News

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


Category Archives For: Secret Agent News

The Secret Agent Report – Apartments Price Per Square Metre

We have just released our latest Secret Agent report!

Comparing square metre rates for houses is common and quite simple as land measurement data is readily available. Apartments are slightly different since it isn’t possible to make comparisons based on the land area they are built on. Floor plans are necessary to do this and the plans provided are often lacking full dimensions. Advertised floor sizes are often rounded-up figures that include external walls and non-habitable areas in the total, making them appear bigger than what they really are.

To overcome this, Secret Agent has manually measured the floor plans of apartments sold from January to March 2016 to create a square metre index for apartments in inner Melbourne. This report will showcase our results with an in-depth look at square metre rates for regions, suburbs and particular apartment types.

Start reading this report by clicking on the link below:

Register to receive our report monthly and access the Apartments Price Per Square Metre report now!

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Settlement Risk Looms

The development space in inner Melbourne and Sydney is set to be severely challenged. Conversations between Secret Agent and various developers over the past month have revealed their increasing anxiety about potential settlement issues. These developers, who have settlements due in the next 18 months, are worried that many of their apartments may not be able to settle due to the restrictions placed on foreign buyers by local banks. This is likely to have substantial implications.

For some time now, developers have used successful business models to sell their projects directly to Asia. Sales companies who specialise in selling unseen apartments to the Chinese market have made large financial gains. These apartments, many of which are tiny by local standards, have been purposely designed for the overseas market. Committed contracts, once thought to be rock solid, are now on shaky ground.

To understand the problem at hand, let us consider a hypothetical situation. An investor group, on behalf of a developer, sells a small two bedroom CBD apartment to a buyer based in Shanghai. The buyer pays $714,000 for the 68sqm apartment, which is $10,500 per square metre, and pays a 10% deposit. Since the transaction was entered into 12 months ago, the investor has no stamp duty to pay at settlement. It so happens that this purchaser defaults. The developer gets to keep the 10% deposit minus fees. The problem is that there is a need to sell the apartment to someone else.

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The Secret Agent Report – True Capital Growth

We have just released our latest Secret Agent report!

Averages are frequently relied upon to determine key indicators such as capital growth. While an average may be a quick and easy metric to measure a data set, it can also produce very misleading results. This is especially true when looking at the capital growth of a suburb. Changes in average property prices and actual capital growth are not the same thing. There are many factors that determine the price of a house and the average growth in property values. Using more reliable methods, Secret Agent uncovers the true capital growth of suburbs across inner Melbourne.

Start reading this report by clicking on the link below:

Register to receive our report monthly and access the True Capital Growth report now!

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Why You Can’t Trust Averages

Changes in average prices are frequently used by commentators to draw conclusions about the property market. Our recent post on Fitzroy’s true capital growth gave some insight into why statistics like averages and medians are not sufficient to make judgements on property value in a given suburb.

To find true growth in value, many factors including property size, location and renovation levels need to be accounted for. This can be done by observing resales of the same property over time, given no structural changes have occurred between sales. When we compare the annual average price changes (reported) and our own index based on resales only, we start to see that capital gains are mostly exaggerated using averages alone.

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Record Breaking Building Permits in Victoria

You might have walked the streets many times over the past 12 months and noticed the substantial number of construction sites and cranes in air throughout Victoria.

The Victorian Building Authority (VBA) has released its latest findings on reported building permits and the total value of building reported in 2015. In summary, this is what they found.

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Noise: A Summary

One of the effects of urbanisation is an increasing number of people choosing to live in the inner city, particularly in high density neighbourhoods. Re-zoning has allowed many residential areas to become mixed use zones whereby apartment high rises, houses and restaurant strips exist all on the same street. In Victoria, these zones are often centred around transport hubs, nearby either tram lines or train stations. All these elements make the hustle and bustle of the city, but one might argue it’s getting a little too noisy. External noise has become a modern day pollutant that is difficult to escape, and has captured our attention.

In our Healthy Environments report, we recommended buying property that is not located on a main road or nearby train stations to avoid high levels of external noise while at home. Noise can have detrimental health effects such as cardiovascular disease, even if you think you’ve become accustomed to the low grumblings of traffic and passing trains.

We recently discovered that, in addition to poor health outcomes, external noise can negatively impact the value of property. These are some of our findings.

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The Secret Agent Report – The Yield Curve

We have just released our latest Secret Agent report!

When deciding to invest in the property market, most of us will first obtain approval for a loan, find a suitable property to buy and then pay off the mortgage accordingly, dealing with any rate rises as they come. It can be that simple. A more clever way to invest would be to consider how mortgage rates are likely to change in the near future, prior to making the decision to purchase. This is where the yield curve plays an important part in making general predictions about future mortgage rates.

Start reading this report by clicking on the link below:

Register to receive our report monthly and access the Yield Curve report now!

The Yield Curve Report


Fitzroy’s True Growth

Between January 2011 and December 2015, 512 houses and townhouses were bought and sold in Fitzroy. If we compare the average prices in 2011 and 2015, these have increased by about 9.4% per year. That’s the only thing this tells us: people spent more money on each house in 2015 than they did in 2011.

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As a statistic, averages can be very misleading. They ignore any changes to the mix of properties being put on the market. For example, each time a property is refurbished, extended or renovated, the value of the property increases. While this increase in value is reflected in an increased average price, this is not true capital growth, as additional investments had to be made. Also, with only about 100 properties being sold each year, the sale of a very few, very large houses would have a significant impact on the average price in that period.

If we break this down into individual years, we can see that average prices fluctuate, which again shows us the limitation of using averages as indicators of capital growth.

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Yield Curve and RBA Cash Rate

Bond yields provide a reliable way to make predictions about monetary policy. This week’s bulletin explores why this is the case.

What is a yield curve?

A yield curve is made by plotting the interest rates of bonds against their maturity dates. A normal yield curve occurs when long-term rates are higher than short-term rates. This is important for an economy’s liquidity, as banks can make a profit by borrowing at the (lower) short-term rates and lending at (higher) long-term rates.

What is a cash rate?

When banks borrow funds from each other in the overnight market, they can charge a special interest rate set by the Reserve Bank of Australia. This is known as the cash rate.

Let’s look at the current yield curve on Australian Treasury bonds with maturities between 90 days and 10 years (above). Parts of the yield curve are inverted (pointing downwards), meaning short-term rates (90 days) are higher than some long-term rates (2, 3 and 5 years). This creates a disincentive for banks to lend and if the entire curve is inverted, it can lead to a “credit crunch”. This happened in the US during the global financial crisis, when money suddenly dried up because banks could no longer profit from lending out money.

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The Secret Agent Report – Sound

We have just released our latest Secret Agent report! In this report, we discuss an important yet often overlooked consideration prior to buying a home: sound. Why does sound matter, especially in today’s highly urban environment? And does proximity to noise, such as busy roads and railway lines, affect the value of inner city property?

Start reading this report by clicking on the link below:

Register to receive our report monthly and access the Sound report now!

The Sound Report