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

Category Archives For: Property Buying Tips

The Secret Agent Report – Rent

Land monopoly is not only monopoly, but it is by far the greatest of monopolies; it is a perpetual monopoly, and it is the mother of all other forms of monopoly.”
– Winston Churchill 

In this latest report we look at the state of rents. This is a key issue for investors within the market. The changing cost of money has changed expectations around yield, while newly built supply has created greater choice for tenants. This is an important read for anyone looking to undertake an investment decision, or a potential home buyer looking to establish whether they should buy or rent.

We look forward to March’s report and getting the early indicators of 2015 to you in The Secret Agent Report. It’s one of the most interesting times in the property market in years.
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The Rent Report


At Secret Agent we speak a lot about buying property, what to look for and how much value a certain characteristic might add. In light of a fresh new year, The Secret Agent Report considers property from a rental perspective. With more investors in the buying sphere than ever before, there has been an influx of available rental properties in the market, especially in the inner city and CBD itself. This has been compounded by the growing number of new apartment completions from 2012 to 2014 and continuing into 2015.

As uncovered by Secret Agent’s last report, sale prices of apartments have remained stagnant in many inner city suburbs over the past year. This, coupled with record low interest rates make attractive conditions for buyers to strike. However, investor sentiment of late seems to reflect concern about rental yields.

The number of people choosing to rent has increased over the past few years. With property expensive to buy, many first home buyers are being forced to continue renting for longer periods than they would have in previous generations. People are relocating for work more than ever and may prefer the flexibility of renting. Furthermore, there is a continuous influx of foreign students coming to Melbourne to study each year, as well as increased immigration levels. There are plenty of people wanting to rent. The question is: can demand still keep up with newly built supply?

A few years ago there would be crowds lining up for an open for inspection, most people holding their applications in hand already prepared to submit on the spot. Competition was tough.

Now tenants have a lot more choice and with choice they can be more selective. Open houses are less frequently attended and applications come in days later.

There are of course exceptions for properties in well located areas, especially quality houses. The reduced competition seems to have put rental prices on hold. If owners choose to increase the rent, they risk having their property vacant for long periods. This has resulted in many tenants not experiencing a major increase in their weekly rent over the past 12 months.

This report will take an analytical look at the rental situation in Melbourne’s inner city suburbs. In particular we look at the annual growth in rents, the turnover of apartments leased out and annual rental yields within each inner city region. All one and two bedroom apartments were included in the calculation of median prices if their weekly or monthly rents were advertised. Fully furnished apartments for short term leases were excluded from the study. To adjust for seasonality in the rental market, the report focuses on sales in the fourth quarter (October, November and December) of 2012, 2013 and 2014. It should be noted that the results listed are gross yields due to the variable nature of outgoings for each property. To obtain a net figure, one can extract 20% from the median rents. Also stamp duty is not taken into account in this analysis.

Due to the large numbers of student accommodation apartments in suburbs such as Carlton, Brunswick East and Collingwood, the results may be skewed in these areas.

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. 

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Year in Review Report


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.

Downsizing. The Secret Agent Report.

2014 is the year of Downsizing. Jodie’s written a guide on how do it.
We also look at Offshore investment; just how much is the Australian market being influenced by the Chinese factor?Our Residential and Commercial Property wrap up reveals some surprising stats… which inner city location had a 54% increase in its housing market? You’ll have to read to find out.

Please sign up via the thinking page to receive this months report to your inbox, and don’t forget to browse the archives.


This months cover image is a slight tip of the hat to the wonderful film poster for Hitchcock’s Vertigo, created by the masterful Saul Bass.

Rather than using the ‘whirlpool of terror’ imagery, we’ve cleaned it up! Downsizing may seem daunting, but this special report
by our resident Investigator, Jodie Walker helps to clarify and promote new ways of thinking about the task.

Saul Bass (1920-1996) created imagery for many films, for great directors such as Alfred Hitchcock and Stanley Kubrick. His distinct typographic style has enjoyed many ‘revivals’ over the years, and the playfulness of his imagery is still celebrated today.

– Saul Bass

On Your Terms

Four years ago, Secret Agent’s founder, Paul Osborne wrote a short book about the property market for anyone looking to make moves in that space.

When released in 2010, it was available for purchase in e-book form from the website for $10. It received wonderful feedback from the industry and the public.

We have decided to reinstate it’s availability in 2014, as a free resource.


On Your Terms

The ideas in On Your Terms are simple, well rounded and helpful, a great introduction to anyone new to the market, or those looking to refresh.

We encourage all interested in ‘one’s shelter’ to have a read, to reinvigorate attitudes for the changing times ahead.

Click Here to have a read!

Self Managed Super Funds and Property; What To Look Out For

Self Managed Super Fund purchases are still quite a new frontier in the realm of property buying. The shyness for many investors on entering financial markets has helped create this trend.

However, it has a few more challenges than conventional property buying, these include the level of deposit required, as well as the type of property allowed to be acquired.

