By Herron Todd White
July 2019

The Melbourne property market has shown signs of stabilisation from previous months and this trend may not continue. With the Coalition government’s surprise election victory and tight credit from institutional lenders slightly lifted, some of the housing stress is expected to lessen in coming months as buyers grow more confident following the Reserve Bank’s recent interest rate cut and moves by bank regulators to lower the stress-test threshold on borrowers.

Residential estates in the outer suburbs (25-plus kilometres from Melbourne’s central business district) in the north, south-east and west are continuing to expand, with house and land packages remaining a popular choice for first home buyers and families. In the middle ring suburbs, located within 10 to 25 kilometres of the CBD, such as Keilor East, Preston, Box Hill, Clayton and Bentleigh, we are seeing redevelopment of older dwellings on large sites into multiple townhouses and small scale apartment complexes. In the inner city, apartment buildings are in various stages of completion and concerns remain around off the plan apartment purchases.

South East Melbourne Property Updates

The south-east of Melbourne has seen enormous growth, with the continuous development of housing estates in the outer south-east and apartment complexes in the inner south-east. Thanks to these developments, home buyers are spoilt for choice when it comes to purchasing a property for below $500,000.

In the outer south-east, you will find mostly family-friendly housing developments offering house and land packages, however, to find a median house price below $500,000 you will have to travel out to Frankston North which has a median house price of $463,693 or Hastings where the median house price is $462,668. When it comes to units and apartments, buyers can find good value in Cranbourne where the median unit price is $356,814 or Pakenham where the median is $378,156 (source: openagent.com.au).

When you are restricted by a $500,000 budget, there are many options in the south-east for units and apartments. 2/11 Rhyl Close, Endeavour Hills, a two-bedroom, two-bathroom unit located approximately 31 kilometres from Melbourne’s CBD sold on 28 May 2019 for $500,000 on the dot.

Also selling for $500,000 on the dot on 22 May 2019 was 1/45 Serpentine Road, Keysborough, a three-bedroom, two-bathroom detached unit of two positioned on approximately 287 square metres approximately 27 kilometres from Melbourne’s CBD. The property was a little dated compared to the Endeavour Hills property but offers an extra bedroom.

When searching for a home in the south-east for less than $500,000, you must realistically consider your circumstances. A single or couple looking to buy for themselves would likely consider the inner south-east around St Kilda, Elwood or closer to the city fringe. However, closer to the city you would be compromising the size of a property but the opportunity costs may be worth it due to the proximity to the CBD. 208/173 Barkly Street, St Kilda sold on 31 January 2019 for $494,000. This apartment offers two bedrooms, two bathrooms and one car space. Proximity to the CBD, St Kilda Beach and tram access are all tempting features for homebuyers however are not always practical when starting a family.

In the past six months, there have been no recorded house sales within 27 kilometres southeast of the CBD. This forces homebuyers looking for a family home to look further and further out if they still want the quality. For example, 243 Cheltenham Road, Keysborough, a deceased estate situated approximately 27 kilometres from the CBD sold in March 2019 for $500,000. This property offers three bedrooms, one bathroom on 532 square metres of land, however, the quality compared to the units and apartments mentioned above is very poor and the property is in need of a renovation. It may be difficult for a buyer to outlay further capital when the sale price is already at $500,000.

Speak with a Keysborough Mortgage Broker today.

West Property Updates

Melbourne’s outer western region has changed considerably over recent times due to significant population pressure and demand for housing. Figures released by the ABS in March showed that Wyndham and Melton were the fastest growing municipalities behind the city of Melbourne. The key reason is affordability.

A recent study by CoreLogic revealed that Werribee’s median house value of $486,022 in March this year was the most affordable and Hoppers Crossing was the second most affordable with a median house value of $527,217 for suburbs more than 20 kilometres outside of Melbourne.

Those looking for a bargain, however, may need to compromise on the size of the dwelling and the number of bathrooms while others may even have to roll up their sleeves and get their hands dirty. Typical dwellings within this area tend to be a mixture of older style brick veneer or weatherboard three-bedroom dwellings with single carports on approximately 550 square metres allotments.

Examples currently on the market include:

13 Goulborn Court, Werribee – $395,000 to $430,000

Three bedrooms, one bathroom on a 587 square metre allotment.

8 Broken Court, Werribee – $459, 000 to $499,000

Four bedrooms, one bathroom, double carport on 540 square metre allotment.

Buyers might have to be quick however with Werribee recording a 5.3 per cent median house price increase over the March quarter which should increase buyer confidence. Furthermore, Werribee was recently identified as Melbourne’s cheapest suburb located on a metro train line. Property prices are influenced by public transport access to and from the CBD and with population and urban sprawl increase, we expect demand to increase.

