An insightful article was published here by Michael Yardney from PropertyUpdate a few days ago discussing whether Warren Buffet would see Melbourne as a place to invest in today's market - https://propertyupdate.com.au/what-would-warren-buffett-say-about-investing-in-the-melbourne-property-market/.
Using some of Buffet's key investment criteria, the article points out some observations when using these to assess the current Melbourne market. Here are some key takeaways:
“Be fearful when others are greedy and be greedy when others are fearful" - with a general stagnation of the Melbourne property market in recent years, many investors have been uncertain about Melbourne and have generally held back. The opportunity to invest could be now, by using strong research to locate excellent suburbs and purchasing at below-market prices.
“The investor of today does not profit from yesterday’s growth” - while looking at historical price growth, it is worth looking at locations that may have seen below average capital growth in recent years but still have solid fundamentals including population growth and economic growth. Melbourne's market falls into this category.
"Use location as a moat – position is key" - the 'moat', as Buffet describes it, is something of value that is solid and helps protect the investment over time. For property investors, these are locations where markets have stayed resilient over a long period including different market fluctuations. With it's ongoing population growth, strong economy, and other solid fundamentals, it may be worth locating areas in Melbourne and investing now to generate capital growth using a long term investment view.
We have run the capital growth chart for 3 popular suburbs in Melbourne below - as you can see by the chart, price growth has remained minimal and somewhat stagnant in the last 5 years.
