PROPERTY investors could have picked the right time to cash in on Geelong’s massive residential growth.
Speculators who bought into growth areas like Armstrong Creek in 2017 are among the hundreds getting building approval for their new houses in the latest ABS data released this week.
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And they’re also set to bank bigger rental returns on their new homes — with a far lower capital cost — than on similar properties in the western suburbs of Melbourne.
A boom in residential construction is building in Geelong as the ABS data shows monthly building approvals jumped 33 per cent in August.
The data shows 401 building projects were approved in the region in August, including 361 new houses (up from 286 in July) and higher than the same time last year.
The total value of new house approvals in August was $121 million.
Metricon’s general manager for regional housing, Phil Barrett said the volume builder was seeing movement of people from Melbourne for a lifestyle change in Geelong.
“They might be setting themselves up for retirement or to commute back to the city or the western suburbs,” Mr Barrett said.
“It’s more affordable (in Geelong), plus you’ve got the first-home buyers’ grant, which is $20,000 for regional areas, not $10,000.
The Gen Fyansford housing estate near Geelong. Picture: Alison Wynd
“But in a lot of cases investors are getting a higher rental than you would have in the western suburbs of Melbourne at a lower capital cost,” he said.
Mr Barrett said investors were earning anywhere from to $40 to $80 more a week in rent in the Geelong suburbs than in western suburbs like Werribee and Point Cook.
“That’s for a capital cost that is probably $100,000 to $140,000 less, mainly in the land value,” he said.
CoreLogic figures show the median asking rent in Armstrong Creek is $410 a week and $420 a week in Mt Duneed. Both suburbs earn a strong 4.3 per cent rental yield.
Mr Barrett said delays in releasing titled land means homes under construction now were on land sold between 12 to 15 months ago.
Geelong’s southern outskirts has been the epicentre of a residential building boom.
A higher proportion of particularly first-home buyers but also investors was keeping the average value of new homes stable at around $317,000, according to the ABS data, as construction costs rise.
“We’ve had a lift in the first-home buyer business because of the change in the grant on July 1 last year, which would drop your average value.
“First-home buyers start at about 17 squares. And developers are carving up the lots a bit smaller to make them more affordable (to first-home buyers).”
New home building continues to expand beyond Highton. Picture: Alison Wynd
Maxwell Collins, Geelong agent Nick Lord said the approval figures reflected a period of stronger demand for new land in the second half of 2017.
He said investors were a strong presence in the market in 2017, along with first, second and third-home buyers.
“Building approvals being up 30 per cent is on sales that occurred a year ago.
“When the market was more buoyant, investors were entering heavily to get in at a lower price point. Now they’re settling their titles.
“Today there is not as many investors in the market.”