We had applied the same thought process and thorough due-diligence on the Melbourne market (as we did with all of Australia), which as you know, lead us to recommend Canberra and Hobart.
How we do this, is a process of elimination as we work through our key indicators across all states and suburbs - eliminating the ones that don't stack up.
Specifically, on the Melbourne market, we applied the same logic and introduced your budget constraints - which only leaves properties outside of the 10km radius. As a rule of thumb, we don't recommend investing in properties outside of this radius.
The suburbs that do meet our key indicators (however, falling outside of the 10km radius) are Frankston, Narre Warren and Altona Meadows. These suburbs are 43km, 40km and 22km respectively from Melbourne CBD.
You'll see below, for houses, they have all recorded strong double-digit growth last year. However, our reasons for not recommending properties in these areas are due to the predicted Melbourne market volatility. When the market is volatile, historically we have seen the suburbs outside of the 10km radius suffer the most. This is due to the socio-economic demographics of these areas, lack of quality infrastructure and inferior quality of tenants.
I have given you snapshots of houses in those areas - most requiring work to achieve a quality tenant. Your budget, however, will restrict the renovations required to bring the properties up to scratch.
We are not comfortable in recommending these suburbs to you to invest given the predicted market volatility. We stand by our initial recommendations of Hobart and Canberra for your investment.
* In brief, we consider market volatility to be a severe market overvaluation (nearly 40%) leading to a strong correction in 2018.
2016 has been a boom year for Melbourne and we predict this to continue into 2017. However, given the impending oversupply of apartments in Melbourne, we believe 2018 will see the market stall, if not retract. It will become a volatile market* of unpredictability and a definite sit and watch market for us. We believe Melbourne is approaching the peak of the market - a market we do not invest in.
In short, we do not want to recommend any suburbs to you in Melbourne - we don't believe that would be the right thing to do by you. Let us explain in more detail below.
As you know, we take a high-level data-driven approach to investing on behalf of our clients. Pinpointing suburbs that will deliver strong growth and rental yields using our key indicators.
We have put clients into properties in Melbourne in the past and they have achieved extraordinary growth - albeit, however, with a budget exceeding yours. We target suburbs that not only meet our key indicators but suburbs that fall within the 10km radius of the CBD, great transport links and projected infrastructure. We also aim to put our clients into houses as opposed to units to maximise their returns and provide stability for their investment. Of course, however, at a higher entry price opposed to units.
As a snapshot below, we'd like to show you what the average median prices are across Melbourne. As you can see, the current house median across all regions in Melbourne is above $600,000. This doesn't mean there isn't suburbs that fit within your budget, but it does illustrate that your budget will not allow us to purchase within our key investment criteria.