Back in 2013 someone asked on one of these forums if Melton and Melton South was a good investment decision.
The response to this was overwhelmingly negative. Everyone warned against investing in Melton at the time citing reasons such as crime rate, abundance of land for future development therefore not making it a good long term investment, the fact that city of Melton was not doing well in terms of development and industry etc
I am curious 5 years down the track with all the recent developments in the Melton area, the boom in population and all the new estates around the area, if opinion would still be the same.
Would you purchase an investment property in Melton that will give you a neutral or positive gearing prospect in 2018? And is Melton forecasted to steadily increase in value over the next 10 years?
Thank you in advance to anyone who responds to this :)
I wish you all a very Happy, Healthy and Successful New Year in 2018
JaxonParticipant@jaxonaJoin Date: 2014Post Count: 284
- This topic was modified 4 years, 11 months ago by Shehan Tambi.
If I can find a positive property anywhere I am open to invest, providing I study the area etc.
if you can find a house you can also add value and build equity for another purchase and have insurances to cover your ass.
were is the risk?
I appreciate you taking the time to respond
I am studying the area and there are times when I am overwhelmed with information and then times where frustratingly, there just isn’t enough
I’m sure I’m not the only one hehe
I will keep an eye and will update everyone on the forums if I come across anything worthwhile
thanks again :)BennyModerator@bennyJoin Date: 2002Post Count: 1,416
I had held off responding, as I have absolutely no knowledge of Melton, nor Melton South. From your short description, it does appear to be a new development area. Even today, you are saying there is a lot of new development going on. Now, that could be good, or bad – for these reasons:-
If it already has some history (years of development behind it) as an area, then it might be that infrastructure has begun to catch up, with schools, shops, transport hubs, hospitals, etc being built. Usually this does not happen immediately, but means new buyers must travel (by car?) to find what they want. Over a period of years (even decades) an area becomes “settled”. Also, any new development is usually sold off at premium prices, such that capital growth is likely to be negative or flat for up to 10 years after initiation. This kind of area often suits owner-occupiers, with young families buying into them using Grants etc to help them into the properties. An investor doesn’t have that option, but of course, can choose to buy there – BUT they are buying a “solution” property, that will likely be doomed to have no growth for at least 5 years, and maybe more than that.
But then, if one is looking for deals, one might just happen upon someone who is wanting to sell up in this “new area” after having spent the last 5 years or so adding bits – paths, garages, planting trees, gardens, etc – all of which add value to a place. But, it is also 5 years old, or more, and might have had the new edge knocked off it – the occasional broken tile, paint a bit scuffed, Dad backed into the fence once, etc. And in such a case, with a family who now “wants out at whatever price”, there might be the chance of a deal.
Using the stats that you can glean from RE agents, you can find out how “sought after” this area is, and even the demographic that suits the area – who is looking to buy, and what price point can they go to? Look too at other positives and negatives about the area – e.g. how many homes have an extra car jacked up on the front lawn? Are the houses (generally) well-kept? Is there a good community feel about the place? Are there sufficient shops, schools, etc?
Talking of negatives, how much other land surrounds Melton or Melton South? Is it jammed against a river or a mountain range? Or is there land in all directions for Kms and Kms? See, there is not much scarcity to push up the price of land if there is heaps of it available. I know the Councils tend to keep some “locked up” – but hey, at some point, a new land release will make it all available. and, when you think about it, it is the land value that appreciates while the buildings on the land DEpreciate. If no-one overly wants ot go there, prices will languish or fall. If everybody wants to go there, land values will climb.
Same principles apply everywhere. Now tell me how YOU see Melton, based on all that….. ;)
BennyOPMParticipant@mjyoungJoin Date: 2017Post Count: 1
Thought i would throw in my experience.
I’ve bought two houses in the area, and every one was giving the dont touch it comments then too. (on another prop forum).
One in Melton South 2006 and one in Melton 2007.
Melton South was an easy call, 7% yield at $140K 3/1/2 600m2. Older place, cost very little to hold. Sold for $237K 3.5 yrs later as needed money spending and thought the market had hit a peak at the time and was not going to return it in added valuation.
