What is 'Value Investing'?
Value investing (a term more commonly used when discussing stocks) is an investment strategy where investments are selected that trade for less than their intrinsic values. Value investors actively seek investments they believe the market has undervalued. Investors who use this strategy believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with a company's long-term fundamentals, giving an opportunity to profit when the price is deflated.
Is the same to be true for property?
Watch the video below to see which region of Melbourne had its prices increase by 9%+ while all other areas fell (this surprised even myself)
*Important note past performance is in no way an indicator of future performance and perhaps the key learning or take away from this report is; markets are not created equal & being able to find value means being able to understand a specific market within context of its wider market.
The West has thrived over the past 4 years because its median price relative to all other regions of Melbourne was much lower considering its proximity to the CBD. Its only a matter of time people get priced out of all areas, this is when they are forced to look further and find gems that were once undesirable and comparably under valued compared to areas within their wider markets.
There are still area's of Melbourne I think are under valued compared to their close neighbours and while buying in these areas can never be a guarantee of immediate price growth - you can much better protect your downside risk when selecting the right properties within these areas...
My opinion is the Melbourne home & land market has been so strong over the past 4 years due to its relatively low starting price compared our inner city ring suburbs and as a median value compared to NSW and WA. In the long term compared to prices we witnessed in the major cities of America & London I still think we have room to grow providing our excellent population, employment & economic fundamentals continue into the long term.