Urban Riches

The Sunday Age

Sunday September 10, 2006

KATHERINE TOWNSEND

Katherine Townsend finds that inner suburbs are the place to be if you want your home to retain its value.

IN A market beset by interest rate rises and in a time of soaring fuel prices, buying a home has become an equation of how much infrastructure you get for your housing dollar.

Agents and analysts suggest these two factors combined should make buyers much more conscious of the transport and time costs related to their housing choice. Will every trip to the shops use three litres of petrol? Would a smaller house closer to the city be cheaper in real terms, if it's in zone one and we can sell one car?

Housing choice will become part of trying to balance the family budget against the rising cost of mortgages, petrol and debt. Experts predict strong growth in the inner 10 kilometres and little or modest growth in outlying areas.

Property analysts Residex say the market has had a "beautiful soft landing" and appears to be at the start of a new cycle with the middle and upper segments likely to do very well. Residex chief John Edwards says Melbourne's outer areas are likely to be a year behind the recovery and fringe areas will struggle more.

UNDER $350,00

In the under-$350,000 market the choices are stark - an apartment in an inner suburb or a largish house in an outer suburban estate.

Buyers' advocate David Morrell, of Morrell and Koren, says buyers should concentrate on the inner 10 kilometres and a period-style apartment somewhere like Prahran will appreciate faster than a large home in an outer suburb.

"Go for the inner-city apartment. It's position, position, position," he says.

Mr Morrell says outer suburban developments can never compete. "It's so easy to bowl over another paddock and build more."

Hocking Stuart founder Greg Hocking says young buyers should stick with inner-city period apartments in areas such as Richmond and Prahran, which buy lifestyle but, more importantly, "the capital gain is the springboard to the next buy."

Barry Plant, director of Barry Plant Doherty, says rising fuel prices and interest rates will have buyers studying their transport maps. "They'll go where the good infrastructure is," he says. Young buyers who might be living in the outer suburbs but working in the city will find faded inner-city apartments the best buys, he adds.

"I think you'll see some of those apartments built within the last 10 years doing well. Central Equity and Mirvac built them and they'll have a few marks on the walls, but they'll represent a good entry point."

Property valuer Peter Hay, of Hay Property Consultants, is optimistic about Docklands. He predicts the waterside apartments will surge.

"Docklands is going to recover quickly because of fuel costs," he says.

$350,000-$600,000

Mr Morrell says the once hot areas of Clifton Hill, Carlton and Fitzroy now present good buying opportunities. "These areas seem to have stopped so they are presenting an opportunity to buy small, quality homes around $450,000."

Mr Hay offers a gloomy outlook for the outer suburbs. He says proximity to new freeways such as EastLink will give a temporary lift to suburbs such as Ringwood or Mitcham, but the growth will be nothing like in the inner suburbs.

He says the fuel crisis means there will be "much more focus on proximity to shopping and transport and walking distance to cafes".

Buyers in this range, Mr Hay says, still need to consider access to infrastructure, as otherwise, driving long distances to work, schools, shops and leisure will eat into household income and their ability to meet mortgage costs.

"If you've got $500,000 to spend and you're looking at Ringwood, spend it in the older part, near the railway station," Mr Hay says.

Barry Plant says suburbs that have grown for 20 years are still good buys. "I would recommend Mount Waverley, Wheelers Hill, Rowville and then places like Doncaster Templestowe, Eltham and Greensborough - areas where you have easy access to train lines, shopping and buses."

Mr Hocking says the same principles apply in all price ranges: "I'd be buying as close in as you can." He says parts of Burwood and Ashburton are good buys, as they are near sought-after areas and have good housing and infrastructure.

In bayside areas, he says Mentone, Chelsea and Aspendale will only increase. "And I still champion Frankston; there is a lot of money being spent there." Mr Hocking also suggests any streets near the beachfront in Altona.

And it is in the $350,000-$600,000 price range that many family buyers try to make a huge leap in housing and suburb. Is it worth buying an ugly duckling in a street filled with period homes?

"No, I believe they'll always be out of context, always be the ugly duckling. Better to buy a '50s or '60s house in a street of them - there are many streets of them in Burwood, for instance.

Don't render them. You can easily make them sleek and modern and make a bit more room out the back," he says.

$600,000 TO $1 MILLION

In the $600,000-$1 million price range, Mr Morrell says the fringes of the south-eastern suburbs' most popular areas offer the best potential. "Fringe areas such as Balwyn or Surrey Hills are worth looking at," he says.

Mr Hocking says this is a very competitive price range and buyers must look at areas "on the edge of the really hot stuff" - such as Essendon, Surrey Hills and Canterbury, which are solid but not the super sought-after areas of Moonee Ponds, Camberwell or Hawthorn.

In the $600,000-$1 million range, however, Peter Hay says buyers would be far better aiming for "bullet-proof locations" including Williamstown, Yarraville, Malvern, Elwood and Ivanhoe - all established suburbs with access to shopping and transport.

The rock-solid real estate in this range is found in a ring around the city, Mr Plant says.

He recommends Albert Park, Williamstown, Fairfield, Alphington, Maribyrnong, Essendon, Strathmore and Kensington.

For most family buyers who need larger accommodation than they'll be able to afford, Mr Plant says to avoid fashionable spots.

$1 MILLION-PLUS

If you think $1 million would solve all your housing problems - think again. It doesn't give buyers carte blanche to their favourite suburbs, Mr Plant says; they will still need to hunt and hunt. "Really, $1.5 million only gets you the basics in Brighton now; so much is in excess of $2 million." Free-standing renovated period homes in Malvern will cost the same, with prices pushed higher by limited supply.

Mr Plant says there is now good buying in areas such as Templestowe. "In the City of Boroondara you can get an extended 1950s weatherboard or a rebuilt 1930s weatherboard for $1.25 million, but recently we auctioned a very tired 50-square house in Templestowe that was built in 1992. It had a reserve of $800,000 and sold for $910,000, and with a renovation of $150,000 you've got a palatial home."

For bullet-proof real estate in a single-fronted package, Mr Hocking says buyers can't go past a Victorian cottage in Middle Park where $1 million will be the general price tag.

© 2006 The Sunday Age

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