Footscray, Maidstone, Thornbury and Preston offer good value for investors.

Four inner-western and inner-northern Melbourne suburbs have offered the best investment value, according to the Annual Recommended Suburbs Survey of the Melbourne-based independent research advisory firm Nyko Property.

The suburbs, Footscray and Maidstone in the inner west and Thornbury and Preston in the inner north, are located within 10 kilometres of the CBD and were undervalued when sold in 2008/09 with a median unit price of under $400,000, in line with the Melbourne Unit Median of $377,000.

Nyko Property Director Bill Nikolouzakis says: “Their price and location gave these key suburbs substantial upside; we identified that they were poised for growth, even in a flat and falling market.

“Although Footscray and Thornbury had a lower socio-economic demographic, our research suggested their proximity to the CBD and the high performance of the neighbouring suburbs would ensure their gentrification,” he says.

Nikolouzakis says that Nyko’s Annual Recommended Suburbs Survey, which uses rigorous and impartial research to assess new property projects for their investment suitability, has stood the test of time.

“The suburbs we have selected in the Nyko surveys from 2008-13 have outperformed the Melbourne unit market by 2.77% per annum – a 63% improvement – as well as holding up well against the Australian unit market, outperforming it by 2.52% per annum – a 54% increase.

“For the clients that bought in Thornbury, their suburb outperformed the Melbourne market in that time by over 100%.

“Our survey takes into account the demographics of the suburb as well as the new demographic entering the area through gentrification and selected projects that we felt most suited that change.”

Nikolouzakis says that Plan Melbourne has been a key factor in identifying which locations are likely to see the highest spike in employment and population growth.

“The State Government has pinpointed suburbs, and even key areas within those suburbs, in which they anticipate growth and therefore have committed extra funds for improvement of infrastructure and amenities.

“An in-depth knowledge of the local areas and the micro-economic factors affecting them are the keys to selecting high growth locations.

“Historically, Australians have bought investment property driven by emotion rather than logic, buying in the area they live in, grew up in or locations that have a certain prestige; this is never the best investment option.”

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Increase in demand for Melbourne property from the financial advisory industry.

The Melbourne-based independent property research advisory firm Nyko Property has recorded a 90% increase in sales in the 2014 financial year on the back of a buoyant property market, says Director Bill Nikolouzakis.

“In particular, we had a very busy second half of the year (January-June) following the 46% increase in sales in the 2013 financial year, with demand from the SMSF sector playing a key role,” he says.

Nikolouzakis says that 69% of Nyko’s sales – predominantly townhouses and small apartment complexes in suburban Melbourne – were made by intermediaries in the financial services sector, continuing the strong spike in demand in 2013.

Nyko does not sell direct to the public, instead using 228 intermediaries of which 73% are in the financial services industry (mortgage brokers, accountants and financial planner) with the remaining 27% comprising local and international estate agents. [Nyko is establishing two offices in Indonesia in Jakarta and Surabaya.]

He says Nyko has identified two key factors for a big increase in demand from the financial advisory industry for these types of property:

• The financial services industry has started to embrace direct property as an investment option for their clients;
• SMSF trustees are becoming more attracted to residential property.

He says that although SMSF investment dropped slightly in the 2014 financial year to 28% compared with 36% the previous year, all the indications are that SMSFs will remain a significant influence in this market.

“This is not surprising. SMSF property investment is being driven by clients of accountancy and financial advisory firms and will continue to be a strong growth area for Nyko Property, despite the slight 8% drop in sales.

“While we might not see such a high increase in SMSF property investment as we did in 2013, we expect it to continue to be about 30% of our business.

“Remember that we saw a 17.2% increase in SMSF investment into residential property across the market in the 12 months to March 2014,” he says.

“One in seven Australians invest in property so financial planners, accountants and mortgage brokers are starting to understand their SMSF clients are investing in property – with or without their advice.

“For those advisors who can value add for their clients by ensuring they are giving strategic advice both in terms of the property acquisition itself, as well as how it dovetails with the client’s investment portfolio, will benefit from growing investor interest in residential property.

“When coupled with the comprehensive information Nyko offers clients on all aspects of property investment, it not only means the end consumer is getting a totality of advice about the investment but advisors can also be comforted by the fact they are acting according to the current regulatory framework,” Nikolouzakis says.

