Melbourne Area Review: On the ground in Melton - with Oliver Cheung & Todd Sloan

Summary

In this insightful podcast episode, Todd Sloan and property expert Oliver Chung explore Melton, an outer suburb of Melbourne, discussing its economic potential, infrastructure growth, and diverse real estate market. They delve into the area's population growth, including a projected rise from 180,000 to 451,000 over the next 30 years, and how local developments like a new hospital and the 2050 vision for Melton's revitalization will drive future demand. With an emphasis on understanding both good and bad pockets of the region, they offer advice for investors looking to capitalize on Melton's evolving property landscape.

Takeaways

• 😀 Melton, located 50 minutes from Melbourne's CBD, is a suburb experiencing significant development and growth, especially with major infrastructure projects like the new hospital.
• 🏥 The new hospital being built in Melton, with a current budget of $900 million, will bring a range of healthcare jobs, benefiting both the local economy and housing sector by offering diverse income levels, from cleaners to top surgeons.
• 🏘️ Melton's real estate market has both desirable and less favorable pockets, with areas like Brookfield and Cobble Bank offering potential for investment, but some other areas with government housing are less attractive to investors.
• 🚉 While Melton has train connections, including V-Line express services, the area's growth is hindered by slow construction activity and limited housing availability to meet the influx of people moving into the region.
• 🔥 Melton is not in a bushfire or flood zone, making it a relatively safe area for property investment in terms of natural disaster risk, but being mindful of fire zones remains a wise strategy for risk mitigation.
• 🌍 Melton is a vibrant, multicultural community, with residents from diverse backgrounds, creating a strong demand for larger homes with multiple living spaces for family gatherings.
• 🏠 In Melton, understanding local market demand is crucial, and property managers play a key role in informing investors about tenant preferences, especially for multicultural families.
• 📈 Cobble Bank's current housing stock is low, with only six houses on the market, but the area has approval for the construction of 183 homes, indicating future growth potential despite a higher days-on-market rate (54 days).
• 💰 The rental yield in Cobble Bank is around 3.78%, which is average for Melbourne, and the rental-to-owner-occupier ratio sits at 35%. This suggests the area has a mix of renters and homebuyers, with more owner-occupier appeal in the neighboring suburb of Karanjang.
• 🏙️ The population of Melton is projected to nearly double by 2050, reaching 451,000 people, with about 10,000 people moving into the area annually. This growth is a significant factor driving long-term capital growth potential in the region.
• 📉 Currently, Melton has a shortage of housing stock, with only 4,000 houses approved for construction, but a projected demand for 10,000 new homes. This supply-demand imbalance could lead to property price growth over the long term, making it an early market opportunity for investors.

Q & A

What is the main reason why the new hospital being built in Melton is significant for the local housing market?

The new hospital in Melton is significant because it will create jobs across a wide range of fields, from cleaning services to high-income professionals like surgeons. This job diversity helps support a variety of housing options, from affordable homes for lower-income workers to multimillion-dollar properties for high-income professionals.

What is the projected population growth in Melton over the next 30 years?

Melton's population is projected to grow from 180,000 in 2021 to around 451,000 by 2050, with an annual increase of approximately 10,000 people.

Why is the housing stock in Melton considered to be insufficient for the incoming population?

The current building approvals in Melton are insufficient to accommodate the growing population. With about 4,000 housing approvals but 10,000 new residents annually, there is a shortfall of around 2,000 houses, contributing to a supply-demand imbalance that could drive capital growth.

What are the good and bad pockets of Melton, and what makes them different?

Good pockets of Melton are areas with strong owner-occupier appeal, often with higher-end properties and attractive streetscapes, like those with willow trees. Bad pockets are typically near government social housing areas, where property values may be lower, but there can still be opportunities for investment in the right locations.

What is the significance of the Vline express trains for Melton's real estate market?

The Vline express trains provide a regional connection between Melton and Melbourne, making the area more accessible. However, the area also experiences freight train activity, which could affect the desirability of certain locations near train stations.

What is the rental return like in Melton, specifically in Cobble Bank?

The rental return in Cobble Bank is about 3.78%, which is considered average for Melbourne. However, the area also shows significant potential for growth due to ongoing infrastructure developments and population increases.

Why is it important to understand the local demographic when investing in Melton?

Understanding the local demographic is key because Melton has a vibrant multicultural community. Many new residents are migrants who prefer larger homes with open spaces for family gatherings. Investors need to cater to these preferences to succeed in the local market.

What role does infrastructure investment play in Melton's future growth?

Infrastructure investment is crucial as Melton is part of Melbourne's growth corridor. State funding is aimed at revitalizing the town center, improving connectivity, and developing a strong social fabric, which will attract more people and increase the area's attractiveness for long-term investment.

What is the affordability index for homebuyers in Melton compared to Frankston North?

In Melton, the affordability index is 29 years, meaning a person buying a home at 30 would have their mortgage paid off by 59. In comparison, Frankston North has an affordability index of 45 years, making Melton more affordable for homebuyers.

What is the outlook for Melton’s real estate market in the near future?

Melton's real estate market is poised for growth due to the projected population increase, ongoing infrastructure improvements, and a shortfall in housing stock. Although capital growth has been slow so far, the supply-demand imbalance and state-funded developments point to a positive long-term outlook.