Mornington Peninsula – Melbourne

Hi

As you may know, the Mornington Peninsula (south of Melbourne) has had great capital growth during the last 15 years. Whilst this has slowed in the last 2 years (typical of most of the east coast), I expect that this area may show strong capital growth over the next 10 years – particularly as the baby boomers, living in the expensive Melbourne inner city suburbs, retire and decide they want to move down the coast. However, from the research I have done, it seems that the yields are very low (2-2.5%) compared to approximately 4-4.5% closer to Melbourne.

Accordingly, assuming that yields are a useful indicator of value, it would seem that most of the Mornington Peninsula is either over-valued, or, unlikely to experience much more capital growth in the next 2-3 years (I expect it may take 2-3 years for the rental returns to increase from the low base of 2-2.5%). Assuming the above, my feeling is that it may be better to invest in an area like Seaford, Carrum, Chelsea, Bonbeach etc given that these areas have higher yields, are close to the beach (thus appeal to retiring baby boomers etc), and are still within commuting distance of Melbourne city.

I would be very interested in your views.

Many thanks

Thames