Melbourne March 2018

The month in review: Melbourne

By Herron Todd White
March 2018

The middle ring suburbs of Melbourne are generally considered to be within 10 to 25 kilometres of the Melbourne Central Business District (CBD). These suburbs are filled with a mixture of single residential and multi-dwelling developments, amenities and educational facilities and are serviced by public transport with a combination of trains, trams and buses. As the median house price rose for the fifth consecutive quarter to $821,000 (REIV) many prospective homeowners and investors are looking to the middle ring suburbs for properties that represent good value for money with location, amenities and proximity to education facilities also being prime factors. Owner occupier and rental demand are both relatively strong in Melbourne’s middle ring suburbs.

Melbourne property

While the proximity to the CBD is a defining factor for the prices in the middle ring suburbs, price is not necessarily middle of the market with many of the suburbs, predominantly those in the east, having substantially higher medians than the city-wide median.

Within the middle ring to the east are suburbs such as Doncaster, Nunawading, Blackburn and Ashburton. These suburbs are primarily comprised of stand alone dwellings in excess of $1 million due to their land values and development potential, as well as townhouses from said developments being purchased for a minimum of $850,000 on average. Notable sales include 38 Karnak Road, Ashburton, a 4-bedroom, 2-bathroom stand alone dwelling sold by Marshall White on 28 November 2017 for $2.35 million and 25 Jeffery Street, Blackburn, a 4-bedroom, 2-bathroom stand alone dwelling sold by Ray White on 15 September 2017 for $2.38 million.

Melbourne property 2

South-east Melbourne suburbs such as Mentone and Parkdale fall within the middle ring and have a median house price in excess of $1.2 million, demonstrating strong demand and buyer interest. Comparing these to neighbouring suburbs Bentleigh and Highett, with median house prices of $1.54 million and $1.4 million respectively, highlights how demand for particular suburbs is driving the market.

In comparison, Melbourne’s northern middle ring suburbs are considered to be a more affordable option. Demand here is driven by owner occupiers, especially first home buyers and young families, who are looking for more spacious accommodation options but have been priced out of the eastern suburbs markets. Overall, the northern suburbs experienced a steady growth throughout 2017 and vacant land prices have enjoyed significant growth in the past 18 months.

In established suburbs such as Broadmeadows and Thomastown, older style detached houses remain the most popular option, with a median house price of $620,000 and $688,000 respectively in December 2017 quarter, according to REIV. This equates to 32% and 20% lower than the metropolitan Melbourne median respectively. These established suburbs offer residents access to developed infrastructure and public transport, whilst also providing opportunities for development.

Demand for townhouses and apartments in the northern suburbs remains subdued due to relative availability and affordability of vacant land, but is becoming more popular due to population growth, especially with first home buyers. Rental demand is mostly driven by proximity to public transport and educational facilities, particularly around university precincts such as the RMIT University and La Trobe University campuses in Bundoora. With a median unit price of $427,000 some 39% lower than metro Melbourne median, Bundoora has a rental median of 4.2% compared to 3.6% for metro Melbourne.

The western suburbs middle ring suburbs, along with the northern suburbs, are considered the affordable suburbs. A number of these fall below the city-wide median house price of $821,000, including Sunshine North, Laverton, Cairnlea and Albion, with median house prices of $704,000, $565,000, $698,000 and $768,000 respectively. These suburbs offer good infrastructure, amenities and proximity to the city and are in demand from owner occupiers, investors and developers. Two suburbs undergoing heavy redevelopment in the west are Footscray with a median house price of $935,000 and a median unit price of $443,000 and Airport West with a median house price of $912,000 and a median unit price of $641,000. Both are continuing to perform well on the market with clearance rates of 73.3% and 76.2% respectively, driven predominantly by owner occupiers and developers looking for their next project. Some notable sales in the west include 3 Rippon Street, Footscray, a 4-bedroom, 2-bathroom stand alone dwelling sold by Village Real Estate on 25 November for $1.56 million and 52 El Reno Crescent, Airport West, a 4-bedroom, 2-bathroom stand alone dwelling sold by Barry Plant for $1.415 million on 4 December 2017.

Melbourne property 3

Overall, last year’s selling season was energised by low interest rates which was a key driver of demand and overall, the middle ring suburban markets were very strong. Auction rates remained high, only losing a few points over the Christmas period.

We expect the western and northern middle ring suburbs to continue a moderate growth throughout 2018 with strong rental results particularly around university campuses. Infrastructure development, such as Mernda rail line extensions, will also continue to push median prices up and continued redevelopment of underutilised, older style dwellings on large allotments will bring new life to these suburbs. The eastern suburbs are expected to remain relatively stable with some slower growth due to their generally higher median house prices.

In 2018 we will be watching the so called bridesmaid suburbs. These suburbs, which have not traditionally been seen as appealing as the more well known suburbs or suburbs located closer to the CBD, have seen rising property prices as purchasers are pushed out from their preferred suburbs and are looking for the next best option within close proximity. For instance, Mill Park located just north of Bundoora has a median house price of $682,000, compared to $830,000 in Bundoora. Closer to the CBD, Reservoir has recorded median house and unit prices of $840,000 and $585,000, while more established Preston, located just three kilometres away, has medians of $1.05 million and $615,000.

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