Regional VIC February 2017

The Smartline Report – February Edition

The month in review: Regional VIC

By Herron Todd White
February 2017

2017 will see regions of Gippsland on the move and other regions stagnate.

Discussions with local real estate agents indicate that 2017 has started off surprisingly with an increase in buyer interest and sales. The expansion of the East Sale RAAF Base is increasing confidence in the local area. Rental vacancies in 2016 were at higher than usual levels, but 2017 is showing signs of investors coming back into the market. Sale could be the surprise packet of 2017.

The Latrobe Valley has come through a tough period. The forthcoming closure of Hazelwood Power Station has put some negativity in the market. Morwell seems to be the hardest hit with evidence of pricing at lower levels than 2014 and 2015, however rental returns are still at a high upwards of 8%. Traralgon new construction is still in good demand, so whilst there is some negativity, Traralgon may be a good buyer’s market at the moment with some good quality affordable properties available.

The Baw Baw region continues to grow. New housing is in high demand and land prices have increased in the past six to 12 months. A lot more workers are commuting to Melbourne and agents are selling properties quickly. There is evidence of increase in values in short term periods.

Koo Wee Rup/Lang Lang/Nyora
These areas have been a real surprise packet, with fast growth and strong demand. Land prices have increased from $180,000 to $240,000 in a 12 to 18 month period. Cranbourne and Peninsula buyers are becoming more interested in these regions. Rural residential small acreage parcels in Nyora are increasing in value.

East Gippsland
Bairnsdale will see continued average sales volume and demand ahead. For Paynesville, 2015 was a good year, 2016 an average year and average volume is expected in the year ahead. Lakes Entrance is showing better than five year average sales volume ahead. Overall East Gippsland has average to better than average sales volume.

Phillip Island
Phillip Island and the Bass Coast have seen relatively stagnant prices over the previous few years. Predictions for price level growth in this area are regarded as positive with minor price growth over the past six to 12 months. New housing coming on to the market in 2017 on Phillip Island, mostly around Cowes, may limit price growth as supply is seen to be keeping up with demand.

Recent press and news stories describing the Bass Coast and Phillip Island as affordable beach side living in comparison to other traditional destinations for Melbourne holidaymakers may result in increased demand and could have a positive impact on price growth.

An increase in interest rates is the most concerning factor with a large number of holiday homes and holiday rentals in this locality. Demand for a second residence or holiday home may decrease if the cost of borrowing increases.

Land sales in Echuca Moama were strong throughout 2016 and this is likely to continue in 2017 amid tight supply for existing housing stocks. Most agents continue to report strong demand for top end properties with numerous off market transactions occurring and several very strong sales, particularly well presented high quality holdings on the north side of the river.

It will be interesting to see how new land products coming onto the market will be received, particularly to the west of Echuca and further development in Moama. Notably there appears to be less premium for larger style blocks with strong sales over $500,000 being achieved for standard residential lots in the more sought after high residential developments.

There has been a strong start to 2017 with agents reporting minimal downtime for the Ballarat residential market during the Christmas and New Year period. The market is expected to perform well in 2017 with continuing population growth in the region.

It is expected that the upper echelons of the market will continue to perform well with demand continuing to exceed supply for good quality properties.

Period style housing in this market continues to be highly sought after. Areas in particular that will perform well in this sector are Lake Wendouree, Newington, Ballarat Central, Buninyong and lifestyle properties.

The lower end of the market is expected to remain static with little growth. Rental markets in these lower sectors are likely to continue to perform well with good returns.

Values in Delacombe and Winter Valley are expected be static for the foreseeable future with an over supply of vacant land coming to the market and numerous new estates.

Ballarat East and Redan have potential to show growth through gentrification in the lower end of the market. These suburbs show growth potential with high volumes of period style housing currently at affordable levels. They also benefit from proximity to services and the city centre.

Overall, the Ballarat residential market is expected to perform well and in line with 2016 trends.

The Horsham residential market certainly has room for improvement in 2017 coming off a sluggish 2016, however, above average harvest yields produced this season may instil some confidence back into the region and the property market.

Despite the better rural season, the market is expected to remain slow at the top end with a limited buyer pool in this price range. We hope to see an increase in the volume of sales within the owner-occupier market ($300,000 to $400,000). Local agents are already reporting an increased buyer interest this year in comparison to the same period last year, however we expect prices to remain relatively stable within this price bracket. Unit prices are likely to remain stable with interest from both investors and people looking to downsize. The rural residential market will again be closely watched with a low volume of sales and high volatility expected.

The Mildura economy has picked up in the past few years, largely attributed to stronger returns being experienced by our local farming sector. Producers of table grapes, citrus and almonds in particular have reinvested their profits by expanding their farms and upgrading machinery. This investment has filtered through the wider economy.

The improved conditions have contributed to the housing market in Mildura continuing to tick along steadily. While capital gains have been modest over the past one to two years, there has been some growth evident, particularly for family homes in the $300,000 to $550,000 segment.

We expect that 2017 will see a continuation of this trend. Buyers are a mix of people moving to Mildura for either employment or retirement and locals looking to upgrade to more substantial homes. Buyers in this segment are looking for 3- or 4-bedroom, modern homes in better locations. The presence of well designed outdoor living areas remains on the top of buyers’ wish lists.

Meanwhile, the most noticeable increase in value has been for vacant land. The cost of completing land subdivisions has increased in recent years, however developers have managed to recoup these cost rises through a combination of smaller lot sizes and higher sale prices. $100,000 is becoming the norm for a 700 square metre serviced lot in Mildura and larger, rural residential lots in preferred areas are now selling for over $150,000.

Values in outlying towns generally track below Mildura, with the exception of Irymple and Gol Gol. These two satellite towns are within 8 kilometres of Mildura, have good amenities and are popular with families. There are a number of residential subdivisions currently under way in these two towns which are expected to satisfy demand for new housing in these areas in the short term.

Rents have risen modestly during the past year or so and it appears that the rental market is relatively evenly balanced at the moment. We expect this situation to continue throughout 2017 as a result of the relatively large number of rental homes constructed in recent years.

Warrnambool has had little growth in the median house price over the past six year period. The oversupply of vacant residential land within Warrnambool is believed to be haltering the growth and we can expect much the same for the coming year.

Similar to 2016 it’s expected that Central Warrnambool will remain the strongest performer in 2017, with high levels of demand and limited supply, driving the increase in capital and shortening of days on the market.

North Warrnambool and Dennington are expected to remain the affordable pockets and are suited to first home buyers and families. Alternatively areas comprising 1950 to 1980 built dwellings, such as Merrivale and West Warrnambool, should be treated with caution, inspite of relatively good rental returns.

Prestige real estate exceeding $750,000 is expected to continue to hold its value in 2017. Extended marketing periods generally apply in this sector, which is due to limited buyers. Agents however, report realistically priced properties are generating satisfactory interest and in some cases sell in relatively short time frames.

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2016. Australian Credit Licence Number 385325

Share on:

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.