Melbourne August 2018

The month in review: Melbourne

By Herron Todd White
August 2018

Melbourne has one of Australia’s fastest growing populations and the housing landscape has changed dramatically over the past 50 years to accommodate this. The outer suburbs have boomed with many new estates as city centre prices continue to be out of reach for many first home buyers and families. The city centre has seen a substantial increase in high rise apartments. Lifestyles have also changed over the years, with people seeking more of a work/ life balance and as such, property within half an hour of the CBD and close to public transport links continues to be highly coveted. Sustainability has also been an emerging trend in recent times, with the aim to encourage newly built homes to be as energy efficient as possible by utilising passive design principles.

CBD and Inner Suburbs

In the 1960s, the Victorian Government opened the Prahran Housing Commission Estate in an effort to boost the local population and inject life into the suburb. Today, Prahran Chapel Street is lively and buzzing with character from morning til late at night. Dwellers in the area are spoilt with boutique shops and a wide selection of cafes, restaurants, bars and nightclubs.

Prahran is an in-demand, inner-city Melbourne suburb, five kilometres south-east of the CBD. This hustling and bustling trendy suburb attracts young independent individuals. Growing demand has led to developers seeking opportunities to accommodate this and build large designer apartments. Prahran has a number of architecturally significant commercial buildings, many of which are on the Victorian Heritage Register. This suburb has a mix of historic narrow side streets full of characterful Edwardian and Victorian terraces and renovated Victorian cottages alongside sleek new apartment complexes.

Inner and Outer South East

The outer south-east has shown substantial growth in the past decade with areas such as Clyde, Officer and Pakenham, once vast farmlands, now sprawling residential estates to cater for the increased pressure on the housing market due to population growth.

In 1968, families looked to build modest homes with plenty of outdoor space for children to play and green thumbs to get their hands dirty. Fast forward 50 years and it is clear the shift is towards larger dwellings and smaller back yards with very little maintenance. Unlike the 1960s, most families today consist of two working parents who do not have the time to tend to a garden or a large lifestyle property. Many estates are built around lakes or parklands (such as Berwick Waters) so families can still enjoy the outdoor lifestyle without the hassle. Garages are also a staple in today’s homes, mainly due to council regulations to minimise street parking and the need for many people in these areas to drive to work. Most of the estates in the south-east have strict developer guidelines to ensure that houses all maintain a similar facade and are in keeping with the developer’s vision. There is also a shift towards sustainable homes, with most new developments having energy saving requirements as an essential component of the build, such as gas boosted solar and recycled water connections.

There has been an increase in buyers purchasing house and land packages with large reputable building companies where they can alter the house design to their particular needs. Such examples include deleting living rooms in favour of extra bedrooms or bathrooms, particularly when multiple generations are living under the one roof. Home offices are also becoming more common as the pressure on the transport system has increased commuting time for many workers and employers have embraced work from home strategies.

Due to such a sharp increase in housing supply in the last decade in the outer south-east, there has been an increased need for public transport, as there is still a lack of industry or business activity centres in the Casey and Cardinia area, although council is actively trying to change this. More established areas still attract higher prices, largely due to proximity to town centres and beaches. Homeowners in this area are increasingly choosing to subdivide their large lots, knowing that supply is limited in established regions such as the Mornington Peninsula.

Inner and Outer West

The outer western region continues to grow steadily like much of the Melbourne metropolitan area, with significant pressure from population increases driving up demand for housing. The landscapes of now established suburbs such as Truganina and Tarneit have transformed over the decades to fill the appetite for available land, with a number of new housing estates popping up. There are still some remnants of the industrial past of Truganina and Laverton, with a renewed focus from developers on creating residential areas that promote lifestyle living.

Traditionally the outer west has lagged behind the inner established suburbs for capital growth, with a greater supply of land compressing prices somewhat. This gap has begun to shrink with annual growth in capital values in Williams Landing over the previous five years at 10%.

 

This compares favourably with the growth of 10.3% experienced in the established inner suburb of Footscray over the same period.

The main challenge now for the outer western market is to adapt to the increasing concerns over housing affordability. Developers and local government have responded to the issue with an increased focused on density around activity centres and existing transport hubs such as Williams Landing. Recent apartment developments including Newtown, Oxford and the sold out Cedar Woods Lancaster have created living options within close proximity to public transport networks. A 2-bedroom unit in the Cedar Woods development will set you back $415,000.

The push to increase access to transport has been supported by the State and Federal government with plans to build two new train stations at Davis Road in Tarneit West and Wyndham Vale, as part of the Regional Rail Link project. The existing Tarneit railway station is the second busiest in Melbourne behind Southern Cross, highlighting the immense pressure being placed on existing networks from the increase in residents in the outer west region.

Estate developers have also responded to the issue of affordability by offering smaller lots on less than 400 square metres and attached townhouse dwellings. The change in composition of housing types resembles the inner suburbs more closely than previously.

The inner west of Melbourne has seen dramatic change over the past 50 years from its industrial and working class roots of the past. Many of the region’s suburbs within five to ten kilometres of the city have become desirable places to live for many young families and professionals.

