Regional VIC November 2017

The month in review: Regional VIC

By Herron Todd White
November 2017

Ballarat Property Update

The major tenant groups across the Ballarat region are students and low income households. Other tenant groups include people who have recently moved to the area looking for accommodation in the get to know you period. This group typically rent different properties to the first two categories.

The main drivers of tenant demand across regional markets are population growth and wage growth. While wage growth in the Ballarat area has been stagnant, as it has across the country, population growth has been significant. The 2006 to 2016 period saw Ballarat ranked the fourth fastest growing city in the country. The economics from there are simple: more heads need more beds. This creates demand which outstrips supply and increases price. The why however is as always far more instructive than the what.

Ballarat’s population growth can be attributed to several key factors including proximity to Melbourne, quality education and health care services and long term employment in industries with future potential.

A typical rent for a property in a suburb within the middle ring of Ballarat such as Sebastoopol, Mount Clear, Alfredton, Ballarat North and Candaian is $300 per week. This amount would lease a 3-bedroom family home with 1- or 2-bathrooms in varying condition depending on location. The bottom of the rental market is around $150 per week for a 1-bedroom unit in a B grade location. The top of the rental market would be around $600 per week. This would lease a large quality home in a first rate area.

The above mentioned rental demand created a significant increase in supply in the middle ring suburbs of Ballarat in the past five to seven years. This brought supply back in line with demand around early 2015. Since this period we have seen a slight cooling in rentals achieved and new properties constructed. The current rental market at present is close to parity, with supply and demand almost balanced. As usual, quality properties attract a premium and second grade stock is difficult to move.

In the event the population of the city continues to increase, we envisage rents will again rise. This will once again spur local developers to action to sate demand.

One of the most expensive rental prices achieved of late was $625 per week at 208 Wendouree Parade, Lake Wendouree. This property has excellent views of Lake Wendouree. It is a two level, circa 1960 built, 4-bedroom, 2-bathroom fully updated dwelling which we feel would be a very nice place to call home.

Baw Baw Property Update

Rentals in the Baw Baw region have remained strong with low vacancy rates and strong rental prices across all property classes. Rental rates are typically 4% to 6%. The market is a mixture of retirees and young families.

There is a large supply coming onto the market with the expansion of Waterford Rise, Emberwood Estate and other subdivisions entering the market. This may place downward pressure on rental rates and increase vacancy rates as more dwellings enter the market.

Bendigo Property Update

The Bendigo rental market is dominated by detached housing. The market is split between new and established dwellings with the majority of established dwellings for rent located within the urban centre of Bendigo. Newer rental housing is typically located in the outer suburbs in new residential subdivisions. Inner suburbs such as Flora Hill and Kennington have a high number of university students driving the rental market given the proximity to LaTrobe University campus. The market for new dwellings is primarily located in the Epsom, White Hills and Kangaroo Flat areas situated between five and seven kilometres from the Bendigo CBD. Rents are fairly consistent across Bendigo with the number of bedrooms considered to be the biggest determining factor in rental amounts. Older housing is located closer to the CBD and newer housing is further away which is considered to have a balancing effect. Average rent for a 3-bedroom house is around $280 to $320 per week. Units typically achieve between $220 and $260 per week.

Echuca/Moama Property Update

The rental market in Echuca/Moama has been relatively tight, consistent with a lack of residential stock for sale. This consistently peaks in the late spring and summer months as new professionals enter town prior to taking up appointments in the new year. This has pushed up rental in recent times and older accommodation is now fetching as much as $350 per week for a 3-bedroom, 2-bathroom residence while more modern accommodation is typically over $400 per week. The market tends to cap out at $500 to $600 per week, regardless of the value of the property.

The impending construction of the second Echuca-Moama Bridge is likely to result in a spike in demand from employees associated with the project and many are tipping a short term spike in pricing and reduced availability while the project is in its construction phase.

Mildura Property Update

There has been consistent demand for rental accommodation in Mildura in recent years and vacancy rates continue to be low as a result. The message is that if you have a residential property which is reasonably well presented, you should have little trouble obtaining and retaining a suitable tenant.

Agents report that most properties are being re-let relatively quickly and that rentals for well-presented properties are generally able to be increased by around $10 per week when they are re-let. Landlords need to be prepared to undertake some maintenance in order to maintain their property’s presentation.

The expectation of continued population growth in the region should help underpin future rental demand.

The median rent for houses in Mildura is around $290 per week and for units around $240 per week. Demand is strongest for 3-bedroom homes in the range of $260 to $320 per week. There is less demand for rentals above $400 per week and it can take longer to re-let these better standard homes. Many younger, single tenants prefer to live close to the centre of town, while families with young children often prefer to be within walking distance of schools etc.

Tenants often investigate the suitability of air conditioning and especially for higher priced accommodation, will expect that it is able to cope with some of the region’s extreme temperatures. Energy efficiency is probably not yet on tenants’ radars but will almost certainly become more important as time goes by.

While rents are cheaper in most of the surrounding, smaller towns, the exception is Robinvale, located approximately one hour’s drive south-east of Mildura. Robinvale is the centre of the booming table grape and almond industries in north-western Victoria and consequently draws a huge number of seasonal workers. The 2016 census indicated that Robinvale has an official population of around 5,000, however reliable estimates suggest the population is closer to 7,000 for much of the year. There is a chronic shortage of suitable rental accommodation and the town’s median rent is at least equal to and possibly higher than Mildura’s.

Warrnambool

The Warrnambool rental market has a healthy balance of favouritism when we compare the landlord to the tenant and at present has a good supply of available properties for rent. Rental returns for landlords are generally around 5% to 6%. With the purchase price for investors being generally sub $400,000, it is a popular market that attracts a wide variety of investors, being mums and dads, young couples or financially secure families and businesses.

Tenants on the other hand are fortunate with the supply of new dwellings that are available for rent. A tenant can rent a 3- or 4-bedroom, newly constructed dwelling for $350 per week. At this price bracket we see predominantly young families with one or two children or a group of adolescents seeing the benefit of splitting costs amongst a group to achieve a low cost of living. The majority of this type of property is located within the newly constructed residential developments which tend to have a slight oversupply.

Inner Warrnambool or locations along the beach attract a different tenant who is willing to pay in excess of $450 per week. They comprise generally young or middle aged professionals, being health or business related, who see the benefit of being located within close proximity of work or the beach. The inner Warrnambool rental market also caters for the unit market with the predominant tenant being from an older demographic, commonly looking to down size and locate within close proximity of the CBD or hospital.

The west and north-west of Warrnambool is predominantly owner occupied, however is interspersed with tenants with lower incomes who are willing to pay around $250 per week for a neat, circa 1970 to 1980 dwelling that doesn’t have the mod cons of a newly constructed dwelling.

Being a regional centre, Warrnambool has been somewhat removed from outside influences and the dramatic changes to trends seen in some metropolitan areas. Historically Warrnambool has provided both the landlord and tenant with good opportunity to either invest or enter into a rental market at an affordable level.

Share on:

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.