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Bill Nikolouzakis

Foreign investors play a critical role in the Australian residential property market, with the current guidelines to investing providing the right legislative framework, says Nyko Property Director Bill Nikolouzakis.

In a submission to the House of Representatives’ Standing Committee on Economics inquiry into Australia’s foreign investment policy for residential real estate, he said foreign investment helped underpin the residential construction market, especially for inner-city apartments, and as such was evidence that the system was working.

“From our experience there is a degree of misunderstanding around foreign investment in residential real estate. In our opinion, this misunderstanding, and, in some instances, the misreporting of what is and isn’t permissible in terms of foreign investment in residential property, has the potential to damage a valuable source of investment in a $4.75 trillion industry.

“What is often forgotten is that foreign nationals can’t buy existing residential property, but they can typically get approval to buy residential property in new developments so they are not competing with first home owners or anyone else for those existing properties.” [This can occur either before, during or immediately after construction.]

Mr Nikolouzakis said it was Nyko’s experience that foreign investors normally bought apartments in the larger blocks within the CBDs of Melbourne and Sydney and to a lesser extent Brisbane.

“This is a market that Nyko Property’s clients in Australia normally are not very supportive of as an investment option and are therefore not competing with foreign investors for those properties.

“We see the involvement of foreign investors (Nyko has established an office in Indonesia) in the residential property market to be completely positive from that standpoint, investing in property that is required for our cities to grow and become the cosmopolitan centres that we know work so well across the world when people live closer to their workplaces.

“In addition, it’s worth noting that the construction industry makes up 9.1% of the Australian workforce and a change in the rules for foreign investors making it more difficult for them to invest in new Australian property would be detrimental to that industry in a workforce that is already struggling with job losses in manufacturing.”

Mr Nikolouzakis said the current process appeared to be streamlined in such a way where it did not cause any roadblocks for foreign investors while giving Government the relevant information to perform checks on this investment.

“Foreign investment, operating under the right guidelines, can continue to be a valuable source of capital to enable positive social outcomes for the Australian populace.”

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SMSFs pushing demand for property research.

Property research advisory firm, Nyko Property, said the increasing use of property in SMSFs and other investment portfolios was leading to a spike in demand for single property research reports.

Nyko Property is a leading property research advisory firm with a 100% focus on new Melbourne investment properties.  It specialises in sourcing pre-sale properties and developing in-depth research reports, which are used by the advice and accounting industries to select investment properties for their clients.

Director Bill Nikolouzakis said the number of advisers seeking independently researched direct investment properties had increased significantly since FOFA regulations were announced.

“We have been operating since 2008 and have worked with more than 200 financial advisers, accountants and intermediaries to source and research the best investment opportunities for their clients.  Approximately 36 per cent of these investments are for SMSF portfolios.

“In 2012-2013 financial year, we saw a 47 per cent increase in sales.  The current financial year has seen a further 22 per cent increase, with two months still to go.  Additionally, we have also seen a 21 per cent increase in sales referred by financial services firms in comparison with agents.

“We believe much of this growth is largely in response to regulatory changes.  Advisers are seeking impartiality when it comes to selecting investments for their clients.  And our research reports provide this impartiality through  independent valuation and pricing and depth of insight that advisers and their clients value and expect.

Mr Nikolouzakis said a focus on macro trends, independent valuations and quality residential and commercial properties will help advisers ensure property investment recommendations were in the best interests of clients.

“At Nyko, we identify key growth areas through constant research of the planning policies of state and local authorities together with market trends.   Melbourne is the fastest growing city in Australia. In 2011-12, the most recent data available, Melbourne grew by around 1,500 people per week. If the current trend continues, Melbourne will overtake Sydney as the most populated city in Australia by 2035.

“Due to the rising population and change in demography, the Victorian State Government introduced a structured plan in 2000 to cater for the city at five million residence. This plan, which has recently been updated, is designed to better manage metropolitan growth by  among other things making better use of existing transport links and locating new links in planned growth areas.

“What this gives us, is a plan that pinpoints the parts of Melbourne that will experience the highest growth in population as well as infrastructure improvement. This, along with an intimate knowledge of the local market conditions, allows Nyko Property to select locations within the key suburbs that will experience the maximum amount of growth and continuing strong demand for rental.”

Mr Nikolouzakis said all properties sourced are brand new and include significant depreciation benefits that materially enhance the investment return.

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