The month in review: Melbourne
By Herron Todd White
Suburbs in Melbourne’s inner east such as Balwyn, Balwyn North and Deepdene are seeing strong activity especially in $3 million to $4 million price range. While the market has slowed slightly since this time last year primarily because of restrictions placed by Australian banks on Chinese investors, the area is still in high demand mainly due to the coveted Balwyn High School zone. Properties within this highly sought after zone can generally add anywhere from 15% to 30% to value compared to those properties located outside the zone (AFR, 2016).
The most common properties in the $3 million to $4 million price bracket are recently constructed French Provincial style dwellings while the older post war style dwellings that originally established the area are being snapped up and demolished to make way for the contemporary dwellings highly popular with the Chinese buyers still in the market.
Properties priced at $4.5 million and above on larger blocks of over 1,000 square metres with older style dwellings are taking longer to sell and are the slowest point in this market. Properties of this sort can take on average two to three months to sell, whereas smaller blocks with recent constructions are selling much faster and generally within 30 days as they are the property of choice for many of the Chinese buyers who still highly influence this sub market.
The most active price point in the inner east right now would be $500,000 to $1 million. The buyer demographic is varied and includes young first home buyers, families, overseas investors and empty nesters looking to downsize. Most of the properties purchased at this price point are apartments, units or flats. This price point is popular as it is attainable for a large portion of the populace through saving and lending and there is a high volume of stock available.
The slowest price point would likely be $2.5 million plus, due to lower supply and stricter lending to foreign purchasers. This price point is largely unattainable for many potential purchasers.
Richmond has been the most active market within the inner eastern suburbs with 198 properties sold at auction so far this year. It is made up of period dwellings, new and old apartments and modern townhouses. It has appeal for both first home buyers and young families due to its proximity to the city and it is well serviced by amenities.
Docklands has been the least active market in terms of auctions, with just five properties sold at auction this year, although more have been sold privately. Docklands is considered less desirable to families due to lack of parks and schools and has also been affected by the major banks restricting lending to foreign purchasers.
Seddon and Yarraville (six kilometres and eight kilometres respectively from Melbourne’s CBD) appeal to buyers who might be priced out of other inner suburbs and are attracted to Victorian and Edwardian period era streetscapes, fast train and road links into the city, proximity to the bay and the village atmosphere. These two inner west suburbs have selling price points firmly entrenched in the $750,000 to $1 million range. Over the past 12 months, 58% of houses sold in Seddon have fallen within this range while in Yarraville this rises to 63%. In both Seddon and Yarraville, couples with children with income levels of $78,000 to $130,000 are the dominant household types. The most common age bracket in Seddon is 25 to 34 while at 35 to 44, Yarraville has a slightly older age profile (RP Data, 2016).
An example of a recent sale is 46 Wilson Street, Yarraville, a circa 1900 single fronted 3-bedroom, 2-bathroom renovated weatherboard home on a 105 square metre block which sold on 26 June 2016 for $908,000.
Moving out to Sunshine, 12 kilometres west of the CBD, the most purchased house price falls in the $601,000 to $750,000 range (39%). While household structure and age profiles are similar to suburbs such as Seddon and Yarraville, income levels drop substantially with $31,000 to $52,000 the dominant household income level (RP Data, 2016). Sunshine is the most westerly suburb of Melbourne with intact period homes. In addition, Sunshine as well as adjacent Sunshine North have larger block sizes and this factor combined with local employment and public transport draw buyers to this corner of Melbourne. Sunshine North in particular has average lot sizes of 600 to 700 square metres. The recent rezoning of parts of Sunshine and Sunshine North to Residential Growth has helped drive interest and prices upwards and many single residential lots are now being subdivided into three lots. The median house price in Sunshine North has risen from $473,000 to $533,000 or 12.7% over the 12 months to September 2016 (REA, 2016).
The outer western suburbs of Melbourne provide an opportunity for many buyers to enter the market. The price bracket with the most transactions over the past 12 months is $501,000 to $600,000 for Point Cook; $401,000 to $500,000 for Truganina; $301,000 to $400,000 for Wyndham Vale and $251,000 to $300,000 for Melton (Source: RP Data, 2016). As the distance from Melbourne CBD increases, the most popular price bracket decreases.
In Point Cook $501,000 to $600,000 will buy you a 3- or 4-bedroom house on an allotment of between 400 and 600 square metres. Similarly in Truganina $401,000 to $500,000 will buy you a 3- or 4-bedroom house on an allotment of 400 to 550 square metres. In Wyndham Vale $301,000 to 400,000 would secure a modern or established 3- or 4-bedroom house on an allotment of between 300 and 600 square metres. In Melton $250,000 to $300,000 buys you a 3-bedroom established house on an allotment of between 500 and 700 square metres. Clearly, 3- to 4-bedroom houses are the most commonly purchased. This is because the demographic in these areas is mainly young families who require a minimum of three bedrooms for their growing families.
