Mornington Peninsula dominates Top 50 list for property investment

Soaring demand for seaside rentals has made these suburbs hot property for investors. See the list.

4, 30-32 Oakland Street, Mornington is under offer with a buyer who has only seen it online.

Unprecedented demand for Mornington Peninsula rentals has made the region Melbourne’s top pick for property investors.

The region dominated a list of the Top 50 suburbs investors should be targeting with 10 entries, the highest for any area.

Not far behind was Frankston with eight entries in the list.

The realestate.com.au data identified strong performers in three key investor metrics: long-term capital growth, rental yields and demand from tenants.

Both Mornington’s house and unit markets made the cut after a strong performance in all three metrics.

A typical house in the suburb has notably jumped 93 per cent in price over the past decade, experienced a 4.3 per cent growth in interest from tenants, and is offering a solid 3.3 per cent rental yield.

Other top Peninsula performers were Mt Eliza houses (121 per cent 10-year capital growth), Somerville houses and Mornington units (both 3.8 per cent rental yields), and Safety Beach houses (22 per cent annual rental demand increase).

The other towns to make the list were Mt Martha, Dromana and the more affordable Tootgarook, Rosebud and Rye.

Barry Plant Mornington director Danae Eden said competition for a Mornington address was so fierce buyers are making offers on properties they have only seen online.

“We have a two-bedroom unit in Oakland Street that is now under offer with a buyer who only saw it online.

“It was listed for $560,000-610,000 and we were inundated.”

While it might be tough to secure a property, finding tenants was a breeze, Ms Eden said.

“Rental stock is incredibly limited. I’ve never seen such waiting lists. It’s actually sad to see people desperate to find somewhere to live and not being able to.”

Ray White Frankston principal Ash Weston has just opened a second office in Mt Eliza to cater for growing interest in the Mornington Peninsula market.

“We were getting a lot of referrals via word of mouth and decided we needed an office in that region to service the interest,” Mr Weston said.

REA economist Paul Ryan said “the Covid effect” that had led to house markets further from the CBD – many of them on the coast – dominating the list was largely the result of a significant shift in where renters wanted to live.

“Expats coming back to Melbourne, or people who are living in small apartments in the city and working from home are thinking, ‘if we’re not working from the office, can we choose somewhere with more lifestyle amenity’,” he said.

“That’s pushing a lot of those Mornington Peninsula suburbs and quite pleasant outer-suburban regions on to the list.”

Advantage Property Consulting director Frank Valentic said the swing away from the inner city was also “reflective of the fact Melburnians are now getting priced out of the inner suburbs”.

Mr Valentic said investors couldn’t go wrong on the Mornington Peninsula, tipping prices to “keep going up”, with potentially lucrative Airbnb returns another benefit.

The data explained

The list was created by realestate.com.au to feature suburbs in the top half of distribution for three metrics:

1. 10-year median price growth: percentage change in median price in year to June 2021, compared with year to June 2011

2. Rental yield: how much profit you generate from your investment as a percentage, calculated by determining the annual median rent as a proportion of the median price

3. Annual change in rental demand: based on searches on realestate.com.au by “high-intent renters” who have looked at multiple properties, made inquiries with agents, booked inspections, etc.

Investor cashflow: the monthly rent a property earns minus monthly mortgage payments (assuming a 30-year mortgage, 80 per cent loan, 2.73 per cent interest rate)