One of the key drivers of property values is the development and expansion of important infrastructure. New roads, hospitals and employment and educational institutions are a significant draw card for population and businesses.
PMS has identified two unique locations which are benefitting greatly from a surge of new infrastructure to their areas and surrounds.
Geelong, to the south west of Melbourne, and Frankston to the south east of Melbourne, are both in the middle of a perfect storm of infrastructure growth, government support, commercial and business expansion and, importantly, population increases.
These factors rarely come together in the same economic cycle, however, improvements and promise in Geelong and Frankston have been steadily building for several years. All the signs now point to strong improvement in property values within these locations.
This is already taking place in some areas of Geelong, and prices and purchaser demand are already increasing, with auctions and private sales indicating a big uplift in demand. However, we see further price and rental growth ahead.
Frankston, during the past couple of decades, has been somewhat of a lower socio-economic hub with slow but steady property demand but often unreliable price growth. Now, however, improved infrastructure, greater employment and an expanding waterfront focus have put the city in the spotlight for many investors and potential owner occupiers.
Frankston is about to shrug off its poor cousin status, compared with its wealthy neighbouring suburbs and locations, and to stand on its own economic and investment credentials as a desirable and rising property market.
The economic gateway to Victoria and investment gateway for property buyers
Geelong has long been the economic gateway to regional Victoria, including the lush western districts farming communities and the renowned tourism destination of the Great Ocean Road. It has proved itself a prosperous and still largely affordable option for property investors and home buyers alike.
Just 75 km from the Melbourne CBD, Geelong stakes its claim as the second largest city in Victoria. It’s at the centre of a region currently benefiting from key development projects from both Federal and State governments to help ease pressures on housing supply for the ever expanding Victorian population.
This infrastructure spending is a bonus to an area that historically already has strong appreciation in property values which in many years has been matched some of Melbourne’s best established suburbs.
Identified as a key component of the Victorian Government’s major planning blueprint, Melbourne @ 5 million, Greater Geelong and the cities of Ballarat and Bendigo are expected to accommodate around 40 per cent of Victoria’s additional population. As it stands, Geelong already has an average population growth rate of 1.7 per cent a year, adding more than 3,000 new residents every year, among Victoria’s fastest growing locations.
A 2,580 hectare urban growth precinct known as the Armstrong Creek project will also be rolled out over the next 15 to 20 years and is tipped to become Australia’s largest urban growth area. When completed, the authorities estimate this community will be home to an estimated 50,000 residents as well as several new shopping and service precincts.
This new urban project, and Geelong in general, is strongly supported by completion of significant new and recent infrastructure including the Geelong Bypass, extended rail links and plans to approve Avalon Airport as Victoria’s long-awaited second international airport.
In addition, the Port of Geelong is set to double its current productivity with a major expansion of its bulk handling facilities to be completed by 2020. This large injection of infrastructure is only going to further enhance Geelong’s already strong cross section of industries and employment opportunities.
The recent rejuvenation of Central Geelong and the Waterfront, including Westfield Geelong undergoing a $150 million redevelopment, is giving the city a boosted cosmopolitan feel, further enhancing its appeal for population, commerce and tourism.
With historic and character filled period homes close to established amenities, rapid and easy connectivity to Melbourne, increasing population growth, and strong property yields, we believe this is an attractive region for investors looking for a good balance of cash flow and capital growth.
Geelong has a wide variety of residential and commercial property stock. Many of the original homes and town planning were developed during the region’s late 1800s gold boom and they reflect the wealth and architectural detail of the time. However, the area also has a large variety of period style housing of later eras as well as character filled homes and contemporary townhouses and apartments.
Yields from established dwellings are 25 to 35 percent higher than similar stock in the Melbourne metro area.
The low entry point for investors is currently between $280,000 and $350,000. The majority of established properties also have subdivision and/or renovation potential.
As the second largest city in Victoria behind Melbourne, Geelong is the biggest regional area in the state with a current population of 215,151.
It has a population growth rate higher than the national average. It was also the fastest growing region in Victoria between 1996 and 2005 with an average of 1.3 percent a year (Melbourne: 1.2 percent and Victoria: 1.1 percent during the same period).
The state government has already committed to encouraging population growth in the region, including providing incentives and assistance to major corporations to relocate in the Greater Geelong area.
Employment, commerce and industry
Geelong has a good cross section of industries and services with more than 10,000 businesses.
The largest single employment industry in Geelong is the health and social services sector, which is government backed accounting for about 15 percent of the workforce.
The port of Geelong is Australia’s sixth largest port and Victoria’s second largest.
Trade forecasts point to significant growth in the Port of Geelong’s bulk handling facility expected to increase by up to 59 percent by 2020.
