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Why so many developers are rushing to the north

Online development listing site ‘Permit Ready’ registered twenty-one permit-ready development sites that were sold in the north during the 6 months up to December 2016, compared with only nine in the south-east.

Their data also shows enquiries by developers into these areas over the period (6 months up to Dec. 2016) had increased by 27%, averaging forty two enquiries per property each month, compared with the previous 6 months which only had an average of thirty three enquiries per property each month.

The north has enjoyed the strong property value rises we’ve seen in many parts of Melbourne in the last few years. According to local agents, in looking ahead the performance should again be better than average because of the lively urban villages and the affordability, compared with the inner urban areas at a similar distance to the east of the CBD in Boroondara and south east of the CBD in Stonnington.

The north’s ability to provide good amenity and popular urban lifestyle options translates into opportunities for townhouse developers.

Reservoir was one of the busiest housing markets in 2016 frequently topping the bill for most monthly auctions. There is a lot of churn there because affordability allows entry into the market and then trading up as the homeowners’ buying processes continue.

Melbourne Acquisitions, a commercial property agency that both sources and also markets new development opportunities, also reports a big increase in interest in northern sites. Melbourne Acquisitions cites increasing enquiries from developers seeking townhouse sites that are either permitted, are infill, or are suitable for the type of rezoning that will cater for townhouse developments.

When developers have to look more broadly for development opportunities, underperforming and undercapitalised areas are a natural target. But Permit Ready claims the north is currently attracting twice as many enquiries as the properties it handles located in Melbourne’s west. Homebuyers priced out of highly desirable and gentrified Brunswick, Fitzroy and Fairfield see the north as a cultural extension of those suburbs and currently a better option than looking west.

The northern middle-ring with its reasonable entry level prices for home buyers also presents good opportunities for developers for achievable and sound return on investment.