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Melbourne's economy is one of the powerhouses behind Australia's growth. It's worth over $90billion and it's been going from strength to strength over the last few years. The city's strong economy makes for an incredibly active and potentially lucrative industrial property market - one which investors should certainly look twice at.
The Monash local government area, just south east of Melbourne's city centre, is one to watch and has been showing signs of strong growth recently. While industrial real estate may not be what springs to mind when you think property investment, the fact is, here in Monash it's seeing excellent returns and attracting scores of savvy investors.
To help make sure your future investment decisions are well informed, we've looked closer at the Monash industrial property market, using in -depth research prepared by Vanessa Rader and Ryan Amler.
A brief summary: Monash LGA Industrial
Melbourne's recent economic revival has been kind to the industrial property market in Monash.
Melbourne's recent economic revival has been kind to the industrial property market in Monash. Indicators such as employment, industrial production and exports have all improved, contributing to a healthy market, and strong demand for property from both investors and owner occupiers. Low interest rates certainly haven't hurt either.
This strong demand is placing upwards pressures on both capital values and rental yields, to the delight of investors who already own property in the region. Typically these investors have mainly been in the sub-$1.5million price point. However Ray White research shows an increase in interest from more entry-level buyers (perhaps enabled by low interest rates).
With some property still available at an affordable price point, interest rates at stunning lows and the positive market conditions, now might just be the best time to invest in industrial property in Monash. Talk to a local real estate agent soon, to make sure that your next investment decision is the right one.
Sales volumes at a three year low
Simple laws of economics dictate that if this trend continues capital values and rents will both increase.
Despite all the positive signs for the industrial property market in the Monash LGA, sales turnover this year to September is at a three year low. So far, we've seen a total of $103.52million in sales - less than half of the total turnover recorded last year.
The precise reasons for this drop are unclear, as interest rates have remained low this year and capital growth is still solid. Last year, It's possible that investors were looking to cash in on short term capital gains, whereas this year they're settling in for the long term because of the consistent strength of the market. Industrial real estate is perfectly suited to those looking for longer term investments, as it's possible to find reliable corporate tenants, and extended leases in this asset class.
Despite how it may seem, demand exceeding supply is a good thing for the Monash LGA industrial market - at least from an investors' point of view. Simple laws of economics dictate that if this trend continues, capital values and rents will both increase.
Assets are moving quicker
Property's average time on the market has reduced over the last six months in most areas of South East Melbourne.
If you're in the market for industrial space in Monash, you better be quick. As we've discussed already, demand is strong in the area, and as a symptom of this, property's average time on the market has reduced over the last six months in most areas of south east Melbourne.
Burwood in particular has been red hot - recording an incredibly low 34 average days on the market, down from 140 recorded earlier in the year. Other suburbs haven't been quite as impressive, with Oakleigh south dropping from 149 to 79, and Mulgrave dropping from 237 to 175.
When buying as an investor, it's worth looking closely at the varying 'days on the market' figures for each suburb. When it comes time to sell your asset, doing so in an area with high demand and a low average sale time could be far easier and might even help you net you a higher price.
Capital values are remaining solid
Industrial real estate isn't known for its red hot capital gains like residential is. But Monash LGA's market is proving to be something of an exception to the rule, showing consistently improving capital values over the last 12 months.
The following are the average average values of space in Monash suburbs:
- Notting Hill: $2,000/sqm to $3,000/sqm.
- Burwood: $1,800/sqm to $2,400/sqm.
- Clayton, Mulgrave, Oakleigh South and Oakleigh: all showing a vast range of values averaging below $2,000/sqm.
If turnover remains low and demand continues on its current trend, it's extremely likely that these values will continue to increase. With a range of different price points available, this promising area could present the ideal investment for buyers of all levels.
High demand for space and a supply shortage has kept yields between 6.5 and 9 per cent, a solid return for any investor. When selecting your property, paying close attention to size, quality and the current lease is essential in ensuring your investment yield is closer to the 9 per cent mark.
If you're considering investment, get in touch with a local real estate agent. If you get the right advice, this promising area's property has the potential to net you long term returns from both stellar yields and strong capital value gains.
