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


Category Archives For: Numbers and Stats

State of the Property Market

Last Friday I attended a conference on the ‘State of the Property Market’ in Melbourne Park with some leading figures in the Property and Planning sectors.

Today I’ll give an overview of one of the speakers followed by some further information tomorrow.

Enzo Raimondo who is the Chief Executive Officer for the Real Estate Institute of Victoria raised some excellent information:

  • He spoke of the main driving factors that influence the property market: Interest Rates, Inflation, Employment, Consumer Confidence, Business Investment, Migration and Population growth.
  • The total value of real estate transactions for Victoria in 2007 was $35,414,748,957
  • Melbourne’s Median sale price for the December quarter 2007 was $485,000. Most expensive suburb was naturally Toorak with a Median of $2,775,000 while Carlton was the biggest mover for a year increasing its Median sale price by 64.3% to $868,750 from $528,750
  • The highest growth was mainly experienced in Melbourne’s inner Eastern suburbs
  • Melbourne added 272,775 new people to the city for the 5 year period ending 30th June 2008 representing a 1.5% increase in population. Melbourne attracted more people than any other capital city while Brisbane was the fastest growing city on percentage terms was a growth rate of 2.2%
  • 36.2% of gross family income now required to service the average loan of $253,551 while renters require 20.6% of gross income to meet rent payments.
  • Vacancy rate for Melbourne: Inner City (0-10km) 1.2% Middle (10-20km) 1.7% Outer (20+km) 2.2%
  •  Victorian demographics: The Baby Boomers (1946- 1965) population is 1,340,916, Generation X (1965-1977) population of 980,995 while Generation Y (1978- 1997) total population is 1,387,072. Property of tomorrow must cater for our different groups and their requirements.

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New Australian record for an apartment sale

A new record has been set with an apartment in East Melbourne selling for a staggering $18.2 Million.

The apartment purchased is part of the Melbourne Mercy Hospital development with the cheapest apartment costing approx $1.05 Million.

The penthouse on the top floor which is not going to be sold and instead is believed to be kept by the developer is apparently 1600 square metres which is absolutely massive when you compare the average single fronted terrace in East Melbourne being approx 150 – 200 square meters.

 Included in the development are a massage room, pool, cinema, child minding centre and a dog walking service!

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Rents will rise 50% over the next four years: report

RentstoriseRents will rise 50% over the next four years in most capital cities across the country according to the Australian Property Monitors most recent report.

A combination of Generation Y leaving home, high migration, low development and high costs to buy a property will continue to drive demand up for rental properties throughout the country.

This is great news for investors and not so good for renters!

The top 20 yields for houses were in Rural or Country areas and predominantly in resource rich states such as Western Australia and Queensland.

Melbourne had the biggest 12 month increase in Median weekly rent with houses jumping by 17% to $350; Melbourne also recorded the largest median increase in Median weekly rent for units jumping 15% to $300 per week.

As property prices increased by more than 25% for 2007 in Melbourne this has not improved yields on properties, in fact the average gross yield for a house in Melbourne fell to 3.9% making it the second lowest in the country after Perth (3.7%)
Units in Melbourne achieved 4.7% with only a slight drop in yield over the past 12 months; however it’s a complete different story when you take a close look at actual inner city units where yield averages 6.32% and a median rent of $400 per week.

67% of Australians own their own home either outright or have a mortgage while 33% rent.


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So what’s the difference between mid 2007 and early 2008?

23TennysonHere’s an excellent example to show you where the market is at for the early part of 2008.

This property located at 23 Tennyson Street Moonee Ponds was first sold on the 14th July 2007 for $611,000 at auction.

The same property sold on the weekend (29th March 2008) for $610,000 showing almost no difference in price between the two different times the property was purchased.

We have reached a stability period for good property, but for how long?

Stay tuned for tomorrow’s blog entry, I will show you the difference between a property purchased in 2006 that was later sold in 2007 and it will shock you!


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Melbourne property prices to increase by 40%?

Melbourne Real Estate prices could rise by up to 40% over the next 5 years according to BIS Shrapnel director and chief economist Frank Gelber. The reason is simple; we are not creating enough new homes to cope with the surging population that is flowing on to the city and state.

It seems the same situation is prevalent across the entire country; underlying demand in NSW is to build 50,000 houses annually however the real figure is 30,000. Victoria is in a slightly better position with underlying demand at 46,000 yet still not meeting demand with only 38,000 new dwellings being built.

Dr Gelber from BIS Shrapnel has made a fantastic solution in my opinion, he has pointed to the need to re zone industrial sites in our inner city areas to convert to residential housing.

Looking around our city in areas such as North Melbourne, Brunswick, West Melbourne, South Melbourne and Richmond and many sites exist that are Industrial Zone 3 which means that development for residential purposes cannot take place.

