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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: The Inside Perspective

The Secret Agent Report – EOFY Review

We have just released a special mid-month Secret Agent report! In this release, we take an in-depth look at the property market over the last financial year.

Start reading this report by clicking on the link below:

Register to receive our report monthly and access the EOFY review now!

EOFY Review 2014/15

 


The Secret Agent Report – Healthy Environments

We have just released our latest Secret Agent report! This month, we take a look at the unseen hazards in our internal living environments, and suggest ways to look out for these in your next home.

Start reading this report by clicking on the link below:

Register to receive our report monthly and access the Healthy Environments Report now!

Healthy Environments Report

 


The Secret Agent Report – School Zones

We have just released our latest Secret Agent report! In this release, Secret Agent compared the performance of public schools with house prices in the surrounding region, to uncover the unseen price of education in the housing market.

Start reading this report by clicking on the link below:

Register to receive our report monthly and access the School Zones report now!

School Zones Report

 


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

Excerpt:

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

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.


The Secret Agent Report – From Rags to Riches

Cities have the capability of providing something for everybody, only because, and only when, they are created by everybody.”
– Jane Jacobs

The extraordinary changes to our inner cities and downtowns are unprecedented in modern times.

The movement to the inner city is not just a local phenomenon but a worldwide trend that can be observed whether you are in London, San Fransciso, New York, Sydney or Melbourne. It is important to realise that what is being discussed here is not a general movement to a city, rather, this trend is a movement to the real inner core of the city. As cities grow the density of their cores increase and at the same time the density falls in their peripheries. This story looks at the consequences of urbanisation. It is about the extreme premiums being paid to be in a position that is highly walkable, close to the commerce opportunities of the CBD, rich in transportation options and a way of avoiding traffic congestion.

Our cover image this month has been provided by one of Secret Agent’s own connections. The house pictured is in Drummond Street Carlton North. The rooftop pictures are also in Carlton North. The celebration is not with champagne – but with a found litre of rotten milk!

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From Rags to Riches Report

Excerpt:

The drastic changes in sale prices as a result of the urbanisation trend have been none larger than Melbourne’s very own CBD and surrounds. In the 90s and early to mid 2000s the focus of the property market was on the tremendous change in rezoned farm land on the fringes of Melbourne. People could buy property or land cheaply and chose to set up their dream homes in the outer suburbs. Now, the focus has shifted and has become more about the centre of each capital city as waves of foreign investment clashes with local resources to secure prime centralised real estate in the inner city regions. 

Let’s go back in time to the year 1969, when the Soviet Union launched Venera 6 towards Venus, Nixon became President of the United States of America and Rod Laver won the Grand Slam for a record-breaking second occasion. It was a simpler life. A time when the humble restaurant menu had three choices. When coffee was coffee, and not spoken about as if it were a tropical fruit, “…sweet and well rounded with hints of pineapple, apple and red berries, with subtle vanilla on the finish.” Many of Melbourne’s young and adventurous creatives, artists, and bohemians embraced living in the inner city suburbs, while others fled to escape the dirt and slums that had developed.

In 1969, you could buy a terrace like the one pictured above in Drummond Street Carlton North, for a modest $7,000. The surroundings were a little less comfortable back then and the neighbourhood was truly edgy. Edgy back then was more of a negative connotation rather than how we would use the term today as a positive description of many inner city pockets. This was a time when gentrification wasn’t even in the vocabulary.

To put the sale price for the property in perspective, consider the cost of a round the world airline ticket at that time. An airline ticket of this kind (like the one pictured above) could be purchased in 1967 for $567 – roughly a tenth of the value of the North Carlton terrace. The same type of airline ticket is now valued at four times the 1969 price.

On the other hand, the $7,000 terrace is now worth almost a million dollars which is 142 times the original price paid. Even after adjusting for inflation, the house has experienced an extremely large turnaround. $7000 in 1969 is approximately $76,000 in today’s dollars. In inflation adjusted terms a terrace in Carlton North would still be valued at over 13 times that of the one purchased in 1969. 

The cost of airline tickets is becoming cheaper and cheaper whilst house prices in the inner city continue to rise steadily.

The question on everyone’s mind is will this huge change in property value be repeated?


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!

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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.

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