Melbourne April 2017

The month in review: Melbourne

By Herron Todd White
April 2017

Inner city
Middle Park and Albert Park are very desirable locations for owner-occupiers in this current market. Close proximity to the beach, public transport options, city cafes, bars, parks and local schools all help make Middle Park and Albert Park appealing.

Within Middle Park and Albert Park, houses are considered more desirable due to greater security of value and they are also deemed easier to sell. Period dwellings make up a large portion of the properties located within the inner-city suburbs with many having undergone contemporary renovations. Unrenovated properties or properties with dated renovations are achieving premium sale prices to allow purchasers to renovate according to their personal style.

Dwelling prices in Middle Park and Albert Park have risen approximately 32% to $1.885 million and 30% to $2.25 million respectively over the past three years which demonstrates the strong appeal. Being close to the city but still far enough away to retain the area’s personality is a key factor in contributing to long-term growth. The continual expansion of the city and growing population ensure these suburbs will remain in high demand and maintain capital growth over the long term.

Prestige
Suburbs such as Toorak, Hawthorn and South Yarra are all continuing to perform well. As of December 2016, the median house prices for these suburbs were $4.762 million, $2.47 million and $2.285 million respectively, with a quarterly change of 22.1%, 18.8% and 28.4%. The in-demand properties are those with large land holdings, or property that can be redeveloped or knocked down without any restrictions.

Apartments that have a point of difference are performing well compared to the rest of the apartment market. Off-the-plan apartments have received much negative publicity in recent times; however, apartments that have high-end finishes in desirable locations with good views are continuing to fetch good returns for investors.

9 Towers Road in Toorak set a new Victorian record when it sold on 20 December 2016 for $26.25 million.

South-east
The popularity of property located within school zones has really become apparent over the past few years. Within the south-eastern region, the McKinnon Secondary College zone has driven property prices up at a steady pace and the market appears to show no apparent signs of slowing any time soon. According to REIV, median property prices for the December 2016 quarter in suburbs such as McKinnon and Bentleigh, both within the coveted zone, have increased an impressive 88% to $1.652 million and 78% to $1.377 million respectively over the past five years.

REIV evidence shows that dwellings situated within the coveted school zone are bringing in on average 25% more than those properties located just outside the zone, which demonstrates the popularity the school zone brings to the area.

Established detached dwellings and townhouses with at least three bedrooms are the most popular housing options for the area. This is evidenced by the ABS statistic that over 25% of the residents of McKinnon and 19% of the residents of Bentleigh are established families that would appreciate the local school zones. The locality of parks, sporting ovals, various public transport options and local shopping facilities are also contributing factors to the popularity of the region.

With the subject of education being a significant factor in families’ housing preferences, it is expected the houses located within the coveted McKinnon Secondary College area will continue to bring in strong prices.

Outer north
Whilst there are a number of developing suburbs within Melbourne’s outer northern region, Mickleham appears to be the most desirable to buyers at present with high volumes of sale transactions. This is likely driven by the overall limited supply of developed land, coupled with immigration levels increasing demand within the area as prospective purchasers look to build new family homes within this developing location.

Vacant allotments within Melbourne’s outer north continue to provide a relatively cheap price point for buyers seeking varying lot sizes. Buyers are able to secure larger lots compared to suburbs closer to the city. The median price for 4-bedroom houses within Craigieburn was $429,000 (December 2016) compared with $690,000, $785,000 and $985,000 for Fawkner, Reservoir and Preston respectively.

Demand is primarily focused on detached dwellings. The developing nature of the area is typically producing new housing products with very few renovation prospects. The most keenly sought-after housing is large, 4-bedroom detached dwellings to accommodate growing families, with the strongest price point for new established dwellings being $500,000 to $600,000.

The high level of demand within this price point appears to be driven by families looking to upgrade. Whilst it is not clear whether the demand at this price point is sustainable, there does appear to be a strong level of demand, underpinned by population growth.

Outer east
Within the outer eastern suburbs, Mitcham and Nunawading seem to be very desirable at the moment for house buyers. This is due to many factors. Firstly, they offer excellent transport links including easy access to train stations and major arterials such as the Eastern Freeway, and are within close proximity of schools. They also offer established dwellings on reasonable-sized lots, which are appealing to buyers.

Families are purchasing in these areas to be close to schools and local amenities. In particular, they are appealing to Asian buyers. The median house sale price in February 2017 was $920,000 (RP Data) in Mitcham and $935,000 (RP Data) in Nunawading. For approximately $920,000, buyers can purchase a 3-bedroom house on land of approximately 600 square metres in Mitcham and approximately $935,000 in Nunawading. In comparison to many other eastern suburbs with good transport links, these areas provide a more affordable option. We expect this popularity to continue and follow the trends of surrounding suburbs.

In terms of townhouses, Doncaster and Doncaster East have seen large increases in development and demand. This has been due to the large allotment sizes and demand for lower-priced family properties. Brand new townhouses are very appealing to Asian buyers. The median house price in Doncaster in February 2017 was $1.27 million (RP Data) and Doncaster East was $1.17 million (RP Data) – hence unaffordable for many families. Conversely, 4-bedroom townhouses in Doncaster can be purchased from $950,000 and from $900,000 in Doncaster East.

The trend with townhouses in Doncaster and Doncaster East is likely to continue due to the large demand for more affordable properties. Driving the demand for townhouses are families wanting to live close to schools and amenities such as Westfield Doncaster. Due to the increases in population this trend is likely to keep rising in the short term.

 

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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.