The month in review: Regional VIC
By Herron Todd White
Throughout the Latrobe Valley, there is a sufficient amount of attached units for the market. Most of these were constructed in the 1970s and 1980s and are 2-bedroom, 1-bathroom brick veneer units with 1-car garage or carport. There has recently been a shift in demand to larger units which are more like townhouses, with 3-bedrooms and 2-bathrooms. A neat, circa 1980 2-bedroom unit in original condition would fetch around $150,000 to $170,000. Modern 2-bedroom townhouses are up around $250,000, with modern 3-bedroom townhouses up around the $300,000 mark.
Unit and townhouse sales in the Wellington area have remained in steady demand. 2-bedroom units and townhouses close to the CBD generally transact at between $220,000 and $240,000, while those distanced from the main shopping areas reach $160,000 to $190,000, depending on location and condition.
Higher end townhouses or those in prime locations can fetch up to $350,000, especially those with two bathrooms or double garages. A landmark sale of a high end, two level townhouse with lake views was made earlier this month, at a sale price of $650,000.
With a view to the investment market, rental returns generally fall in the 5% to 7% category and are an attractive low-maintenance option for investors.
When we think of units in Mildura we typically think of what was constructed in the period between about 1970 and 1990. During this period there were quite a few small complexes constructed, typically containing three or four attached units, usually 2-bedroom on standard residential allotments within 1.5 kilometres of the town centre. While some of these complexes have been updated, many are still in largely original condition. With a relatively tight rental market, occupancy rates for these units have been strong irrespective of their condition and investors have seen them as a safe, positive cash flow investment.
Some complexes are held under an Owner Corporation structure, while others are not. Our advice to owners has been that it is probably not worth strata titling those complexes still on a single title, as these complexes are quite affordable for investors, typically selling for between $300,000 and $500,000.
These properties have larger living areas and private outdoor areas. Some of these have been constructed in inner city locations, with these typically containing two or three townhouses, however a number of larger complexes have also been constructed on larger allotments, specifically included for this purpose in new subdivisions. Buyers of these properties have included a mix of both owner occupiers seeking either more affordable or low maintenance accommodation and investors.
The largest of these complexes contains approximately 50 townhouses, each of which has a double garage and small rear yard.
The old adage that land appreciates while buildings don’t applies to the unit and townhouse market in Mildura. Value movements have tended to be lower for attached units than for detached housing, although increasing rents and decreasing interest rates have made their yield more attractive in recent times.
There are still opportunities to refurbish some of the older unit complexes with the benefit of then generating higher rents and reduced maintenance costs.
The opening mark for older 2-bedroom, 1-bathroom accommodation in a six to eight unit complex can be as low as $150,000 for units constructed in the 1970s although generally prices range between $170,000 and $190,000. Centrally located units and townhouses tend to achieve substantially better prices with some demand for 3-bedroom townhouses within walking distance of town or the hospital. Typical prices are in the order of $250,000 for townhouses further out of town and $350,000 to $450,000 for well presented, centrally located townhouses. Supply in this market segment is almost exclusively the domain of builders who are able to construct the buildings during their quieter periods.
Attached housing in the Ballarat region is limited. The majority of attached apartments are centrally located and constructed between the 1950s and 1980s. Most multi level complexes are two to three storeys. In recent times developers have converted churches into residential apartments which vary from 1-bedroom to 4-bedrooms. Modern attached unit complexes are limited within Ballarat with only a handful constructed in the past 20 years.
We have noticed a shift in the design of modern units toward larger living areas with more than one bathroom. These properties attract a premium in the rental and capital markets.
The older style 1970s 1-bedroom unit in a well maintained original condition within the inner ring trade for around $150,000 and rent at a yield of 5%. This market is performing reasonably well due to its affordability and rental demand.
The townhouse market in the region is the one which has seen a significant increase in supply over the past five years with several developers in the area building many 3-bedroom townhouses. The increase in demand has in the most part been taken up by an increase in demand from investors. This has seen the capital values for the properties hold steady. Developers and agents are now reporting this demand is showing some signs of slowing. As such the next 12 months will reveal if an over supply issue is a possibility.
Off the plan purchases for villas and units have been steady in recent months with three developments of 10 to 20 townhouses each in progress within Brown Hill, Ballarat East and Sebastopol. The villa market has shown approximately a 5% to 10% increase in value over the past five years in the sub prime locations. This increase has largely been driven by investors looking for positively geared properties with tax depreciation benefits. Given the increase in supply prices should begin to stabilise.
An opportunity would be to purchase an older, original 1- or 2-bedroom unit in the Wendouree area, undertake a simple renovation or update of the property and then lease it. This would result in a return to the investor of around 7%.