Melton 4/3/2 two storey Paid $242K 580m2 bought as it was an opportunity that presented below market value due to vendor needing a contract to obtain bridging finance – was prob worth $280K ish at the time and I had the replacement cost of 6 years old house alone at purchase price. Now worth about $490K but rent is still only $350pw – could push it but dont need to. This house had about $6Kpa depreciation from the start which helped – cant play that card now due to changes in May last year. Still hold it as will get killed by CGT if i sell, so it is chugging along fine.
On rent in Melton you tend to hit a glass ceiling where people who will pay high rent just go and buy a house locally or move closer to the city, so you are limited at the higher end of the rental market.
I’ve been happy with both purchases and the holding cost has been low to non existent and gains have been ok without being spectacular.
Concerns at the moment.
Yield is generally too low to enter at current prices for newer houses and depreciation capability is diminished due to tax changes. I haven’t really viewed the lower end of Melton South recently to make a call on yields there at present.
Cant buy newly built houses anymore below replacement cost and enjoy depn benefits to bring to cash neutral from the start like my 2007 one.
New houses built on postage stamps now ~ 300m2.
Better yields to be had in SE QLD / Perth / Adelaide with similiar entry prices and better block sizes for potential dual occ later. Melton is an area you capitalise on when mortgage rates jump and people need out in a hurry or the banks do.
Hope this helps.
thank you so much for taking the time :)
I have learnt a lot from your reply and I am so grateful !!
I couldn’t have asked for more from a reply to a post
The real numbers and experience is what I was after on top of the education from the experienced investors and I cannot thank you enough for your honest and detail information
Thank you so much for the time you took to reply to me with that detail and appreciate the recommendations !xdrewParticipant@xdrewJoin Date: 2010Post Count: 479
There is a mixed message to be given when the property is newish areas with a high rental return.
First, it SOUNDS very attractive .. as in melton .. returns of 6-7% are actually possible.
But it falls short in a couple of necessary areas.
One of the main factors for keeping and holding a property is its placement in convenience.
In the good ol’ days the placement of convenience used to be close to the CBD as most of the business and jobs and commerce was in or close to the city or surrounds.
Nowadays that criteria has been extended towards any area with a decent shopping centre / district and a couple of good restaurants.
For instance Glen Waverley which all my compatriats tell me is overvalued .. has a sweet zone with both good restaurants of quality surrounding the shopping centre, easy parking and multiple options to choose from within either the shopping centre or surrounds.
It makes for a very attractive zone to enjoy and participate in.
Melton is a bit of a muchness, and always has been. It has areas of shopping that are ok but not great, it has Woodgrove for shopping which is ok but not great, and it has a main strip that always looks half dead towards dying .. with that deathly cheap look being todays fashion statement.
I remember going to Melton for one of my first real estate job interviews .. and it being the only time I wanted the guy to say .. sorry .. you arent for this job.
The returns are attractive for all the wrong reasons.
The neighbourhood of Melton is for the people who are prepared NOT to go to the city (its too long a distance) and not worry about working anything but local.
So even expanding the amount of people who live there (and are prepared to live there) its not going to change into a major tourist destination overnight (or even in the near future).
Your bank, and your interest and your returns will always be about going into an area where you can guarantee the return without risking proportionate or excessive risk, and having a capital gain within a period within your lifetime.
Melton falls short because of extended risk components based on tenancies, and lack of demand for property at a higher level or higher rate.
There are still areas across Melbourne within 50km of CBD that are value and in demand regularly so there are a lot better purchases to be had.
As a kid I used to pooh-pooh the dangerous aspect of some suburbs and the risk factors involved. Until that is, my father and I went to look at a couple of properties in Sunshine (this is 1990s Sunshine) that the tenant had been in dispute and had successfully burnt the property to a crisp.
You can think the risk is imaginary until you walk into a situation in Ballarat where the tenant wants to burn your property AND BLAME YOU because that means he gets to go back to a government backed property at no cost.
That happened .. thats real .. and you have to realise what is possible on a bad tenancy.