The big news in Melbourne of late was the buoyant auction results for this year’s hit renovation series ‘The Block’ in St Kilda.
Our McGrath St Kilda office achieved the highest sale price in The Gatwick for Hayden and Sara’s apartment, selling for $3.020 million – $545,000 above reserve and delivering them $645,000 in prize money.
Every apartment sold well above reserve and whilst it is a blockbuster TV show, these are also real sales to real buyers. I agree with McGrath Chief Auctioneer Scott Kennedy-Green, who did an excellent job on the night, that high quality properties will always have an edge, even in challenging markets.
As discussed in our newly released annual McGrath Report 2019, Melbourne has been cooling down over the past year, following 51% growth in home values over five years during the boom.
The market peaked in November 2017 – five months later than Sydney, with its cooling phase starting slowly but gathering pace in mid-2018.
Properties retained their value in FY18, with 1% growth, however, overall, buyer demand is clearly weaker, primarily amongst investors but increasingly also owner occupiers, as tightened lending criteria takes hold of the market.
In the 12 months to June 2018, the number of homes listed for sale remained roughly the same as the previous year, however sales fell by -16.8%. At the end of FY18, Melbourne’s median house price was $821,000 and the median apartment price was $574,000.
As always in a slowdown, the citywide market has become patchy with prices in outer areas continuing to grow, while the inner and middle Melbourne markets broadly taper off.
Entry level suburbs with houses under $600,000 are drawing strong interest from first home buyers aided by stamp duty concessions and the new $50 million HomesVic co-purchasing program, whereby the government takes a 25% equity share to increase affordability for buyers and reduce the need for larger deposits.
Official figures show 250 buyers have provisional approval to buy via the pioneering program, which offers up to 400 properties in Melbourne suburbs including Dandenong, Ringwood and Sunshine, and regional hubs including Ballarat, Bendigo and Geelong.
Nine of Melbourne’s top 10 suburbs for median house price growth in the year to June 2018 were located in the middle to outer ring areas in the sub-$700,000 price range. The best performers were Coolaroo (37%), Melton South (32%), Melton (27%), Sanctuary Lakes (29%) and Sunbury (26%), according to CoreLogic figures.
Family buyers are also fuelling strong construction activity in the city’s outer east, north and west at the rate of 1,500 new family households per week, according to the Housing Industry Association.
A longstanding correlation between property prices and school zones means homes in sought-after districts should somewhat defy the slowdown, particularly given the premium that families are willing to pay.
Real Estate Institute of Victoria (REIV) sales figures for CY17 show houses in popular public school catchments were up to $400,000 more expensive than homes just outside the zone.
Examples include South Yarra Primary (median house price $410,000 higher than homes 1km outside the zone), Altona Primary ($325,000), Valkstone Primary ($250,000), Camberwell High ($289,000) and McKinnon Secondary College ($235,000).
“Parents of school-aged children are investing in the family home by buying into areas zoned for some of the city’s best public schools, rather than paying the equivalent in private school fees,” says Richard Simpson, REIV President.
Victoria continues to attract the lion’s share of international investment in Australian residential real estate. Victoria represented 41% of Australia’s 13,198 approved applications in FY17, more than any other state and 8% higher than New South Wales.
The total value of proposals was $10.33 billion of the nationwide $25.2 billion pie.
Top flight education facilities continue to attract international students, with the University of Melbourne and Monash named in the World Higher Education Top 100 rankings again in 2018.
Foreign buyers with deep pockets also remain active in Melbourne’s prestige market, reportedly setting a new house price record in February 2018 when Stonington Mansion in Malvern changed hands for $52.5 million.
Looking long term, Melbourne offers far more robust prospects for capital growth due to strong population and employment growth, major investment in infrastructure and cheaper housing than Sydney. All of this should provide a comparatively softer market landing.
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