Scoring a 4-bedroom weatherboard home in Yarraville for $180,000 in 1996 wouldn’t have seemed so special all those years ago, but you’d be hard pressed to find a decently sized block under the $1 million mark today. The number of buyers for areas in and around social hubs such as Footscray, Seddon, Newport and Williamstown has driven up capital values over the decades. The community feel and aspects outside of the physical house have been attractive to buyers.

Connections to the heritage of the area such as the reactivation of the Sun Theatre in Yarraville are attractive to prospective purchasers of residential real estate.

The premium for available space has seen a response from developers and planners to increase density in the inner west region. Newly fitted out 2-bedroom units in the established Seddon area range from $800,000 to upwards of $1 million.

Further afield, the apartment market has hit the suburb of Moonee Ponds, with developments including Rise and Oro offering modern dwellings. The changes in the landscape signify the push to more dense living spaces, a far cry from the dispersed nature of much of the inner west region many decades ago.

Inner and Outer North

The property market continues to be heavily influenced within the inner and outer northern suburbs. Significant net immigration in the outer northern areas such as Craigieburn, Mickleham and Kalkallo has led to lower vacancy rates and properties being listed on the market for much shorter periods. This has ultimately led to increased value and rental returns for property in the outer north. The inner northern property market is heavily restricted by the availability of credit from main financial institutions. Twelve months ago there was more money available for purchase leading to an increase in numbers of properties being purchased and sold, but in 2018 this has not been the case and has led to an overall squeeze on property value.

The housing mix in outer north areas such as Wollert, Diggers Rest and Mernda has increased the amount of smaller sized attached townhouses compared to larger living detached dwellings. The primary focus point of this change is to complement the transport and shopping centre hubs which derive the main source of value in the outer northern areas.

The Melbourne City Council (MCC) has led a sustainable initiative for units in the inner northern suburbs of Collingwood, Brunswick and Carlton. The main focus point is to increase the number of units and apartments by making car spaces obsolete to encourage walking and bike riding. The higher rate of units compared to townhouses in the inner suburbs derives from units proving to have superior floor plans, more access to natural light and caters well for the increasing number of downsizers within Melbourne.

Fifty years ago the housing property was abundant with late post war and rendered triple fronted styled dwellings. Properties located in Balwyn and Bundoora in 1970 would have been worth $34,000 and $33,750 respectively compared to the current price tag of $2.386 million and $750,500. The property market has expanded massively since 1968 which opens up discussion of just how much more the property market can possibly increase before it plateaus or declines.

Eastern Suburbs

Taking a trip down memory lane 50 years ago, one of our Senior Valuers was able to share that he bought his first home in Lilydale for $31,000 in 1976. He was required to pay a $10,000 deposit and secure a home loan for $20,000. Fast forward to today and the median price for a 3-bedroom, 1-bathroom house on an 840 square metre block is about $720,000.

In 1972, a humble 3-bedroom, 1-bathroom double brick house in North Balwyn sold for $23,500. At that same time, houses in Doncaster were about $10,000. Today’s median price for a 3-bedroom house in North Balwyn is $1.795 million and $1.35 million in Doncaster (source: realestate.com, July 2018).

In the 1960s, Blackburn and Nunawading saw a housing boom, where houses replaced orchards. The City of Nunawading Civic Centre opened in 1968, which combined with the City of Box Hill to form the City of Whitehorse in 1994 (Whitehorse City Council, July 2018). In the 1970s, property value was approximately 2.5 to three times the average salary for a single income earner. Today a household would generally have two sources of income and the property value is seven to eight or more times the combined salary.

In the eastern suburbs, a 1970 family home was about 90 to 100 square metres, 3-bedrooms, 1-bathroom, a back yard for the kids to run around and a hills hoist clothes line on a 600 square metre block. Typically now in these popular suburbs, 600 to 800 square metre blocks are being subdivided to accommodate two or three new townhouses that are approximately 200 to 250 square metres of living area plus an alfresco.

The other end of the spectrum is to build a big modern 400 square metre plus home with five bedrooms all with walk in robes and en suites, theatre room, alfresco and swimming pool.

Summary

The increasing population remains the driving force behind many of the changes seen over the past half century. To accommodate this, the housing market has had to adapt with developing what was once farmland into residential estates, increasing the height of high rise apartments and building low rise apartments and townhouses on the city fringe. Well established suburbs with limited available land have seen an increase in subdivision, with battleaxe blocks becoming increasingly common as home owners look to cash in on the value of land.

Sustainability has also been a key focus of the 21st century with many run down industrial areas being transformed into bustling residential hubs, whilst still maintaining the industrial feel of the town’s roots. Lifestyle changes have also been a contributing factor, with people wanting to be closer to social hubs and within easy access to public transport. This has put pressure on the state’s infrastructure, leading the state government and local councils to push for an increase in public transport and community facilities.

The low interest rate environment has encouraged many first home buyers to enter the market.

As the banks begin to tighten restrictions on lending, the market looks to remain steady in the short term, although the supposed interest rate increases could change this in the foreseeable future.

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