I know a number of single fronted homes that have a similar zoning, often banks will not give the prospective buyer a mortgage unless they have a 20% deposit rather than the standard 10%.

Views do differ on the future state of the market with Westpac chief economist Bill Evans predicting a fall in house prices across the country of 12% suggesting we would then be back at long term trends.

I wonder whether long term trends really matter overall in the long run, many people have suggested for the last decade that our housing prices are over inflated but I think it depends on ones interpretation. If you’ve been use to buying property at a certain price and that does change rapidly, then the tendency is to say that something is too expensive.

If you take into consideration the country’s strong economic outlook and population boom over the next decade, the question is if you don’t buy a property now will you be looking back in 10 years time and think, opportunity missed?

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It’s history in the making

For the first time on record, Melbourne’s rental vacancy rate has dropped below 1% on February statistics.

If you’re looking to secure a rental property within 4km of the CBD then the situation gets a whole tougher, the vacancy rate is now only 0.5% with demand surging.

According to Enzo Raimondo the CEO of the REIV “Across Melbourne there are 447,074* rental homes and a 0.9 per cent vacancy rate means around 4020 properties are vacant”

Try attending open for inspections around town on rental properties and it won’t take long to work out the heat is well and truly turned up on the demand for rental properties. Some opens are attracting 60 – 70 prospective tenants through each open and would be tenants really have to dangle the carrot with offers of 6 months rent upfront and in some cases more.

Simply put: great news for renters, poor news for tenants.


How holiday weekends influence property prices

eastereggJust the handfuls of auctions took place on the weekend which begs the question, are auctions that take place on public holiday weekends a good opportunity for a buyer who is looking to avoid competition or is this good news for a property seller.

It’s a very bold move by a vendor to place their home on the market with an auction scheduled on a major public holiday weekend like Easter, this was proven on the Saturday just been with only 55 auctions taking place across the state and many of these where in coastal areas.

The clearance rate was 82% which has also been far higher than in recent weeks, the little property that did get auctioned in the inner city of Melbourne had very little trouble of selling.

In a normal weekend of property auctions many homes are offered for sale that might compete with each other, for example a number of single fronted homes in Prahan may be offered on the same day via public auction at similar times, this then means a would be buyer has to choose which auction they will attend if satisfied with numerous single fronted homes in the location.

When a property is auctioned on a public holiday weekend, this means it has prime focus from the buying marketplace and without competition from similar housing stock.

From my experience, if the property is right for the buyer, they will delay taking off early for their holiday in pursuit of the house or have someone at the property on their behalf ready to place a bid at auction. People’s mood also has an impact; holiday periods generally mean people are happier, when people are happier there is also a tendency for people to spend more!

On the other hand, if the property is not priced right or misses the mark as to what the market place is searching for then this could backfire but this would also backfire on most weekends throughout the year.

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Is Melbourne property expensive?

So you think Melbourne properties are expensive?

Their is Absolutley no doubt that the property market in Melbourne and Australia has been very strong for a long time and many property buyer's can't quite get their foot in the door and buy something.

When I was working in Real Estate over in London the prices for real estate came as a shock, a list recently published shows the 20 most expensive streets in the UK which is heavily dominated by London.

The average values in the top ten pricest streets come in at a staggering $12,307,096 while the most expensive street was Courtenay Avenue, Hampstead, London with an average sale price in the street of $14,453,333!

I'm glad we don't have to all buy a home in London!

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How long does it take for a property to sell?

daysonmarketnew

At your left is a graph from Saturday's edition of the Financial Review.

The graph shows us the average amount of days a property takes to sell in the current market, this is from the point of being listed by the agent and then sold. Also shown is the discount rate for each capital city, this is the variance between the asking price that the vendor is requesting for their property and the eventual sale price.

Canberra is leading the way with an average of 41 days on market while only at a discount rate of 3.4% and Adelaide not to far behind. The graph is great example of how strong capital cities perform, if demand is outstripping supply then more competition for properties happens as a result, this then translates to properties being sold quicker and prices a lot closer to the vendor's asking price.

Perth which used to have average days on market of 30 days in late 2006 and a discount percentage of 3.3% has now ballooned up to 94 days as it’s average days on market and a discount rate of 6.5%

Sydney, while still low on both fronts has improved from a discount rate of 9.1% in middle 2005.

The important thing to remember as with any graphs is the variables in each city, most capital cities have far stronger figures when looking at property positioned close to the CBD.  The average auction campaign for a property in Melbourne is 3 weeks with most property closely located to the city not having too much trouble selling.

Very interesting stuff!

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Up and Up and Up

UpArrowsmallAn interesting article appeared in the Age today about Melbourne house prices over the past 12 months.

Melbourne surged 25.2% in 2007 outstripping all other Australian capital cities.

With 1000 people moving into melbourne each week demand looks likely to increase however it is doubtful 2008 will be as strong as 2007.

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