Inner City and Inner Suburban
Inner City and Inner Suburban Over the past 12 months, St Kilda has experienced median house price growth of just under 20%, from $860,000 last December up to $1.03 million by October 2016 (Source: REA Group Ltd, 2016). The St Kilda house market is comprised predominantly of period dwellings, with Victorian and Edwardian terraces, California bungalows, Spanish mission villas and art deco apartments, as well as modern townhouses and apartments. St Kilda is considered desirable by young buyers and middle-agers due to its proximity to the beach and the CBD, as well as its vibrant café and music scene and public transport access.
The Melbourne apartment market continues to be viewed with caution. The median unit price fell from $460,000 in December last year to $435,000 by the end of October 2016 (Source: REA Group Ltd, 2016). One main contributor to the falling demand for apartments is the decreasing rate of lending to foreign investors, as the major banks have tightened lending to international purchasers. Another factor is the continuing increase in supply of apartment stock in the city, with complexes such as Melbourne One, EQ Tower, 888 Collins Street and Platinum complete or beginning the settlement process at the time of writing. This fits with what we predicted at the start of the year, with concerns about oversupply and building regulations still casting a shadow over the apartment market.
While the Melbourne CBD and Docklands might appear to grab the apartment oversupply headlines, many suburbs in the inner north west of Melbourne have also seen large volumes of completions during 2016. We referenced concerns of excessive supply in suburbs such as North Melbourne, West Melbourne, Moonee Ponds, Ascot Vale and Essendon in our February 2016 predictions and it would appear that this caution was warranted.
The September 2016 quarter has seen falls in unit median prices across multiple suburbs. In North Melbourne, the median unit price fell 10.7% to $518,000 while in West Melbourne, the median fell by an even greater 17.6% to $482,000. In Moonee Ponds, the median unit price fell 13.8% to $535,500, while in Ascot Vale the median fell further by 26.6% to $455,000. Of the suburbs we referenced, only Essendon has seen a rise in the median unit price of 18.8% to $547,000 over the same period (Source: REIV, November 2016).
Vacancy rates appear to be impacted by the increased volume of apartments. In North Melbourne, the rental vacancy rate is 5.02% and is 5.24% in West Melbourne (Source: Real Estate Investor, 2016) compared to an average of 3% for inner suburbs up to four kilometres from the CBD (Source: REIV, September 2016). These higher vacancy rates – over twice the market equilibrium of 2.5% – underpin the relative weakness of the unit market in these suburbs.
Houses on the other hand have seen median price gains over the past quarter. We have highlighted the trend towards subdivision of large blocks in suburbs such as Sunshine, 12 kilometres west of Melbourne’s CBD, in previous Month in Review editions. The median house price in Sunshine rose 11.2% to $689,500 over the September 2016 quarter while closer to the CBD, in Maidstone, the median rose 15.2% to $755,000. Buyers being priced out of inner west suburbs such as Yarraville and Seddon are increasingly looking slightly further out to suburbs such as Sunshine, Braybrook, Maidstone, St Albans and Albion all with fast train links to the CBD, shopping, schools and road infrastructure.
The price growth in Sunshine has since been eclipsed with the sale of 3 Hertford Road, Sunshine on 29 October 2016. On 768 square metres of land and in the same family for more than 90 years, the sale price of $1.615 million smashed the previous suburb record of $1.1 million (achieved in June 2016) by over $500,000.
The larger lot size is positioned directly opposite the Sunshine Shopping Centre. It is also located inside the Sunshine Activity Centre Zone which was incorporated into the City of Brimbank Planning Scheme launched in December 2015 to encourage job growth and development around Sunshine town centre. The zoning permits development of up to four storeys (13 metres) for this address (Department of Transport, Planning and Local Infrastructure, 2016). These factors combined to propel the selling price to over $500,000 past the reserve. The property was sold to a buyer with adjoining land in an L-shape around the property.
Throughout 2016, the outer western suburbs have performed quite well although some suburbs have performed better than others. The table below shows reported median sale prices for September 2015 compared to September 2016.
As shown, Point Cook, Williams Landing and Werribee have performed particularly strongly. However, Werribee South has not performed as well which may be due to its isolation and the slow pace at which development is taking place.
A high sale was recently recorded in Point Cook – 23 Panorama Way sold on 1 August 2016 for $1.8 million. This waterfront property is situated within the Sanctuary Lakes estate. With a land area of 900 square metres and a total living area of 386 square metres, it comprises 4-bedrooms, 4-bathrooms and a double garage.
