Melbourne real estate: Frankston makes mark on Top 50 suburbs for investors

Investors wanting to climb the property ladder are being urged to move fast on these postcodes. Here’s why.

Ray White has 2 Nodding Ave, Frankston North priced at between $510,000-$560,000.

A string of Frankston suburbs are being targeted by investors keen to add beachside addresses to their property portfolios.

The municipality had a staggering eight entries in Melbourne’s Top 50 suburbs to invest in – second only to neighbouring Mornington Peninsula on ten.

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

Frankston and Seaford made the grade in both the house and unit categories.

Perennial favourite Frankston South was joined on the list by Carrum Downs and Langwarrin.

Surprisingly, Frankston North also made the list as buyers searched for value by the bay.

Barry Plant Frankston director Thomas Larkin said investors recognised they got more dirt for their dosh across Frankston.

“These are bigger blocks than what’s on offer in the inner city which means you can rent it now and look at a subdivision down the track,” Mr Larkin said.

“The suburbs that are doing really well are also close to the beach, Frankston’s major retail and business precinct and public transport.

“That’s appealing to both buyers and renters.”

Even previously overlooked postcodes, such as Frankston North, were blossoming as investors searched for affordable beachside suburbs.

“I’m not surprised to see demand there,” Mr Larkin said.

“You can buy for around $600,000 and rents average about $350 so it’s a good entry point on both counts.

“There isn’t a lot of stock around and there is high demand for rentals so investors know they won’t have trouble finding tenants.”

Ray White Frankston principal Ash Weston said the suburb was often the second choice for buyers who were priced out of their preferred market.

“You do have to be careful with Frankston North because it does boom when the market is hot but then falls back when the market cools and people can once again afford their first choice.

“But having said that it’s a great place to invest because it has the strongest yields of any suburb in the City of Frankston.”

He said the suburb’s affordability made it popular with first home buyers who were able to purchase there without having to pay stamp duty.

“Investors always follow the first home buyers into markets and that’s what we’re seeing here.”

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.”

Those considering investing in Frankston should move fast, Mr Larkin said.

“In five years from now people will be saying they wish they had bought here before they were priced out of the market,” he said.

“Frankston really is placed to be like the Gold Coast or Geelong and we are already starting to see the sort of development to help it make that transition.

“It only takes one or two developers to make that leap of faith and the rest will follow.”

The Horizon project at 1 Plowman Place is tipped to be a development catalyst for Frankston.

One such developer was Urban DC developer Danny Ciarma who broke ground on the ambitious Horizon Apartments in July.

The $82 million luxury apartment complex on Plowman Place would encourage other developers to roll out similar projects in Frankston, Mr Larkin said.

“You get a couple of those and the cafes and bars follow and all of a sudden you have an atmosphere people want to be part of.”

The upcoming $600 million Frankston Hospital upgrade would also add value to properties nearby.

“A project like that brings jobs and confidence,” he said.

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)