Melbourne City
According to REA data, the median house price in Melton South climbed 12.5 percent over FY 2020-21—notably outperforming the 8.9 percent growth achieved by Greater Melbourne over that time. This performance reflects a period of reorientation in Melbourne from the metropolitan centre heavily affected by COVID lockdowns to the city’s more spacious and sprawling rim. The price of new homes in the area was also well below the Home Builder cap of $750,000, and the 18-month construction commencement extension means that many new builds in Melton South were eligible for the grant. According to Treasurer Josh Frydenberg, 121,000 Australians applied for the grant prior to the 14 April 2021 deadline.
According to ABS data, 1,422 new houses were approved to be built over FY 2020-21—representing $384.3 million worth of new houses. In addition, $55.7 million of non-residential building work was approved over the financial year. The good news for investors is that a large proportion of residential construction activity is expected to come from owner occupiers. This is because three-quarters of pandemic-era lending in Victoria went to owner occupiers according to ABS data (see chart below).
Source: ABS
A high proportion of owner occupiers in an area is good for investors in several ways. First and foremost, it means less competition in the rental market. If a lower percentage of homes in an area are rental homes, then the number of homes vacant at any particular time are generally also fewer. This tips the supply-demand scales in favor of landlords. In addition, a healthy mix of owner-occupied and rented homes is also beneficial for factors such as demographic support for the area.
For instance, owner occupiers generally relocate less frequently which contributes to community activity. Owner occupiers also have a greater incentive to actively manage the upkeep of their homes and neighborhoods. When it comes to selling your asset after a long-term hold, the opportunity to sell to an owner occupier means selling to somebody emotionally invested in the purchase, rather than an investor who cares more about the numbers.
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