Nyko Property’s recommended suburbs outperformed the Melbourne market by 63% and the Australian market by 54% in the 5 years from March 2008.
This was due to careful selection of up-and-coming suburbs in undervalued regions of the inner north and west of Melbourne that were poised for growth. Four of the six suburbs Nyko Property selected in 2008 and 2009 had a lower socio-economic demographic at the time of sale. However due to their close proximity to the CBD and large Government infrastructure programs we identified they would experience rapid gentrification and capital growth.
The best performing of these suburbs was Thornbury, growing at an average of 8.99% per annum during that time, an improvement of just under 100% on the Melbourne Median.
One of the key factors considered when selecting suburbs, and indeed locations within suburbs, was the areas relevance to Plan Melbourne – the Governments plan for a more efficient city. With the fastest growing population in Australia, 106,800 people in 2012-2013, and the demographic changes occurring, selecting the correct property types was also vital.
There is now an average of just 2.6 people living in each Australian household according to the latest Sensis. This indicates the properties that performed well in the past are not necessarily the properties that will perform well into the future. Along with the population growth and demographic change, the ‘new normal’ market which will consist of shorter property cycles (dropping from the 7-8 year cycles we are used to down to 3-4 year cycles driven by consumer confidence and the merry-go-round of reporting which affects it) will provide opportunities for continued growth within Melbourne.
However, the days of purchasing the ‘one next door’ and making strong capital growth are behind us. For property investors to realize those returns in the future they will need to be much more strategic in selecting locations and the properties they buy within those locations.