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

Trulia Rent vs. Buy Index

As data management and technology get better and better,  some really interesting ways to look at values are emerging.

A favourite is the Trulia Rent vs. Buy Index, which lists American cities by were it is best to either rent or buy.

You can see the recommendations from New York to Washington DC.

I’m sure the Australian market is getting close for similar information to be available for upcoming buyers.

Baby Boomers

Actively being discussed is the ‘cashing out’ by baby boomers at exactly the same time.

My thoughts have been that suburban homes are really going to come under pressure over the next decade. It’s why we are big believers of the inner city market but not much further out.

Another interesting perspective is here

Enquiry rate lifting

Over the past few weeks we’ve noticed a surge of enquiry for buying.

As people are noticing the better value,  this seems to have created this demand we were not quite expecting.

It seems many are trying to capitalise on the markets uncertainty by avoiding the competitive market of 12 months ago.

We cannot see a surge in prices and this is good news.  It means that you can now afford to be hyper selective out in the market, without the fear of prices increasing if you choose to look ‘a few over’.

Chronic Shortage of Supply – Inner City Locations

Stock levels across the country and state are up and this has a large impact on the law of supply and demand.

Times like the present are great at identifying areas prone to high supply during a weaker market.  Often that’s a good sign to stay away from investing into that area.

We do most of our acquisitions in Melbourne’s inner city suburbs.  The demographics have much to do with this shortage and the styles of property.

It doesn’t look like this is going to change anytime soon.

Game Mechanics & Property

With the gamification of almost everything being a growing trend,  property is no different.

The big banks are starting to use more and more of these tools for consumers out in the property world.

Commonwealth Bank has released an online game called Investorville which lets investors manage their portfolio and analyse possible yields when buying a property.

With growth mortgage growth not going to be as strong over the next few years compared to the last,  I’d expect to see many interesting tools available to property buyers and consumers as a way to capture some market share for the banks.  Either way,  it’s good for property seekers.


Looking at specific markets rather than ‘the market’

We can often get caught into the trap of looking at ‘the market’ as one singular thing.

You’d be forgiven for thinking that the whole market is down and that it’s a ‘buyers paradise’ out there.

It’s also easy to view the share market as one whole.   If we look deeper however we can see that some individual shares have skyrocketed over the past six months fuelled by strong demand.  While overall the market has fallen,  individual shares can paint a different story.

The property market also works in a similar way.  The perception can be built around the entire market while the reality can be very different for each individual property.

Let me give you an example.

Looking at the Median sales data,  we can see small falls overall in Melbourne.  Yet being in the business,  I can see examples were pricing has fallen 10 – 20% in certain segments.  While other segments are holding steady or are seeing strong demand pushing price up.

Of note is areas such as Point Cook,  CBD student accommodation property, homes in Balwyn North all showing varying degrees of price falls.   While I’m seeing good family homes in the inner city with nothing to spend seeing prices hold steady and in some instances showing prices that are beating all previous expectations,  while an unrenovated single front terrace has shown stalling interest levels.

Here’s an example of the different markets that are operating at the moment in Melbourne.  It’s important to note that they are linked,  yet are showing in some cases very different market performance:

  • 1st Home Buyer Market
  • Investment Market
  • Lifestyle Property
  • Coastal Property
  • Family Home ( Mortgage Belt )
  • Family Home ( Middle )
  • Family Home ( Top End )
  • Student Accommodation
  • Empty Nestor Down Size
  • Single/ Couple Professional
  • Family / Professional Upsizing

Now in each of the above categories,  you can look at the different types of stock that exist for each type:

  • Single Fronted Period
  • Double Fronted Period
  • Modern / Townhouse
  • New Homes (non period)
  • Warehouse Conversation
  • Art Deco Apartments
  • 60’s, 70’s Apartments
  • New Apartments
  • Location:
  • City
  • Within 10km of CBD
  • 10km – 20km of CBD
  • Outer
  • Lifestyle
  • Non Residential

I’ve quickly jogged these down and I’m sure I’ve missed a few.  Yet each of these segments are reacting very differently at the moment.  It’s important to work out the type of market you’re buying into in order to gauge demand moving forward and price.

Old or new?

Many property buyers are faced with the decision of buying new or older property and most will already have a preference for one of the two.

In most debates, the established property wins hands down. This is for a number of reasons:

Period and older property cannot be replicated and is therefore unique and scarce, providing for better capital growth prospects.

Older property is normally well built – They just don’t build property like they used to.

The building materials used in the past would make building a house today just too expensive for most.  A mixture of solid brick,  slate roofing and bluestone foundations are rarely seen in today’s homes.

There is often opportunity to value add when buying older property, which is much more difficult with new property. Many doubts exist about the longevity of today’s modern home.

House hunting in tough elements

The winter market is one of the best times to buy real estate, not just because generally it is quieter, but because you get a good feel for what it is you’re buying.

Attending open for inspections this winter you will be viewing property in it’s toughest elements – cold, wet and damp.

This is a good opportunity to observe how a home will survive throughout winter and to uncover any dampness, leaks or roof issues.

Some tips to remember when house hunting –

  • Look out for any obvious rising or falling damp
  • Keep an eye out for leaks
  • Ensure the property is well ventilated  (poorly ventilated property in winter can lead to serious mold issues)
  • Check how well the property retains heat and that the heating system works effectively
  • Keep an eye out for any signs of mold in the interior of the property

Discounted loan rates

It seems banks are now offering bigger discounts on home loans as they try to pick up the lending market from a tough patch. Borrowers can now look to save around 0.7% – 0.8% on their mortgage.

This will come as good news to buyers as the banks fight for their business. Mortgage brokers in the market have confirmed this and feel some great mortgage rates can be secured at this time.

Note:- Though this post written back in 2011, its equally relevant now (May 2014) as it was back then.  There was a period where the big lenders were not passing on the whole amount of interest rate drops from the Reserve bank, stating higher costs as a result of competition for available funds.  Now, that emergency for the banks seems to be well and truly over, and instead they are under assault from the non bank lending sector who in April 2014 dropped lending rates by almost 1%, with Pepper home loans leading the charge.

The major banks have responded with a host of rate cuts of their own in a bid to hold on to their share of the market.

In addition to drops across the range of mortgage products, we are seeing an increase in the low doc loan market, something that only occurs when more people and lenders have confidence in the market continuing to be strong for some years to come.  It was these sub prime loans that  played a big role in the financial downturn at the end of the last decade.  Perhaps lenders have got short memories, or its a local phenomena only possible because of Australia’s strong financial performance, not seen in other parts of the world.

However way you look at it, increased competition and increased types of mortgage products coming back onto the market has got to mean good things for both buyers and sellers.  Buyers will have more chance of getting into the market, and more buyers in the market is always good for sellers.

Melbourne Mortgage brokers include

Mortgage Brokers Melbourne

Mortgage Choice

Melbourne Mortgage

Mortgage Broker Geelong

Buyers heading where the jobs are

It’s clear the Melbourne housing market as softened overall this year, however there are still some suburbs performing quiet well and recording strong growth. Over the past year Essendon North has been the city’s top growth performer, then Docklands, Sandhurst, Keilor East and Spotswood, all of which are located in Melbournes West.

It seems buyers are most interested in suburbs with strong employment. The buying popularity of suburbs within the west reflects the strength of employment in these areas. As with property growth, employment growth has been led by the north west and outer western suburbs, with these areas account for almost 25% of Melbourne’s overall employment.