Where should I buy? Inner City or Outer Suburbs?
A common debate amongst many home buyers, should one buy property inner city (within 5kms CBD) or outer suburbs where it seems more affordable?
The simple answer is totally dependent on your property portfolio strategy and buying in an area that fits within your financial means.
Let’s take a closer look at this…..
Over the past thirty years or so, Melbourne property values have been a major talking point for many Australians, with some areas seemingly increasing in value much more than others. When we look closely at the results, it simply comes down to that famous mantra…location location location …
Some twenty years ago. the Kennett government gave us Docklands - post code 3008 (and last month’s suburb profile). What was once an old shipping port wasteland is now a new inner-city suburb attached to the CBD with easy access to public transport, a quality marina, increasing lifestyle amenities, a popular sports and events stadium and the some pretty spectacular city skyline views. Investors and home owners came from everywhere wanting a piece of it – at any cost. Fast forward to 2018 and you have a nice clean suburb of quality residential apartment towers surrounded by the Marina, restaurants, cafes, and some major retail and banking corporation hubs even setting up head offices. We've even seen film studios being established here and producing academy award winning productions. However, residential property values seem to have done very little and stayed idle…a 2-bedroom apartment that sold for $505,000 in 2009 is today being advertised for $530,000-$550,000, an average increase of just 1% pa. Many lenders have introduced lending limitations for high-density suburbs such as Docklands, Southbank and even the CBD to help mitigate potential future mortgage delinquency.
Popular theory is simply too much supply of inner city apartment market versus limited demand in suburbs mentioned above, especially with new, ‘cookie-cutter’ apartment developments. Whereas move out around 5kms in any direction of the CBD - Footscray, Brunswick, Kew, Hawthorn or Prahran as examples and you will need around $550,000 just as your deposit today! In 2012, a modest 3-bedroom home in suburban Footscray sold for $570,000 – today, estimated to sell for around $1,100,000 – that’s around 11% pa growth, with similar results reported with properties sold in other inner suburbs.
Main reasons being inner city suburbs offer greater infrastructure, education facilities, lifestyle and entertainment amenities and are much more established in regards to employment opportunities as well as accessibility to the city business hub.
The outer-ring suburbs (10+ kms) generally offer a quieter lifestyle and much more affordability in housing for most home buyers. However, some house and land package deals can be marred by lower quality construction in order to keep costs down, so due diligence on the part of the buyer should be carried out prior to purchase. Essential infrastructure and amenities such as public transport, schools and community hubs etc also can take many years to develop and travel expense, convenience and commute time factors needs to be considered if your work and lifestyle draw you to the city. As a result of this, property values can be slow to grow the further out you go. The government continues to release new lots of land in the expanding, outer suburban areas on a regular basis to accommodate growing local demand as well as the 1700 people or so every week migrating to Melbourne (yes it is that many), so the opportunity to own a home is much more viable.
So where should you buy? - The answer will depend on
Whether you buy an investment property and how long you intend holding it, or…….
Buying as your principle residence in which case you are best guided by where you would like to live and how that aligns with your lifestyle and what you can afford….
Please feel free to call me on 0438 041 111 to organise a time for a confidential discussion on your own situation and how we may be able to help secure your property purchase.
As always, enjoy life, work hard, play safe and remember that we are always here to help you
‘Take the Confusion Out of Lending’
Peter Vinci - 0438 041 111