Last spring, Secret Agent investigated the cost of rebuilding two period homes in inner Melbourne using current technology and materials. Our results below demonstrate that the prices paid for period property fairly represent the quality, history and scarcity of these types of homes in today’s market.

Using real examples of a Victorian terrace and an Edwardian house, we found that recreating these homes from scratch would cost at least $740,000 more than what you would pay for a genuine period home.

While it is possible to build a new home that imitates the defining features of Victorian and Edwardian houses, replacing period character to its full extent is almost impossible to get right. Note that the figures in the analysis of replacement values are conservative estimates only. Read the full post

Last week, Secret Agent released our report on the current state of rental yields for houses across inner Melbourne. Here is a summary of our findings:

• Over the last 5 years, yields have dropped by 0.42%, from 3.06% in 2012 to 2.64% in 2017.
• During this period, median house prices have increased by 38% (9% p.a.), compared to only an 11.8% increase in weekly rents (2.88% p.a.).
• On average, median weekly rents are between $500 and $700 for most suburbs. Sale prices tend to fluctuate significantly according to suburb.
• Suburbs with lower median prices tend to have higher yields, as weekly rent is mostly consistent across all regions.
• High and low yields are not concentrated in any particular region of inner Melbourne.
• Collingwood, Cremorne and West Melbourne had the highest median yields in 2016/17 at 3.69%, 3.32% and 3.26%, respectively.  Median prices were well below the $1million mark.
• Burnley, East Melbourne and Alphington had the lowest median yields at 1.35%, 2.07% and 2.31%, respectively. Median prices were all above $1.3million.
• Sale price is strongly, negatively correlated with yield (-47%). Yield is more dependent on purchase price rather than rental income.
• Yields are even lower for larger properties, as sale price increases faster than median rent.
• In 2017, 2, 3 and 4 bedroom homes can expect to yield 2.72%, 2.61% and 2.52%, respectively. All three types have had the lowest yields since 2012.
• Investors paying high prices for properties are even more reliant on capital growth to increase their returns.

WINNERS

First Home Buyers
First home buyers will be able to use voluntary contributions to their superannuation to save for a house deposit. Withdrawals will be taxed at a lower rate, but the amount you can contribute is capped at $15,000 a year and $30,000 all up. Both members of a couple can take advantage of the scheme.

In Victoria, the state government will abolish stamp duty for first time buyers of homes valued up to $600,000, make cuts to stamp duty on homes valued up to $750,000, and also double the First Home Owner Grant to $20,000 in regional Victoria.

With the first home super saver scheme, we may see increased demand for property below $600,000. This will push up the prices of houses and townhouses in outer suburbs such as Cranbourne. Inner city suburbs will be less affected, as average prices are typically above $600,000. Developers will also have to compete more agressively for development sites that allow sub-$600,000 townhouses to be built and sold in these outer suburbs.

Downsizers
A person aged 65 or over will be permitted to make a non-concessional contribution to superannuation of up to $300,000 from the proceeds of selling a principal residence owned for the past ten or more years from 1 July 2018.

This is good news for real estate agencies operating in areas popular among downsizers, such as the inner city, as there is more incentive for elderly property owners to sell their home. Developers can also benefit from creating stock in these areas. Read the full post

We have just released our latest Secret Agent report!

In recent years, we’ve seen house prices skyrocket while rents have risen less dramatically. 

This month, Secret Agent compares rent increases and house price growth in inner Melbourne to find out to what extent yields have decreased over the last 5 years.

Access the Rent report now!

While the cost of standalone and semi-attached houses in Melbourne continue to skyrocket, apartments have only had minor price changes over the past 12 months. Further, as houses continue to become a rarity, apartment supply is steadily increasing. Many people will have to start considering apartments if they wish to live in the inner city.

For people used to living with a backyard and having adequate distance from their neighbours, moving into a high-rise apartment building is out of the question. But there is another option: boutique apartments, usually between 8 and 40 apartments spread over no more than four levels, typically built in the 1960s to 1980s. They offer a middle ground between the freedom and privacy of standalone houses, and the affordable yet crowded environment of high rise towers. Read the full post

In February, we released Melbourne’s first price per square metre index for houses and townhouses based on internal floor area. We’ve summarised our key findings in an infographic for you to share and download easily.

Here’s what we found:

Terraces: $13,155/sqm of internal space

Most affordable suburb: Flemington $10,262/sqm
Most expensive suburb: Middle Park $17,357/sqm

Most affordable room: Living room $6,869/sqm
Most expensive room: Bedroom $14,717/sqm

Townhouses: $8,387/sqm of internal space

Most affordable suburb: West Melbourne $7,128/sqm
Most expensive suburb: South Yarra $12,008/sqm

Most affordable room: Kitchen $4,692/sqm
Most expensive room: Bathroom $19,424/sqm

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Click here to download the PDF version of this infographic.

Inner Melbourne average Q1 2017: $8,882/m2
Inner Melbourne average Q1 2016: $8,622/m2
Percent annual growth: 3.02%

On average, apartments increased in price by $260 per square metre, or 3% over the past year.

One bedroom apartments have remained about the same in nominal terms (which means they have fallen in value in real terms) and are now the cheapest apartments at $8,650 per square metre. All other apartments increased in price, with 4 bedroom apartments now averaging $11,450 per square metre. Not many of these properties get sold each quarter, so prices tend to fluctuate a bit. Similarly, three bedroom apartments increased in average price by about $1,000 to $9,400 per square metre in the first three months of 2017. Two bedroom apartments are also up slightly ($8,900/m2), while studios were more expensive than 1 and 2 bedroom apartments over the past three months ($9,200/m2). Read the full post

We have just released our latest Secret Agent report!

This month, Secret Agent analyses the updated capital growth index for the first quarter of 2017. The index tracks all resales of properties in inner Melbourne suburbs since January 2000.

By using only resales of the same, unchanged properties over time, the index tracks the true capital growth of properties in Melbourne, taking out factors such as subdivisions, extensions and any other alterations, all of which affect measures of average prices.

Access the Capital Growth Update report now!

This week, we continue to explore the results of our Better Apartments Design Standards study.

One of the factors that had a very high pass rate was maximum room depth. However, given that this standard simply measured whether the depth of habitable space was less than a fixed value (1.5 times the ceiling height, or 9.7m if there is a rear kitchen, see Figure 1), this may not necessarily be a good thing. Smaller apartments are more likely to pass simply because if room dimensions are smaller, apartment depth will naturally be smaller too.

Read the full post

As part of the Victorian Government’s Better Apartments Design Standards, three new rules were introduced for minimum room dimensions. These determine the minimum width and depth of main bedrooms, additional bedrooms as well as minimum size and dimension of living areas. For more detail, refer to our latest report. We sampled 3000 apartments built over the past 6 years in inner Melbourne.

Our research finds that if the new standards were already in place when the apartments were developed, only 7.7% (231 apartments) would have passed the minimum requirements for all three room dimension standards. Read the full post