The month in review: Regional VIC
By Herron Todd White
Property prices remained stable over the past 12 months. The winter months showed a slight slowdown, with agents having buyers but struggling to get the listings. The spring months have seen an increase in buyer activity. Traralgon has a larger portion of land to buy which has seen an increase in construction. Morwell prices have slowed slightly, although whether this is a reaction to the fires of last year is hard to tell. On the positive side for the investor market, rental returns are as high as 7.5% to 8% on lower purchase properties. Sale tends to hold its own, and with the RAAF base expansion, we would put Sale in the watch and act category.
This is considered a real growth area, being only an hour from Melbourne. Construction activity remains on the increase with the Waterford Rise Estate continuing development.
Prices here have been stagnant with generally medium interest, however high end value properties are considered to be at their most affordable prices in many years, plus very high rental returns are achieved in peak seasons on low to medium priced properties. Phillip Island could be the sleeping giant.
Koo Wee Rup/Lang Lang
This area is on the move. Close to Pakenham and Melbourne, land prices in these two localities have increased in the past six to nine months with good demand for new homes and building.
Prices have remained stable with an increase in buyer activity in recent times. It may be a good time to buy as 2016 looks more optimistic compared to recent years.
The strong performers in the Horsham residential market this year have proven to be the middle tier market from $300,000 to $450,000, mainly comprising large modern homes within developing or modern subdivisions. This market has taken off with resales displaying good levels of improvement in value.
On the other side of the coin, the property that has not fared so well is the bottom end of the market from the $95,000 to $150,000 price bracket that generally comprises small ex-government housing purchased by investors.
This market has seen limited growth in 2015 and values remain relatively steady in many cases. This market movement was opposite to expectations, largely as a result of the relatively weak national economy and APRA changes to investment loan criteria enabling the owner occupier market to dominate sales volume. This focus on owneroccupiers brought about a number of top end sales in 2015, in particular a property on Eastgate Drive, Horsham that sold for $599,000 and a property in Haven that sold for $675,000 which indicate the underlying confidence in the local market.
2015 saw the Warrnambool property market regain some of the growth lost in the previous 12 months.
The numbers of sales were down on previous years which is attributed to the ongoing uncertainty surrounding current interest rates. Buyers active in the market took advantage of some great purchasing opportunities with the 2015 market considered a buyer’s market.
The median housing price remained steady in comparison to recent years at $325,000, with the best performing market being between $300,000 and $400,000 which accounted for approximately 48% of sales. The prestige market of Warrnambool performed the worst, with little sales transacting over $700,000. Extended selling periods were required to achieve a successful sale with a limited number of purchasers in this bracket. The majority of home owners considering selling in this bracket decided to hold on until the market saw some improvement.
The current oversupply of residential land continues to be a major factor in Warrnambool’s property market, with properties built in the 1980s to early 1990s, feeling the pinch the most, as potential purchasers opt to build new, rather than buy old and established. Land values have also suffered due to this oversupply with some developers offering incentives to purchase particular parcels of land.
Located in one of Warrnambool’s most tightly held locations, Stansfield at 3 Victoria Street was offered for sale for the first time in over 45 years. The property comprised a fairly original sandstone dwelling and was purchased at auction for $650,000, after considerable interest. 5 Melaleuca Court was offered for sale in 2015 and comprised a circa 1980s clay brick dwelling located within one of Warrnambool’s most exclusive areas, featuring river frontage on a site of approximately 4,025 square metres. It sold for $1.11 million.
It has been a year of fits, starts and false dawns for the Ballarat residential market as a whole. Through the long and traditionally quiet winter months, discretionary vendors kept their properties off the market to wait for their gardens and purchasers to burst into life. However when the leaves returned to again adorn the trees the market was hit by two events which had vendors holding their hands and cheque books firmly in their pockets.
Around August, Australian mortgage regulators tightened lending policies on investment properties which effectively increased the amount of cash or capital an investor needed to purchase the same property. Consequently, the sub $300,000 market in Ballarat which is increasingly investor driven saw a softening in demand.
Additionally, after staging a near three year surge the Melbourne and Sydney markets came off the boil and returned some sub optimal auction clearance rates in the initial weeks of spring. This had the doyens of Domain and the like dashing for their quills to fill property paper pages with promises that as they oft predicted, the bubble had burst and we were in for the worst.
In turn and unsurprisingly, Ballarat’s initial months of spring were dull, with even the most bullish agents admitting the demand for their services was somewhere less than the usual out of control. However vendors held their nerve, their breaths and their asking prices and, as they have done before, the purchasers returned, first in an indignant huff and then an insistent rush. So much so that November to date has shown some very encouraging results which indicate, not for the first time the rumours of the burst have again been greatly exaggerated.
The most sought after properties have been established modern and period properties in established and developing areas. We have also noted that a property’s garden and cosmetic presentation has had a greater than usual impact on price.
Areas that have seen the greatest growth include Buninyong, Wendouree, Soldiers Hill, Black Hill, Ballarat Central and rural residential properties on the north and eastern sides of Ballarat.
Areas that have struggled include those with large supplies of property. These include Lucas, Delacombe, Sebastopol and some sections of Alfredton.
The surprise of the year has been the performance of Buninyong. The sleepy hamlet 12 kilometres south of the city has a significant supply of serviced lots on the market in several estates. However not only has this supply been taken up, but values of established new and period property in the area have seen growth of up to 10% for the year.
After perusing our predictions from February this year we have awarded ourselves the score of six our of ten. We were correct in predicting an unspectacular year from the prestige sector and new estates. However our crystal ball neglected to reveal to us the tightening on investment lending which rendered our gentrification proclamation of Ballarat East a miss judgement. Additionally we failed to predict the stand out performance of the Buninyong market.
77A glance back at the predictions we made at the start of 2015 for the residential property market suggest that we weren’t too far off the mark. The improved market conditions evident in 2014 have continued into 2015, although our data suggests that values levelled off in the second half. Well presented properties are still selling relatively quickly and agents are reporting good demand, particularly in the $200,000 to $400,000 price bracket. We have continued to see a smattering of higher valued sales, with the most noteworthy ones being an off the river sale of a prestigious home in Mildura for $1.5 million and the sale of a home overlooking King’s Billabong for $865,000.
Residential vacancy rates remain low, however the greatest demand is now at the lower end of the market. Where there had been tenants competing for properties in the over $300 per week bracket, demand at this level has subsided. It is possible that low interest rates have enticed tenants to instead purchase a property or it may just be that we have had less migration of professional people to Mildura in the second half of the year. It would seem that the rental market is now at a more balanced level.
Those subdivisions completed in 2015 have been selling quickly, reflecting some pent up demand. A rural residential subdivision in Koorlong has had 23 lots out of 26 sell within six months of release. Meanwhile a subdivision in the popular satellite town of Irymple has had 18 of 30 lots sell this year and the final stages of a subdivision in Mildura South has also sold quickly