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The latest happenings in the Melbourne property market. For our Essays and The Secret Agent Report, see our Research page.


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The Secret Agent Report – 2014 Review

When the number of factors coming into play in a phenomenological complex is too large scientific method in most cases fails. One need only think of the weather, in which case the prediction even for a few days ahead is impossible.”
– Albert Einstein

Urbanisation. We’ve said it once, we’ve said it twice and we would not be able to provide an accurate end of year review without mentioning it again. The top performers for 2014 were in suburbs that were flush up against the CBD highlighting the increasing value of proximity to home buyers and investors.

We also take a look at what we can expect from 2015. This section of the report aims to study the underlying momentum in Melbourne’s inner regions, without all the noise associated with average house prices.

We hope that you enjoy this reflection on the year that has passed and we look forward to providing you with many more exciting stories as 2015 progresses. 

Register to receive our report monthly and access this latest release – Sign up on our Thinking page.

Year in Review Report

Excerpt:

2014 has been a buoyant year for housing in general. Interest rates did not move a whisker with Australia embarking on some of the most accommodative financing conditions in its history. Will this continue is the big question. Advanced economies have all seen very low interest rates stay, as part of their central bank policies. This effort appears directed at fighting deflationary conditions, since the 2008 crisis ripped through world economies.

The role of expanding credit growth is directly linked to momentum in housing prices. The big question next year will be what happens if interest rates drop a further 0.25-0.5% and how will this impact on the property market. The reserve bank is cautious about stimulating the housing market too much, however may be forced to do so with further rate cuts. Australia’s deteriorating terms of trade and the desire to further devalue the Australian currency may force the RBA’s hand.

The business community seems to be engaging in further investment with higher credit growth starting to emerge again after the long de-leveraging period between 2008 and 2013. This will be good for the economy however the impacts might not be felt for a further few years after this investment has had time to produce fruits. Housing which had also been de-leveraging has showed a bounce back as we’ve seen with market conditions overall quite solid.

Most capital cities have started to see stalling growth with the exception of Sydney. Its growth curve now resembles a hockey stick which will also be worrying the RBA.

Low interest rates are most likely needed to help support regional areas and Australia’s smaller cities. However, Sydney looks to be getting to a danger point of blowing up if this trajectory keeps running its course. The RBA may introduce controls, such as have been done in New Zealand, which would force prospective property buyers to not be able to use the same amount of leverage to purchase a property. This way they can cool the market without cooling the economy which would be a symptom of higher interest rates.

The fastest growing section of the market in 2014 was the investor purchaser. Investors have caught up with owner occupiers for mortgage approvals. Also on the rise has been the foreign investor who is even better placed thanks to a lower Australian dollar. The importance cannot be stressed enough of the value of Australian property to many overseas. The safety in the asset is so highly prized that many investors have looked at Australia as simply a place to store wealth, rather than to create wealth.

The Chinese economy will be the most important economy to watch for Australia in 2015. China continues to get more important to Australia when it comes to exports. It’s hard to believe that in 2008 Australia captured more value in exporting to Japan than it did to China.

The economy of Australia is at a cross roads. Unemployment seems to be on an up trend and average hours worked is decreasing. This is a function of a winding down of the mining industry and technology allowing firms to be increasingly efficient.

The headwinds are a still very uncertain world economy and a slowing Australian economy.

Within the inner city areas of Melbourne the market continued to show strong demand. Houses were the strongest performer and have isolated themselves from the abundance of apartments that have been prevalent in the market. Houses grew in all the four regions we tracked – the inner East, West, South and North. The rush for homes within close proximity to the CBD is being fuelled by downsizers and young families looking to capitalize on the strong ranking state schools that have started to flourish over the past few years.

On the other hand apartments have actually gone backwards this year thanks to an oversupply of new apartments with proximity rich positions. This hasn’t affected the classic Art Deco apartment market however it has had a noticeable drag on buildings that are less than 20 years old and are starting to show wear. The explosion of new construction in the CBD has also created a drag on rents with generally no rental growth over 2014. We expect much of the same in 2015.

The interesting observation is that the top performers for 2014 were in suburbs that were flush up against the CBD highlighting the increasing value of proximity to home buyers and investors.

We hope that you enjoy this reflection on the year that has passed and we look forward to providing you with many more exciting stories as 2015 progresses.


Melbourne’s Building Styles – The Guide

“It’s so fine and yet so terrible to stand in front of a blank canvas.”
– Paul Cezanne

When searching for a property to move into or to customise for your own needs, an understanding of the building styles available is paramount. Each town has a history, which helped to form its built fabric.

Create-By-Secret-Agent-Melbournes-Building-Styles
We have put together this guide to help you understand the history of Inner Melbourne. When you find your blank canvas, remember to take the rough with the smooth, and we hope this helps you find some inspiration!

DOWNLOAD NOW

CREATE BY SECRET AGENT – INSPIRED HABITATS
Create is a division within Secret Agent that delivers personalised inspired habitats, for your home, investment property or office.

create


The East West Link – One Step Closer to Reality

The East West Link Project moves one step closer to reality. 
Secret Agent has paid careful attention to the upcoming East West link since releasing the East West Link Report. 
 
The Victoria State Government has today announced its selection of Lend Lease as the company responsible for building the project. This will create many opportunities/ disadvantages in Melbourne over the coming decade. 
 