In the north of Melbourne there were not too many surprises in 2016. Dwellings in the inner north continued to perform well and show good growth. Suburbs such as Brunswick, Brunswick East, Thornbury and Northcote proved to be the strongest performing suburbs, with Victorian and Edwardian period homes fetching the highest prices. The median house prices for November 2016 for Brunswick, Brunswick East, Thornbury and Northcote are $920,000, $950,000, $997,500 and $1.112 million respectively (REA Group Ltd, 2016). First home buyers are now looking to suburbs with lower price points such as Pascoe Vale, Fawkner and Coburg North to get a start in the market and subsequently we have seen the median house price increase gradually throughout the year.
Throughout the north of Melbourne, median house prices across all suburbs showed some growth. In the mid north, there were no outstanding results or surprises, with suburbs such as Thomastown, Meadow Heights and Dallas all showing growth of around 5% (REA Group Ltd, 2016). In the outer north the performance of suburbs such as Greenvale and Craigieburn all remained steady, due to the abundance of new housing estates and supply of vacant land.
167 Clarke Street in Northcote set a new suburb record price of $4.3 million, eclipsing the previous record of 29 Cunningham Street by $760,000. The 5-bedroom dwelling which features a swimming pool, wine cellar and city views shows the increasing popularity of suburbs such as Northcote.
The 12 months to November 2016 have seen a steadying of the market and in general, flattening or modest price growth within the outer eastern suburbs.
As predicted, Ringwood continued to be popular with developers with a number of low-rise apartment developments reaching completion over the past year. Additionally however, developers continued to push further east to suburbs such as Kilsyth, Mooroolbark and Bayswater North. As affordability remains an issue for first-time purchasers, developers are taking the opportunity to develop traditionally larger blocks of land with a single dwelling on them and subdividing them into townhouses.
Wantirna Rise, Wantirna and the Harcrest Estate, Wantirna South are two new estates which have proved to be particularly popular over the past year. Fuelled by their proximity to reputable schools and the Westfield Knox shopping centre, purchasers paid in the region of $500,000 for a 450 square metre parcel of vacant land.
Glen Waverley and Mount Waverley were the two suburbs which appeared to be most negatively impacted by changes to foreign investment regulations established by the Foreign Investment Review Board (FIRB). This coupled with new legislation set by the Chinese government to limit movement of funds out of mainland China to US$50,000 per year saw considerable stagnation and in some instances price decreases within Glen Waverley and Mount Waverley. In the last quarter of 2016 however, it appeared that the market began to regain momentum, driven partially by the record low interest rates, but also local purchasers and families determined on ensuring their children had the opportunity to enrol in one of the best schools in Victoria.
As predicted at the start of the year, Frankston has started to show the signs of growth that many have been forecasting for a while. In the Frankston area, namely Frankston, Seaford, Carrum Downs and Langwarrin, entry level houses circa $400,000 to $500,000 are in high demand and selling well due to limited supply. The market continues to be strongly influenced by record low interest rates, strong buyer demand and limited available stock. This also links in with an affordability issue as buyers are priced out of more affluent areas closer to the city.
Further along the coast and into Bayside, established period homes and newly built townhouses and units performed strongly, especially those within close proximity of shopping centres or shopping strips, train stations and the beach. Markets performing not so strongly were off-the-plan apartments, in particular 1-bedroom apartments of around 50 square metres in size and apartments constructed circa 2000.
Predictions for a stabilising market and moderate growth in the south east housing estates have been a little off, as growth was generally stronger than initially predicted. In February we forecast that prices would stabilise due to high volumes of new land being released in the estates, however we have seen consistent growth throughout the year, namely in Clyde and Officer.
Previously overheated suburbs within the Boroondara municipality such as Balwyn and Balwyn North saw house prices dip at the end of 2015 and early 2016 as previously reported due to the restrictions on foreign lending by some of our larger banks in addition to limitations by Chinese banks on international bank transfers.
Towards the latter part of 2016 however there have been strong results throughout Boroondara, especially within coveted estates such as Sackville Ward. The recent sales of 107 Mont Albert Road, Canterbury and 51 Rowland Street Kew, which both represent essentially land value only, sold for $4 million and $4.8 million respectively. Both sales exceeded their reserves significantly and are considered to be well above an acceptable market range, demonstrating the re-emergence of Australian-Chinese purchasers within the area.
The trophy sale of 2016 would have to be 4 Robertson Street in Toorak. The undisclosed sale price, achieved only 22 days after hitting the market, is purported to have fallen just short of the Victorian record house price of $26 million.
The three level Provincial style dwelling boasts 7-bedrooms, 7-bathrooms, 3-kitchens, a dining room that seats 20 people and a 25 metre self-cleaning lap pool with spa. Designed by Casper Architecture and Design in conjunction with Thomas Hamel Interiors, the dwelling sits on over 1,700 square metres of land within a coveted Toorak estate. Despite having significant overseas interest, the swift sale of the property is reported to have gone to a local family.
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