% yield and that’s terrible. You may as well have your money in the bank in a cash account.”
BIS Shrapnel’s Angie Zigomanis agreed with this analysis, noting that there’s still a large pipeline of units under construction that have yet to come through to completion due to longer lead times.
“The flipside with land is that it can be switched on very quickly [in Melbourne],” said Zigomanis.
“Compared to three or four years ago, there are more estates are coming onto the market so there’s not as likely to be as much pressure on prices from a supply perspective.”
With auction clearance rates improving, interstate investors might be under the assumption that the market is picking up as well, however this isn’t the case, he said.
“It’s a bit misleading in relation to looking at the market from a broad point of view. Most auctions take place in the inner middle suburbs … and people in middle Melbourne are more secure and confident in employment than those on the fringes.”
The unit market is that tipped to move more into oversupply even while from a demand perspective the picture isn’t quite as bleak with population growth still strong, he said.
Mr Hunter also warned that the Sydney market also didn’t present best buying, noting it is too hot, with the best investment opportunities currently presenting themselves in Western Australia and Queensland.
Image courtesy of J Kuba/flickr.
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