Property market picking up in outer-Melbourne suburb of Melton thanks to improved buyer sentiment: Hockingstuart

Located 40 minutes to Melbourne’s west, the satellite city of Melton has weathered the ups and downs of the property market better than most. As a result of its location and relative affordability – our median house price is half of Melbourne’s at $250,481 – Melton has remained attractive to first-home buyers, investors and renters alike.

While traditionally many Victorian suburbs record a spike in activity during  spring selling season, in Melton our market generally remains consistent throughout the year due to high supply and demand and that all-important affordability factor. So while Melton hasn’t experienced a sudden flurry of activity there has been a noticeable upswing in market confidence this spring. Improved buyer sentiment has encouraged sellers, previously hesitant to enter the market, to list their properties – but this isn’t just because spring has sprung, it’s about stronger economic conditions.

At hockingstuart Melton we’ve seen the average number of days on market drop by 30% since the start of 2012 and the number of homes we’ve sold increase by 27% from August to September.

Melton’s growth is largely due to the fact it has remained an affordable option for those looking to buy and invest. Decreasing interest rates has helped by encouraging more first-home buyers and investors into the market. Consequently, properties at the lower end of the market are proving very popular. So far this spring, homes in the $200,000 to 300,000 range have been selling exceptionally well, and we’re expecting this to be the case for 18 Ridgeway Drive.

With the first-home bonus for newly built homes scrapped earlier this year, established properties are currently the most popular, as they’re a cheaper alternative to new homes – we recently sold this three-bedroom family home at 42 Penguin Street for $226,000. That said, recent trends in our market show first-time buyers prefer new homes if they can afford it, so with further interest rate cuts predicted and the resulting increase in the affordability of loans, we’ll likely see renewed demand for new homes.

At the same time, developers are struggling to sell homes off the plan as the market is flooded with blocks of land and house-and-land packages being offered for sale. Buyers prefer a finished home they can walk through, touch and see. For example, 12 Rainsford Place was sold in just two days and 2 Ormonde Esplanade in two weeks.

In terms of rental yields, the greatest return on investment is coming from investment properties priced between $200,000 to 250,000 (returning between $250 to 285 per week) and in some cases allowing investors to positively gear their property – a rarity in recent years. Further up the scale, investment properties between $250,000 to 300,000 are showing rental yields approximately matching the repayments of investors (up to around $300 per week).

At the higher end of the Melton market, in the $300,000 to 400,000 bracket, we’re seeing a trend in families look to upgrade to larger homes on large blocks within 40 minutes of the city.

Likewise properties priced above $400,000 are attracting increased interest from home buyers. For example, we recently sold a property at 54 Unitt Street at auction for $584,000. There were three active bidders and a crowd of over 40 spectators who saw the property sell above reserve price. Auctions are rare in Melton, given that most buyers borrow approximately more than 80% of the purchase price and the conditions imposed on securing loans of this type see most properties sold privately. To see this level of competitive bidding is yet more evidence of improving buyer sentiment.

So, what is the outlook for the rest of the year? With economists predicting further interest rate cuts in the near future, further aiding Melton’s affordability factor, buyer confidence will only continue to improve and in turn this will encourage more sellers to list their properties.

With all this in mind, I expect to see supply and demand for properties in Melton increase into the new year, driving up median house prices and rental yields. So for budding buyers out there, it’s a good time in Melton’s market cycle to invest – and not just because it’s spring!

Julian Conte has more than a decade experience in real estate and is director of hockingstuart Melton and Werribee.