Melbourne misfire: Property forecasters wide of the mark

Published 11 September 2013 10:42, Updated 12 September 2013 10:04

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Melbourne misfire: Property forecasters wide of the mark

Recent reports about the state of Melbourne’s apartment market appear to have been wide of the mark, says Monique Sasson Wakelin. Photo: Craig Abraham

Last week, Angie Zigomanis of research house BIS Shrapnel told ­property investors to steer clear of the Melbourne market, saying there are “more estates coming onto the market so there’s not as likely to be as much pressure on prices from a supply perspective.”

It followed claims from another expert, wHeregroup buyer’s agent Todd Hunter, that low Melbourne yields made the Victorian capital a poor investment proposition.

“Properties are only achieving 3 per cent to 5 per cent yield and that’s terrible,” he said.

“You may as well have your money in the bank in a cash account.”

These are tired and worn arguments that once again are being trotted out to suggest a regional weakness.

Now I’m a Melbourne girl, but I don’t protest because of some parochial self-interest. I take issue with this forecast because the reality is that we are likely to see some reasonable capital growth in Melbourne over the next year.

And if mistakes are being made about the fundamentals and the analytical benchmarks of one region, they are undoubtedly being made about other places as well.

There are indeed some oversupply issues in the high-rise inner city apartment market and in housing estates in fringe suburbs of Melbourne, but they are localised problems and not major factors for the whole market.

And anyone who focuses on yield as the yardstick of whether property is a worthy asset class to invest in has got it seriously wrong. Investing in property should primarily be about capital growth, not earning an acceptable percentage yield.

BIS Shrapnel has built its profile as a property commentator off the back of an annual publication, Australian Housing Outlook,that includes three-year predictions for Australia’s capital cities. Is that standing justified?

Read the full story at Smart Investor

Monique Sasson Wakelin is a director of Wakelin Property Advisory.