Regional VIC February 2018

The month in review: Regional VIC

By Herron Todd White
February 2018

Echuca

Building demand and tight supply continue to dominate the conversation at a local level with most local and bulk builders busy. This is consistent with continued gains in almost all market segments from the mortgage belt through to the higher end. Reasonable conditions in the rural sector will likely feed through to general buoyancy in the local economy and coupled with the construction of the second bridge, is likely to result in ongoing buoyant conditions for 2018.

Ballarat

Happy new year to all our valued customers.

The sun is blazing, the grass is yellow, the pubs are busy on school nights, many cafés are closed and many people are away with sand between their toes. It must be January in Ballarat.

As the Sturt Street set slink reluctantly back to their desks, we are to give our predictions of what will happen in the Ballarat bricks and mortar game this year.

Although unspectacular, our general prediction for the Ballarat residential property market is that it will continue to hasten slowly. The strong underlying economic fundamentals of the area are such that any downturn or deflation would be extremely surprising.

We consider the sweet spot of the market will again be renovated period properties in good locations. These locations include Ballarat Central, Lake Wendouree, Soldiers Hill and even Buninyong. The main driver of growth will be the demand for properties in these suburbs due to their location, street scapes and access to infrastructure such as the train station, Lake Wendouree, Parkland and the Ballarat CBD.

The new green field estate properties will again generally feel pressure to maintain their values due to ongoing over supply issues. Two estates which we feel could buck the trend will be Insignia and the new section of Lucas, known as Lucas Platinum. These estates border already established and well regarded areas and most importantly the supply of the land within the estates is finite.

Suburbs that seem affordable at present include Ballarat East, Golden Point and to a lesser extent Black Hill. We consider there to be a significant chance of positive price movement in these areas due to gentrification and an increase in the capacity and speed of the train to Melbourne.

We would advise buyers considering off the plan investment properties in most areas to use the utmost caution. Experience has shown us these often promise much but deliver little.

Mildura

The Mildura market played out as expected in 2017, ticking along steadily, with modest growth in particular for family homes in the $300,000 to $550,000 price bracket.

We expect 2018 will see a continuation of this trend. The Sunraysia region is currently benefiting from some significant investment in local horticultural industries, resulting in higher employment and stronger business activity. The strongest demand is likely to continue to be for good standard family homes in town and also for rural residential properties with plenty of room for larger sheds or swimming pools. These larger properties are predominantly between 2,000 and 5,000 square metres in size and located within a 10 kilometre radius of Mildura.

There are a number of traditional residential subdivisions currently underway in Mildura and we expect that demand will remain firm for serviced lots. Vacant building blocks in Mildura are expected to continue to increase in value as developers try to recoup ever increasing subdivision costs.

The release of land in some recently completed subdivisions in the outlying towns of Irymple and Gol Gol will help to satisfy demand from families and first home buyers able to avail themselves of first homeowner grants from state government. Prices in Irymple and Gol Gol are similar to Mildura, however the average lot size tends to be bigger, which is attractive to many buyers.

The rental market is expected to continue to be reasonably evenly balanced and rental growth is likely to be modest.

There are number of initiatives currently being proposed by Mildura Council, including the Mildura South Sporting Precinct, Mildura Motorsports and Community Precinct and stage two of the Mildura Riverfront redevelopment. These are big projects, reliant on funding from state and federal governments. While it is unlikely that the first two projects will commence in the short term, it is hoped that at least one may come to fruition in the next few years. These projects have the potential to drive tourism growth and have been eagerly anticipated for some time.

Finally, as Mildura endures a scorching week of high temperatures, we expect buyers to continue to look more closely at the energy efficiency of homes. One of the weaknesses of the current state-based energy rating scheme is that it does not differentiate between winter heating and summer cooling, so we occasionally still see houses being built in Mildura which are more suited to a cool climate and consequently require substantial energy to cool in summer. Builders and home owners need to be better educated to look at more than just whether a home achieves a 6 star energy rating.

Shepparton

The Shepparton property market (including Mooroopna and Kialla) has had a ten year median price increase of just 1% (CoreLogic). Yet the region has seen increased sales volumes with overall average days on market falling. Local agents have reported increased activity from all buyer types, with a noticeable increase in interest from metropolitan investors being attracted to the higher yields that the area offers. Mooroopna is starting to see an increase in the $350,000 plus market, which is considered to be ‘top of the market’, while good quality established stock in Shepparton and Kialla above $450,000 is becoming more fluid. Generally, new constructions with basic upgrades (cooling, appliances, benchtops etc.) are in line with market parameters, however overcapitalised builds are becoming more common.

Residential vacancy rates are sitting around 1.5% with approximately one third of the Shepparton population being renters. Investment yields in the area are hovering around the 6%, however it’s not unusual to find properties with tenants in place being sold with yields of above 7%. Hence the increased investor activity.

The major infrastructure project for 2018 is the Goulburn Valley Hospital redevelopment. $168 million has been pledged by the State Government which will see a four storey tower, three new operating rooms, refurbished and extended maternity ward, plus other upgrades. The hospital currently employs some 2,200 staff and is one of the largest employers in the region. Preliminary works have commenced, with an estimated completion date sometime in 2020.

Other infrastructure upgrades on the horizon are the passenger rail upgrade which will deliver more than double the number of services to and from Melbourne; and the Shepparton bypass project (which has been on the cards for 21 years and counting, however is now starting to gain some traction).

The relatively low property values, the planned infrastructure upgrades, the increase in buyer activity, and the regions proximity to Melbourne should bode well for an increase in residential property values over the coming 12 to 24 months.

 

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