The city also services the important and world renowned tourism destination of the Great Ocean Road. This asset attracts more than 6 million tourists a year.
Geelong is home to three major hospitals with Barwon Health being Victoria’s largest health care provider and the health sector is a major employer in the region.
Well established education facilities including Geelong Grammar, Geelong College, Deakin University (two campuses) and Gordon Institute of TAFE are crucial to developing a skilled workforce for both Geelong and surrounding areas. These assets not only draw considerable commuter and student visitors to the area but also provide long term employment opportunities.
Employment opportunities have for many years continued to expand in the growing education, service industries, tourism and health services sectors. The closure and staff reductions at Geelong’s older style industries including Shell, Ford and Alcoa have long been factored in to the local economy and are not expected to have any major impact.
Transport and infrastructure
Whether road, rail or air, Geelong has all the major transport options covered.
Road transport offers easy access to and from Melbourne with the new Geelong Ring Road.
It also has easy assess to and from Melbourne via train, with an average of 12,000 commuters per day making the journey using a regular hourly service to Melbourne and increased peak time services.
The city centre and inner suburbs have undergone major gentrification.
Both population, educational and commercial infrastructure continues to expand in this region.
Education regeneration projects are underway in Geelong and Colac. These projects will deliver a better model of education to communities and also provide the opportunity to develop partnerships with community organisations, businesses and other levels of government.
The state government has committed to spend $30 million to expand Geelong Hospital and $50m to redevelop the library precinct of the city.
Work has also already commenced on the Regional Rail Link, a $4.3 billion project to construct up to 50 kilometres of new V/Line track between Werribee and Southern Cross Station in Melbourne. This new link will further increase the reliability and frequency of services to and from Geelong.
Geelong is also part of scheduled work to connect it to Melbourne’s water supply over the next few years.
Growing satellite city on the move. Demographic changes drive property values.
Ongoing gentrification in the City of Frankston is expected to have a major impact on the population and demographics of the area which is already starting to flow through to higher property values.
Major infrastructure improvements and new spending by the state government and the private sector have been the trigge for revitalising the area. However, local government support for new developments and commerce, expansion of existing tourism and recreational facilities, and greatly improved commuter services to the Melbourne CBD is reinforcing Frankston as a major drawcard for property investors.
Frankston already has strong population growth, about 0.8 percent a year, however, this is expected to further increase as the demographic and commercial growth within and around the city become more widely recognised.
Frankston has now become an easy commute to the CBD and is rapidly reinforcing its position as a popular gateway and service centre for the traditional resort locations on the Mornington Peninsula and nearby wine region. It is also perfectly positioned to take advantage of the economic and population benefits from the major expansion of container facilities at the nearby Port of Hastings.
Increased employment opportunities within the region are also expected to help swell and underpin long term population growth and housing demand.
Recently complete infrastructure
The area has benefited greatly from the completion of the $759 million peninsula freeway with travel times between the CBD and the peninsula greatly improved as well as improving traffic flow in and around Frankston for residents.
The completion of the privately funded Peninsula Centre commercial redevelopment is a major vote of confidence in the area by the development industry. The $25 million private project not only increases the quality of commercial space in Frankston but also improves the general appeal of the town centre.
Major infrastructure already under construction
A major employer, South East Water is completing its $100 million head office relocation to the area, adding 750 employees to the community by 2015.
The $47 million redevelopment of the Frankston Regional Aquatic Centre is also expected to add 300 construction jobs during the work and about 60 permanent jobs on completion in 2014/2015.
New infrastructure projects approved
The centre piece of the Frankston waterfront, the Frankston Yacht Club, is undergoing a $7 million local government funded redevelopment. The improved waterfront access and facilities are expected to be a major attraction for tourists and residents, as well as create increased employment.
An $80-$100 million development of the Frankston Marina is also planned to further add to the waterfront focus, and again is expected to add up to a further 100 jobs when it is completed in about 24 months.
Most of the area’s existing property stock is mid-20ᵗʰ century onwards although the area also has its share of early 1900s architecture.
The median house price has fallen 2.5 percent during the past 12 months to $350,000. At this level, properties are considered good value for investors.
However, new development is also making its mark on the area. Arrio Apartments, a new $70 million residential development including 90 luxury apartments, is also under construction and is setting new price records for the area. The high specification project is also filling a growing need for more upmarket accommodation in Frankston.
The changing demographics and population growth in Frankston is expected to increase more rapidly as the full impact of these major infrastructure projects takes hold.
Already the area is showing a significant swing away from its lower socio-economic roots and demand for upmarket housing and amenities is outstripping supply. However, rising property prices in the area have not yet caught hold and discounted purchases are still available.
Rents, too, still have some way to go with rental incomes stable for about the past 24 months, although this further indicates rises in the future have plenty of room to move.