A rapidly growing and gentrifying area is attracting significant residential and commercial development – but is all what it seems?
The housing market in Melbourne’s Footscray is “rapidly changing”, according to Richard Thornton, population forecaster and consultant at ‘population experts’ .id, with “a significant amount of old industrial land … identified for future residential development”.
In addition, there has been a marked increase in dwelling stock since the last census, which Mr Thornton expects will “drive a very significant population increase”.
Investors are expected to be the main targets, and primary buyers, of the flood of new stock.
“The population change experienced will be dictated by the types of dwellings constructed,” Mr Thornton said in an analysis blog on Footscray this week.
“Predominately these will be multi-storey apartment blocks, although some medium density townhouse development will occur in the Banbury Village development and in other industrial strategic sites located outside of the Footscray CAD, such as the Kinnears Rope Factory.
“This type of development is expected to be marketed to investors rather than owner-occupiers, and much of this stock is likely to add to the rental pool.”
This sweeping change, however, could cause problems for the market, particularly as Footscray has been relatively quiet in recent years.
“Over the last 25 years, Footscray has had very little development, certainly not in comparison with the neighbouring suburbs of Maidstone and Maribyrnong. It is only in the period of 2006 to 2011 that any real residential development has taken place, and most of this has not been in the Footscray CAD, but in the surrounding established areas and along the Maribyrnong River (Salt Creek Precinct),” Mr Thornton continued.
“This suggests that the Footscray development market is underdeveloped and may face greater risk of a future economic downturn, or oversupply of apartments.”
The risks, according to Mr Thornton, don’t stop there.
“Even with a large number of approvals for large multi-storey developments within areas such as the Joseph Road Precinct, nothing has been commenced as yet. These projects represent significant risk and will require a large number of pre-sales before financial institutions are willing to back the projects. Footscray, despite its locational advantages, has no real track record for this type of development, and developers and investors are being immensely cautious; it appears some of these sites have been resold a number of times post-approval, presumably because of the risks in proceeding.”
Despite the warnings, there are signs values are on the way up, Mr Thornton said.
“Land values have been increasing both in terms of rental values and mortgage, with the highest quartiles in both showing the largest increase, especially in term of owning property.
“Although Footscray remains more affordable than the average for City of Maribyrnong, this gap is closing and it is likely that as development gets underway in Footscray it will become a more expensive area within which to both buy and rent.”