Australia – Undervalued suburbs. Opportunity?

Hi Kbrodee,

I can’t help with any knowledge of Frankston, but this quote of yours caught my eye:-

We soon realised that the stigma attached to the suburb was in no way justified or logical. We had spent considerable time in the outer suburbs of Sydney over an hour’s drive from the CBD prior to looking in Melbourne, where the median price for a basic weatherboard house was 500+, many of those areas felt genuinely unsafe whereas we did not experience that feeling at all over the 6 weeks we spent exploring Frankston North.

Sounds to me like you haven’t just “raced into the cheapest property you can find around”. As such, now and then we must simply chance our arm (or, if you like, go with your gut).

Your gut sounds quite settled. Maybe you have happened upon a previously “downer suburb” and it has now grown up – it happens.

If the price being paid sits favourably with the available comparables, then why not? Having a good tenant is worth quids, so also in its favour. And extra land for the same price – too good !!

Maybe an old quote I happened on the other day is worth repeating for you – take a look – the quote I refer to is the one that kicked off this thread (the “Heads I win” one……)
https://www.propertyinvesting.com/topic/4996026-quotes-of-note/

Hope it helps……

Benny

OK Kbrodee,
let me play devil’s advocate !! I checked out those links you posted. And the first one had a big question that I think needed answering.

It is on a good sized block (586m2?) and the interior looks very nice – perhaps renovated? So, the two questions that follow are these :-

1. It seems the median value for a 3bdr in FNorth is $316k. Given that, WHY is your one worth $60k more?

2. If others are NOT renovated, maybe THEY are back around that median, and waiting for YOU to buy them, spend $30k on a reno, and make $60k in Equity !!

So, is that first linked one a “solution”? (Has someone renovated it to boost up its price?)

Steve would say “Buy problems and sell solutions”. If you buy solutions, someone else will be taking the cream !!

Benny

It seems there is nothing gong for under $350k

Did you see the Median that pops up whenever you click on a property (it takes about 30 secs to show up).

When clicking on that first link, it shows the Median (middle) price is $316k. So if most are selling for $350k, how can that Median be correct? It should indicate that a bunch more 3bedders are selling BELOW $316k.

Now median means middle – so, if 7 houses are sold, they could be $420, $410k, 390k, $316k (middle), $312k, $310k, and $310k. As you can see, the AVERAGE can be way higher than $316k. But median of $316k says there are others selling for that price or less.

Or Realestate.com.au have got it wrong.

By the way, if you click on a 4bdr house, the median “should” be higher – re.com.au seem to differentiate between #of bedrooms. Try it out.

Benny

Hi Kbrodee,

Can anyone shed some light on how the median price on realestate.com.au is calculated??

Yes, I can – I went to the source, pulled up that same property, then, where it shows Median Price, clicked on it. It opens up to show you the numbers, then has a comment like “How was this calculated?” Click on THAT, and all is revealed…..

Median Price: The price of a property that falls in the middle of the total number of houses sold over a period of time, based on 137 house sales from 1 Aug 2015 – 29 Aug 2016.

So suddenly, things make sense – and the Median value in this instance is about as useful as an ashtray on a motorbike !! :p

In a fast-moving market, the gap between last year’s prices and this year’s have obviously been substantial. More detailed info is needed, but one can GUESS that the lift in values has been quite recent, otherwise the Median would be reflecting a higher value already. Like, if prices started climbing in Sept 2015, then the median by now should be showing near $360k+

But given that Sales of 137 houses are considered, and the MIDDLE one is showing $317k, I can only conclude that the changes in value have been occurring for way LESS than 6 months. The “middle” value is perhaps from 6 months ago while prices were still depressed.

Anyway, now we know, kind of. In a few more months, I would expect that Median to race upward, based on your comments and the passing of time.

Edited later – 18 Jan 17 – Median now showing as $340k (middle price calculated from 110 sales between 1Jan16 to 17Jan17). Still “behind the times”, showing that its growth is not slowing. Also shows that perhaps growth was “under way” by Jun16 (then $340k instead of $317k around March). A further check in Mar17 should see a value near $360k reflecting Sep16 values…. My guesses are that the mid-point of the value should be evident around the mid-point of the timeframe. That is NOT accurate, but should give some kind of normalcy to the median values in a fast-growth market. e.g. I called Jun16 as likely value of $340k – but in fact, Mar 16 was only $317k median, Frankston North might have had all of its growth in just 9 months, not 12 – thus, a “middle sale” might have taken place in Aug16 and not Jun 16. There is no way for me to know for sure.

Edited later again – 28 May 17 – Median today for a 3/1 house in Frankston North is $394k (middle price calculated from 165 sales between 1May16 to 24May17) with Rental Yield of 4% ($300/wk). :) And a quick look at properties for sale shows that asking prices are above THIS Median – so, still growing?

Latest Update – 20 Dec 17 – the 3Bdr Median for Frankston North today is now $455k. Once more, this is the “middle” price of 150+ houses sold in the last 12 months. I think KBrodee will be a happy camper today for going ahead and purchasing in Sep16. One interesting point is that the 4Bdr median today is just $485k. In most cases, a 4Bdr often commands way more than a 3Bdr ($50k to $70k more) – is the closeness of both values indicating an approaching “top of the market”? Or is it an aberration? Hmmm…..
Benny

PS I see your point re that “needs renovation” place. I’m wondering if $306k is really pie in the sky, but someone who can spend the time and love can maybe get a place with good bones for a good price somewhere in the 2’s. And is that a granny flat in the back yard? Hmmm !!

• This reply was modified 7 years, 11 months ago by  Benny. Reason: Update medians as of mid January
• This reply was modified 7 years ago by  Benny. Reason: Further update - Dec 2017

Congrats on your purchase @kbrodee!! Such a coincidence as I just joined this forum and read Steve’s book and yet I was in Franskton North 2 weekends ago driving around and having the same musings as your post which was one of the 1st I clicked on upon joining.

• This reply was modified 8 years, 3 months ago by  Patricia.

I would also consider Melbournes western suburbs, they have already moved like most of Melb but they are still good value. Melb is number 1 for immigration and service based industries growing. Broadmeadows only 15 km from cbd, look for development sites with potential, build at rear and manufacture cash flow

Marusa
MTR:)

Well spotted Kbrode!