Lend Lease today announced that is has entered into an estimated $5.3 billion Public Private Partnership with the Victorian State Government to finance, design and construct stage one of the East West Link in Melbourne. The project remains subject to financial close which is expected to occur during October.
Lend Lease Group Chief Executive Officer and Managing Director, Steve McCann, said, “Lend Lease is pleased to be announced as the Victorian Government’s partner to deliver this important infrastructure project. The East West Connect Consortium will leverage it’s international and local expertise to deliver an outstanding outcome for the people of Victoria.”
 
We encourage you to read the East West report to examine this in further detail. Property owners and aspiring property owners should try and get as much information as possible around this topic to optimise their financial decisions. 

 

Register to receive our report monthly and access this latest release – Sign up on our Thinking page.

The-Secret-Agent-Report-September-2014-The-East-West-Link


Election 2013

With the election around the corner we thought it was timely to ask:

How do elections affect the property market in inner-city Melbourne?

Using data based on over 112,000 sales in inner-city Melbourne between January 2002 and July 2013, Secret Agent investigated the last three federal elections – 2004, 2007 and 2010.

All three elections experienced a decline in average inner-city Melbourne property prices in the twelve month period encompassing both lead-up and preceding six months of the election (Figure 1). These declines were particular evident for the 2007 and 2010 election periods when looking at the last decade of property prices (Figure 3).

It was not until six months after the elections (Figure 2) that housing prices began to fluctuate less and experience steadier, upward growth.

Looking at what has happened the last three elections, with the upcoming election in September 2013 we could see fluctuating, but declining property values over the next few months, followed by steady positive growth over the following year.

Election-Figure-01

Figure 1 – 12 Month Election Period (2013 in red)

Election-Figure-02

Figure 2 – 12 Month Period (starting 6 months post election)

Election-Figure-03

Figure 3 – Average Monthly Sales Price, Jan 2002 – July 2013 


The Secret Agent Report – Volume 3 Released

The Secret Agent Report – Volume 3: The Year in Review Special Edition… Has just been released!

TheSecretAgentReport-DJ13

In this edition, we cover some of the notable results that helped shape and define the year.

Our research on underquoting analyses the widely accepted 10% rule – that is adding 10 percent to an advertised price in order to gauge what the property will actually sell for. The findings are interesting, and remind us of the complexities of the real estate industry.

The Secret Agent Report November 2012

  • The Year In Review
  • Underquoting – The ’10%’ Rule Analysed
  • 2012 Noteworthy Sales
  • 2012 Winners & Losers
  • Available Properties on the Market – A 3 Month Comparison
  • Median Sales Prices – Apartments and Houses
  • Square Metre Rates
  • Lowest and Highest Sales per Suburb

To download your own copy, click here!


Incomes and Property Prices

theage.com.au today has an article, which discusses the income required by a couple , with two children – to service a property purchase within Melbourne.

The dark blue areas show were the largest income is required to purchase a property.  What surprised me is not so much the Eastern suburbs or inner city income requirements,  but the incomes required to purchase property in outer Melbourne areas.


Turnover Trends

At Secret Agent, we wanted to compare the turnover of this year (amount of sales + total volume in $ value) compared to the previous three years. The turnover figures are for each suburb located within 6km’s of the CBD. This is what we define as true inner city living. We’ve used the first nine months of data for the years 2009, 2010, 2011 and 2012 and have matched the days exactly to give the most accurate account of the situation. Inner city data relates to all house sales and has excluded apartments. Victorian data will refer to all types of property.

Inner City (within 6km of CBD):

  • Carlton has seen a 135% decrease in sales this year (first 9 months) when compared to the first 9 months of 2010.
  • Suburbs within 6km of the CBD have seen a 20% decrease in total sales. Down to 1273 sales at this point compared to 1524 in 2010.
  • East Melbourne for the first 9 months of 2009 & 2010 recorded 46 house sales. Transactions have almost halved for the same period 2011 & 2012 with 24 sales being reported.
  • Comparing the dollar value change of East Melbourne worsens the situation. From $60 Million is house sales (first 9 months of 2009) to $20 Million this year (first 9 months).
  • Some suburbs have defied the trend. North Fitzroy is having its strongest year ever with $72 Million changing hands which has eclipsed all previous years.
  • Other suburbs with higher turnover this year than in the previous 4 years include North Melbourne, Princes Hill and Parkville. The inner North seems to be the outlier with the data.
  • South Yarra has been hit like a bomb. $165 Million in 2010 down to $91 Million this year.
  • Suburbs within 6km of the CBD experienced a staggering difference in the turnover dollar amount. From $1.64 Billion in 2010 (first 9 months) down to $1.162 Billion this year (first 9 months). 2010 has approx 40% more volume (in $ amount) than at the same point this year (2012).

Victoria:

  •  Victoria last year had 96,000 sales (Apartments, Land and Houses combines) compared to 144,000 in 2010, 165,000 in 2009.
  • However it compares badly with 2007 the granddaddy of them all at 173,500 total sales. Almost half the amount of sales!
  • 45,000 apartment sales in Victoria in 2009. In 2011 only 26,000 sold for the year.
  • 2011 the worst year for vacant blocks of land in over 20 years. As the outer fringes feel the pain. 2012 should prove to show a worse record once the year if complete.