We’ve found a list of unacceptable properties that will stop a bank or lending institution providing credit for a Self Managed Super Fund Property purchase:

  • Units or apartments with less than 45 square metres of living area
  • Converted Hotels or motels
  • Churches or places of worship (Converted or otherwise)
  • Residential property with a commercial content or used for a commercial purpose
  • Commercial or industrial property
  • Relocatable homes
  • Leasehold other than Crown Leasehold
  • Any property in excess of 50% per borrower in any one completed development that has a maximum of 8 properties in the development (duplexes are acceptable), or any property in excess of 4 per borrower in any one completed development where there are more than 8 properties in the development.
  • Boarding houses or hostels
  • Brothels
  • Specialised student accommodation
  • Any property subject to a rental guarantee (display homes and State and Federal government properties are acceptable however)
  • Any property that is subject to a ‘two tier’ market
  • Home units attached to management rights of the complex
  • Any property located in a flood zone greater than 1:100 year frequency
  • Any property located on a contaminated site, or land holding greater than 40 hectares (100 acres)
  • Any property that is used for the purpose of farming
  • Specialised or unique dwellings
  • ‘Over 55’s’ dwellings
  • Property with a capital value less than $60,000 (land and improvements)
  • Any property that will require developments of more than two dwellings on it
  • Boundary of property located within 50 metre of high voltage transmission lines
  • Properties with partly finished construction work
  • Serviced apartments
  • Studio apartments or bedsitters
  • Any property located on a island that is not accessible by road
  • Any property with a ‘lease for life’ convenant on the title

Self Managed Super Fund purchasers should seek advice before committing to a property contract, as the rules are tight.

As always, do your homework!

The Signal Point

We’ve been looking forward to this day.

The 29th of January is a signal point of the year kicking into gear for 2013.

January is, without doubt, the quietest month of the year in real estate.

Many are away, and thanks to much of the vendor population in Melbourne being of the age when they have a child or two, school holidays are a massive diversion to property trading.

So welcome back. Options and new marketing campaigns will start to increase. This year might still prove to be a slower start, yet it’s a start – which counts!

Traditionally Spring is the most dominant time in property trading, however March can be one of the busiest months of the year.

Owners seeking uninterrupted 5 week auction campaigns will have this in their sights.

After the Australia Day Weekend has passed, it indicates a signal point to us that we are moving from a dormant market to an active one.

Home Alone

From Secret Agent Researcher, David Goei.

A tradesman we were speaking with recently commented how he had been working throughout the whole of New year’s Day, with 16 break ins occurring on the 31st of December, and no one wanting to fix them up. Most of these occurred in the North and Western suburbs, with sliding doors and  windows being the main points of entry.

It is little surprise that burglars tend to strike during the holiday season, when people are away or out enjoying themselves on New Year’s Eve, but this is just one of the indicators that a home is a prime target.

Chris McGoey, a security consultant, and Richard Wright, a criminology professor, interviewed convicted burglars in North Carolina, Oregon, California and Kentucky on when they are most likely to strike and have come up with this list of things.

  1. Burglars tend to scout out their targets beforehand, by performing simple manual jobs which involve casing the inside of your home, even using your bathroom so that they can unlatch the window or reduce security. And remember: Burglars do their best never to look like burglars.
  2. Announcing vacation plans on social media alerts burglars, and they can find your home address with some effort.
  3. Displays of opulence might work against you, it simply means you are more worth robbing to burglars. It is advisable to draw the curtains at night, or your home becomes a thieves’ shopping gallery.
  4. An open window is an open invitation.
  5. Christmas Lights set up… but always turned off?  A giveaway that you have left for the season.  If you choose to put up Christmas Lights or Christmas Decorations outside your home for Christmas, its a good idea to take them down if you are planning on going away and were thinking just to switch them off
  6. They are likely to try and open your front door if no one answers when they knock. This is why there should be no excuse for not locking your front door when leaving your home; you might be having a bad day but you could make it worse. If you answer, they will simply ask for directions and walk away.
  7. Placing a security system behind a door with decorative glass might not be a good idea, especially if burglars can see if the alarm is set. And on that matter, always set your home alarm if you have one, you might be complacent but burglars are more than happy for you to be. Some motion detectors would not hurt while you are at it.
  8. Drawers of any kind (sock, medicine, underwear) will be raided.
  9. A safe which isn’t bolted down is likely to be simply carried off, to be opened at a later time.
  10. That trick McCauly Culkin used in that movie? It actually works; sounds and lights coming from inside a home act as a good deterrent against burglary.
  11. Mail piling at the letter box or front of the house indicates your absence
  12. Burglars are not adverse to breaking a window to get in, all of which is why…
  13. It pays to be friendly with your neighbours. They could help you keep any incoming mail, or check in on that strange sound coming from your home. That or you could get a really loud dog for your kids next Christmas.


Special Conditions

The rise of special conditions in contracts for the sale/purchase of real estate is growing at a very high rate.

Normally solicitors would prepare a standard contact of sale with minimal conditions. We are noticing however – the steady increase in the amount of special conditions stipulated into the contract.

These special conditions are not standard, and usually benefit the vendor at the expense of the potential purchaser.

For example, recently we’ve seen:

  • Special conditions that allow the vendor to resale the property during the settlement period if a higher offer is received by the vendor.
  • Substantial penalty rates for any overdue monies that are far and above normal penalties.
  • Time limits such as; 10 minutes that the purchaser has to sign a contract before the property is resubmitted to auction.
  • Liability transfer for any building works completed by the vendor to the purchaser.

Watch those special conditions!

Insurance Overlook

A large grey area has been developed in the field of insurance for home buyers and landlords. When exactly does a purchaser take out insurance on a property? When the initial deposit is paid – or when settlement has been effected?

Technically, a purchaser doesn’t own the property until settlement has been completed. However new contracts can have special conditions inserted that require the purchaser to be insured at the time of exchanging initial contracts.

This can seem to almost shift the liability.

An example of what could be a potential problem. Let’s say that buyer X buys from seller Y. The property is a vacant warehouse. Buyer X completes a final inspection and everything looks fine. The property settles and buyer X drives to their new warehouse to find the whole property has been burnt down.

Was the fire pre settlement or after? Was Seller Y insured?

These situations can leave buyer X in a very sticky situation. An insurance policy from the point of deposit would have been a safe and secure option for X.

Even If Y is deemed accountable, it could be a nightmare trying to get compensation through the past owner.