Alternatively, if buyers are after something more modern, they will need to look further afield to developing estates such as Wyndham Vale, Rockbank or Melton South.

Speak with a Wyndham Vale Mortgage Broker today.

East Property Updates

In 2018, properties prices were showing signs of decline; properties were still selling, however the supply had declined and days on the market averaged to about four weeks. This time last year, the median unit sale price in Lilydale was $539,000 with a rental return of $350 per week, and approximate rental yield of 3.38 per cent. Today it has dropped to a median of $490,000 with a rental return of $365 per week reflecting a yield of approximately 3.87 per cent.

Fast forward to 2019, with a budget of $500,000, purchasers are still able to find a modern two-bedroom, two-bathroom, one-car space apartment in Boxhill, Watirna South and Ringwood. The weekly rent is around $340 to $550 depending on the location and age of the apartment.

$500,000

404/1 Elland Avenue, Box Hill, Vic 3128

2 Bed 2 Bath 1 Car Apartment

If apartment living is not your style and you prefer a bit of land, older style villa units with two bedrooms, one-bathroom and one lock up garage can be found in the areas of Ringwood, Croydon, Bayswater, Boronia and Kilsyth. The weekly rent is around $330 to $380.

The majority of purchasers of apartments and units are first home buyers and downsizers, with villa units generally performing better than apartments.

For Sale $460,500 to $490,000

1/95 Scoresby Road, Bayswater, Vic 3153

2 Bed 1 Bath 1 Car unit

Looking to buy the family home, we recommend the buyer to increase the budget to about $700,000 and look further out towards Ferntree

Gully and Lilydale for something that has been updated and ready to move in, as we have found properties that were sold within the $500,000 budget were in original condition that required some renovation work.

Sold $500,000

9 Rose Court Lilydale, VIC, 3140

3 Bed 1 Bath 1 Car house 820 square metres

 

Sold $530,000

38 Agora Boulevard Ferntree Gully, VIC, 3156

3 Bed 1 Bath 2 Car house 727 square metres

CBD Property Updates

The Melbourne CBD and inner city suburbs residential market has remained steady throughout the year in values, and rental returns are ranging from four to five per cent. At an entry point of $500,000, you will find a one-bedroom, one-bathroom, one-car space city apartment or a two-bedroom, one-bathroom apartment in the heart of the CBD.

$470,000

206/336 Russell Street, Melbourne, Vic 3000

1 Bed 1 Bath 1 Car Apartment

45 square metres

The apartment living area will vary generally between 50 and 60 square meters which reflects $7,500 to $8,500 per square metre. You will see developers now coming up with new incentives to trump other developments by offering facilities such as allocated refrigerated wine storage and common cinema rooms, BBQ facilities, gyms and swimming pools are now the norm.

We caution buyers that between 2011 and late 2018, more than half of inner-city off-the-plan apartments re-sold by their owners had no capital gain or sold at a loss. “They basically sold for the same price or less” (SMH, Johanson, S. May 2019).

North Property Updates

As a result of the declining Melbourne property market, more purchasing options with $500,000 have opened up in the outer northern suburbs, which were not available in 2017/2018. This price tag can give you a circa 1990 to 2005 single storey dwelling with a land area of 550 to 700 square metres in Craigieburn or a newly constructed modern single storey dwelling on a smaller allotment in Mickleham.

13 Plumpton Avenue, Craigieburn

Sold Price: $500,000

3 Bedroom, 2 Bathroom, 4 Car

Sale Date: 29 May 2019

Land Area: 695 square metres

Year Built: 1980

(Source – RP Data)

2 Puckle Avenue, Mickleham

Sold Price: $472,500

3 Bedroom, 2 Bathroom, 2 Car

Sale Date: 12 May 2019

Land Area: 290 square metres

Year Built: 2018 (Source – RP Data)

Alternatively, as there is an oversupply of vacant land allotments in these outer northern suburbs, buyers could purchase a small block of land and build a new single storey dwelling for around the same price tag. Property that can be bought for $500,000 in the inner northern areas such as Collingwood, Carlton and Brunswick are still very limited, even with the decline in property values. Buyers in these areas can purchase a studio apartment with a living area of 45 to 55 square metres. As these suburbs are in such close proximity to the Melbourne CBD, you will not find another type of property to purchase with this price tag in these areas.

206/75 Wellington Street, Collingwood

Sold Price: $460,000

1 Bedroom, 1 Bathroom, 1 Car Sale Date: 26 April 2019

Living Area: 50 square metres

Year Built: 2019 (Source – RP Data)

Another option is to co-purchase an existing two or three-bedroom single dwelling on a small parcel of land in Brunswick or Fitzroy with the sole purpose of providing rental income and hold as a future investment property. As rental properties are still quite sought after and are providing reasonable returns, this is also a viable option.

