Regional VIC July 2018

The month in review: Regional VIC

By Herron Todd White
July 2018

Echuca

The lazy half a million puts the buyer fairly and squarely in the middle of slightly better than average 4-bedroom, 2-bathroom accommodation in the Echuca Moama marketplace with established surrounds plus pool or shed depending on the size of the block. Generally speaking, there is good demand for rentals of these types of properties though this tends to spike seasonally in the lead up to Christmas with the net migration of professionals into town. Typically yields sit at around 5% and a little higher during peak periods and lower during off months.

Mildura

$500,000 is enough to buy an above average home in Mildura. The main segments where we see this price point are modern homes, often with a pool, in better regarded subdivisions in Mildura, or slightly older homes on 4,000 square metre lots within ten kilometres of Mildura. The choice will come down to personal preference, with people wanting convenience and lower maintenance choosing the former and those wanting the extra space and room for sheds or greater landscaping choosing to live out of town.

At this stage, we would expect both categories to perform well over the short to medium term. With the outlook for interest rates remaining low and Mildura’s economy improving on the back of stronger conditions in the horticultural sector, we expect demand for better standard housing to remain strong. There appears to be a larger pool of buyers prepared to pay $500,000 than was evident two or three years ago.

Last year, when posed with the question of where to invest $500,000, we suggested buying a complex of three or four 1980s built residential units. This option remains attractive for investors, with low vacancy rates providing certainty of income and a likelihood that rents will increase in real terms.

Ballarat

Last year we told you $500,000 would get you a renovated period property in a good location close to the CBD. The sale we gave as an example was 427 Doveton Street Nth Soldiers Hill; a four bed, two bath period dwelling renovated in the past seven to ten years set on a 552 square metre block.

As we look at the example sales provided in the article, we can see that the inner ring period property market has indeed strengthened significantly. To illustrate the point, in the past week, 322 Lyons St Sth, Ballarat Central sold for $500,500.

On balance, this property is in a similar location to the Soldiers Hill property, however, it is on 50 square metres less land and provides 3- bedrooms, 1- bathroom and open plan living areas. Additionally, this dwelling is in an inferior internal condition to the dwelling analysed last year.

There are however large sections of the market which have only seen moderate growth. These areas include large parts of Alfredton, Delacombe and Sebastopol. The growth in these areas is limited by the ongoing supply of land and dwellings onto the market. In these areas $500,000 will still buy a near new dwelling with four bedrooms and 2- bathrooms on 600 square metres of land.

In many ways, this price point is the ‘sweet spot’ in the market. The pool of purchasers at this price point is deep and varied, including families, singles, young couples, downsizers and investors. Due to this deep pool, we expect the price point to continue to perform well as the population of Ballarat continues to expand.

Rental returns at this price point however, are generally not spectacular with single period dwellings close to town returning circa 3% to 4% and modern dwellings returning 4% to 5%.

Bass Coast

The $500,000 price point in the Cowes residential market will buy you a modern three to four bedroom 2 bathroom dwelling located on a 480 square metre to 600 square metre allotment in the new housing estates. Alternatively, you could purchase an older style three bedroom dwelling in original condition below $400,000 however, in closer proximity to the beach or township, which appeals more to the investor/holiday market rather than the owner occupied market seen in the new housing estates.

Within the past six months the Phillip Island residential market has seen strong buyer activity with a good level of demand resulting increased capital growth. The entry level and middle markets have seen a significant increase in values in both existing smaller style holiday houses and modern dwellings. Agents are particularly reporting a strong demand for vacant residential allotments within new subdivisions with demand outweighing supply, with many purchasers consisting of retirees from the Melbourne eastern suburbs.

For a new three to four bedroom dwelling in a new rental ranges from $350 to $400 per week.

Wellington Shire

In the Wellington shire area, $500,000 will purchase a good quality four bedroom dwelling in a modern estate, generally with reasonable ancillary improvements, including outdoor living area and shedding. Alternatively, $500,000 will also buy a renovated older style dwelling in a central location, close to the CBD and recreational facilities in a well regarded area. In terms of rural residential, it’s possible to purchase a reasonable quality (although older style) dwelling with extensive ancillary improvements for around $500,000.

For investors, $500,000 could buy two circa 1970s dwellings in established areas in Sale or Maffra, with a rental return in the order of 5.5 to 6.5%.

In the short to medium term, property at these price levels is expected to show a low to moderate level of growth in the Wellington Shire, particularly given the expansion of the East Sale RAAF Base and subsequent population growth and job creation in the area.