Melbourne May 2018

The month in review: Melbourne

By Herron Todd White
May 2018

Historically, Melbourne properties of $3 million and above have been classified as prestige. Recently, the ultra-prestige price for detached housing has increased to properties above $5 million and up to $15 million to $25 million, following the increasing number of properties falling between the $3 million and $4 million mark. Similarly, any townhouse or apartment above $3 million is labelled as prestige.

Melbourne has four main prestige areas,comprising parts of the Stonnington, Boroondara, Bayside and Port Phillip City Councils.

The main prestige suburbs in the City of Stonnington are Toorak, South Yarra, Armadale, Malvern and Malvern East, located in Melbourne’s inner southeastern suburbs alongside the Yarra River and a short distance to Melbourne’s CBD.

Kew, Hawthorn, Hawthorn East, Camberwell, Balwyn, Balwyn North and Canterbury make up the City of Boroondara’s prestige market. Approximately five kilometres east of the Melbourne CBD, the area is primarily residential in nature, with a number of renowned private schools such as Scotch College Hawthorn, Fintona’s Girls School Balwyn and Xavier College Kew.

Almost two-thirds of Boroondara consists of water courses and parklands such as the Yarra River and Yarra Bend Park.

Bayside and Port Phillip City Councils run along the north-east coastline of Port Phillip Bay. Most prestige properties are seen in Brighton, Middle Park and Albert Park, which are primarily residential suburbs with occupants attracted to the inner city lifestyle as well as the luxurious beach surroundings.

The prestige apartment market is evident in East Melbourne, St Kilda Road, Melbourne and St Kilda. Some addresses of note include: 150 Clarendon Street, East Melbourne; 60-66 Clarendon Street, East Melbourne; 51 Spring Street, Melbourne; and 576-578 St Kilda Road, St Kilda.

High net-worth individuals are the buyers driving these sectors. Similarly, developers drive prestige sales, where the current improvements add little value and the site is suitable for potential multi-unit or single dwelling development.

The inclusions high net-worth individuals seek are modern kitchens and bathrooms including stone benchtops, designer joinery and tapware, and floor to ceiling tiles in bathrooms. Other sought out inclusions are quality floor coverings such as timber flooring (parquetry or American Oak), travertine tiles and luxurious carpets, typically large gross building areas, basement car spaces, self-cleaning designer swimming pools, championship tennis courts, and landscaped properties.

Popular Melbourne based architect, Nicholas Day, has crafted multiple prestige properties throughout Melbourne. Other prestige architects include Phillip Mannerheim, Bruce Henderson and landscape architect Jack Merlo. Visioneer Builders is an award winning company specialising in the construction of prestige properties. These renowned property experts attract buyers who drive these sectors.

The Stonnington, particularly Toorak, market, Boroondara and Bayside markets have revealed good median house price growth in 2017. The current cycle has been generally firm for approximately six years, with the last softening occurring in mid-2012 (realestate.com.au). For instance, the Toorak median house price as at 9 April 2018 was $4.4 million, which has doubled since December 2016 and seen a growth of 30.9% over a year. According to Domain Group chief economist Dr Andrew Wilson, overall prestige prices in Melbourne itself rose by 11.6%.

The Reserve Bank of Australia’s first meeting for 2018 flagged the possibility of interest rate rises later in the year on the basis of the strengthening economy. Notwithstanding this, the commencement of the 2018 auction period in February revealed moderate results with auctions well contested in general and clearance rates at 70%. The current market appears to be in a steadying phase with a balance between buyer demand and vendor expectations. We note premium, A grade property continues to command good demand from purchasers.

The Melbourne prestige market looks to be continuing on from its 2017 growth in the short to medium term outlook. Prestige buyers are seeking great properties closer to the CBD. John Bongiorno of Melbourne’s Marshall White states, “I see a big trend that will continue over the next decade of inner suburb Melbourne in particular becoming more and more bullet-proof. With the development of infrastructure and congestion on the roads, people are getting fed up with waiting times in traffic and want to live, increasingly, within an eight- to 10-kilometre radius of CBDs. That’s where the best investments will be, too.” (domain.com.au).

In the long term view, there is caution, as the prestige market could be reaching its peak.

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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.