Speak with a Brusnwick, Carlston or a Fitzroy Mortgage Broker today.

Shepparton Property Updates

In the Shepparton region, a lazy half million dollars still buys you far more than in most regional centres. Most of the ex-display homes are selling for around the $500,000 mark with a considerable upgrades list, which is up from around the $450,000-mark last year. Unfortunately, due to the oversupply of land in the area, it is still quite easy for builds to be an overcapitalisation in their respective estates.

Many out of town investors are still being drawn to the Shepparton region because of the strong rental yields exhibited by the sub-$300,000 market, of which most appear to be investment properties merely changing hands, rather than an influx of rental stock. There are still a number of former housing commission properties being sold with yields up around 7.5 to eight per cent with tenants in place. Typically, these properties don’t last more than a fortnight on the market.

Inner-city buying is still very competitive, however, I personally see this as the area with the most growth potential as the government spending starts rolling into the area over the next two to three years with the hospital redevelopment, arts museum and rail upgrades. Character homes in these areas will see a significant upswing in values as properties with equivalent amenity in other towns are fetching far higher prices.

Units are still struggling with falling prices over the past five years to the tune of -13.5 per cent (Core Logic), however, rental yields are strong, giving investors positive cash flow.

The best buying in Shepparton at the moment is a 1960s to 1980s dwelling that could use some cosmetic refinement. These are at very affordable prices with good prospects for value uplift after works have been completed. These properties are always sought after by owner-occupiers, investors and tenants, mainly due to their location and the bang for buck.

Mildura Property Updates

The median price for a detached dwelling in Mildura is just under $300,000, however, there are numerous sales at around $500,000 and sales activity at this level appears to be increasing.

A quick glance at our records suggests that the number of sales over $480,000 in the Mildura postcode has increased from around 20 per year in 2015/2016 to around 50 per year now.

Last year we predicted a strong outlook for better standard homes in the Mildura region and the evidence suggests this has proven true, with this sector showing more value growth than the lower end of the market.

$500,000 will buy a modern four-bedroom home on a larger than average size lot, with good external improvements such as sheds or pools. Buyers are typically owner-occupiers, with investors more likely to buy cheaper housing in the $250,000 to $400,000 bracket, due to their higher rental yield.

The improved sales activity in the $500,000 segment is due to a combination of ongoing strong economic conditions in the local farming sector and low-interest rates. The outlook for the farming sector remains generally positive and we expect our economy to remain buoyant in the next one to two years, although we note the potential for low irrigation allocations in the coming year to curb this confidence.

The other alternative for investors with $500,000 to spend is to buy a complex of three or maybe four units. Rents have been increasing in recent years, and this has maintained gross yields of around 6.5 to seven per cent. Older complexes will be more affordable, however, these come with a need for ongoing maintenance and buying a better standard three-unit complex may prove the better long term investment.

Wodonga Property Updates

The Wodonga, and indeed West Wodonga, residential dwelling markets have been characterised by a spread of sales which have predominantly occurred within the $200,000 to $400,000 price bracket, followed by the $400,000 to $600,000. It’s not insignificant to point out that while the number of sales overall has remained stable over the past two years, the number of sales within the $400,000 to $600,000 price bracket has increased to 28 per cent of all sales over the past 12 months.

In terms of newer dwellings, $500,000 certainly goes a long way in Wodonga. At this level of value, you could expect to purchase a large 200 square metre dwelling with a high-quality fit-out, situated on an allotment of between 550 and 850 square metres located within a well-regarded residential estate with either elevated views or situated close to schools, shopping and recreation facilities. Generally, these properties are of a display home type standard.

Older established properties at around $500,000 will secure the purchaser a large renovated period style dwelling located within close proximity to the CBD and situated on a large allotment of between 800 and 1,000 square metres.

If you’re looking for a tree change and are seeking a rural lifestyle property within the surrounding district, $500,000 will not get you much in the way of newer quality improvements, rather one should expect an older style dwelling most likely requiring renovation or updating.

With regard to vacant rural lifestyle land, you should expect to pay a minimum of $250,000 for allotments in excess of one hectare. Unfortunately, the tyranny of distance does not help in lowering the price point, particularly the closer you get to Yackandandah, Beechworth and Kiewa, all of which are well regarded and sought after localities.

In terms of investors within this market, $500,000 will most likely allow you to purchase two 1990 two-bedroom strata titled units in original condition with a lock-up garage and private rear yard. Unfortunately, there are very few blocks of flats within Wodonga, let alone at this price point. The last block of units sold had six one-bedroom barracks-style flats built circa 1970, which was purchased for $625,000 at a gross yield of just under 6.1 per cent.

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DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.