On the other hand, the slowest price points in these areas over the past twelve months are $1 million to $1.25 million plus in Point Cook and $751,000 to $1.25 million in Truganina; $751,000 to $1.25 million plus in Wyndham Vale and $401,000 to $1.25 million plus in Melton (source: RP Data, 2016). In most cases it is the higher price points that have the least sales. This is mainly due to the low supply of dwellings at these price points. These areas are predominantly new estates with similar land sizes and similar pre designed dwellings. There are not many architecturally designed high specification homes that could obtain a higher sale price. Furthermore, demand for high priced dwellings in these areas is low as larger budget purchasers may prefer a superior location, for example closer to Melbourne’s CBD.
The price point most active in Melbourne’s north is $700,000 to $1.2 million. This price point is especially active in inner suburbs such as Brunswick, Northcote, Thornbury, Preston and Coburg. This price point is popular in properties within close proximity of the CBD.
A suburb that continues to be one of the most dynamic in Melbourne’s north is Northcote. Northcote has had a quarterly median house price change of 18.2%. This can be explained by the suburb’s proximity to the CBD, its public transport connections, trendy bars, cafes and live music venues. Northcote has also experienced a number of high end sales. 25 Simpson Street, Northcote (see below) sold for $2.34 million on 27 August 2016.
One of the slowest and least active suburbs in Melbourne’s north is Broadmeadows, highlighted by its median house price of $390,000 and quarterly growth of 2.2%. Broadmeadows has also had less than 30 sales within the suburb in the last quarter (source: REIV, 2016). A possible reason for this small amount of activity is the huge supply of affordable, newly constructed homes in Melbourne’s outer north suburbs such as Craigieburn and Greenvale.
In comparison to this same time 12 months ago, Glen Waverley has experienced a considerable slowdown. This was expected as such rapid growth rates were simply not sustainable and the change in foreign investment rules also reduced the number of competing buyers in the market. Although those properties located within prestigious school zones are still achieving high market sale prices due to modest competition between local and overseas buyers, it is those secondary properties located outside the school zones which tend to be the slowest.
Within Wantirna South the most favoured price point tends to be between $750,000 and $950,000. For this, buyers can expect to purchase a partially renovated or updated 3- to 4-bedroom, 2-bathroom house on a 600 to 800 square metre block of land. This particular price point tends to be favoured by more established families and investors, both groups with a heavy Asian influence and many of whom tend to buy in the area because of the high performing schools and proximity to local amenities.
17 Mockridge Street, Wantirna South (above) is a typical example of what can be purchased for the favoured price point in the suburb. This property sold for $800,000 on 18 August 2016.
Suburbs such as Healesville, Upwey and Tecoma tend to be favoured by young families and first time buyers. The main reason for this relates to the more prominent sale prices of between $500,000 and $550,000. These properties, although generally quite large, tend to be in their original condition and in need of updating. Interestingly however, weatherboard properties tend to fetch a premium in comparison to their brick veneer counterparts, with purchasers favouring this style.
With the increasing number of subdivisions occurring or which have occurred within recent years, properties in Croydon which are either new or up to five years old tend to be preferred by purchasers. Similar to other suburbs, families are the predominant purchasers, however retirees looking for a home which requires minimal maintenance and upkeep are also favouring these new units. Furthermore the suburb is considered as more leafy than its neighbours which again suits both sets of purchasers. The price point most favoured tends to be between $650,000 and $720,000 and for this they can expect to secure a 3-bedroom, 2-bathroom townhouse with approximately 150 square metres of living.
In contrast the $1 million to $1.2 million range is perhaps the slowest. The number of properties in Croydon which sit within this price range is limited and those which do come onto the market can take some time to sell. Buyers of such properties tend to be local residents looking to upgrade to a larger home, however similar to the outer eastern suburbs, at this price point weatherboards are favoured and tend to sell much faster. For example, 9 Moore Avenue, Croydon (see below) which sold for $1.11 million in April sold within 26 days of being advertised (Source: RP Data, 2016).
The $1 million plus price seems to be the key pulling factor preventing more sales from proceeding. Purchasers at this price range also have neighbouring suburbs such as Ringwood and Ringwood East to consider, both of which are closer to the Melbourne CBD and benefit from their proximity to newly refurbished local amenities.
Relatively affordable homes (roughly $400,000) in the new estates are in hot demand. This demand typically comes from first home buyers, investors and downsizers. For this price, a new or recently built 3- or 4-bedroom home can be purchased depending on the quality of finish. Many agents are reporting that their biggest problem at the moment is finding new listings. Once they have the listing, the house practically sells itself. According to one agent in Officer, an existing home recently sold within three hours of it being listed on the market.
There are still rural lifestyle properties located in parts of Officer that haven’t been overtaken by new estates and some of these sales fetch over $1 million. However these properties are not in high demand and take far longer to sell. Buyers in this market commonly represent older couples and families looking for a location further from the city. The lifestyle market is slow by contrast, representing not necessarily a dead market, but a market not as active as that mentioned earlier. It can be assumed that this is a result of the higher price point and a product that’s not in as much demand as those in the estates.