Investors lead the way in Melbourne’s heart
The market may have flattened out recently, but pockets of hot property still remain.
Victoria’s property market may have seen something of a slowdown in recent months, but the mood among those in the know in the garden state is that there’s no need to panic.
“It’s been a quarter of very moderate growth, but this has to be viewed in the context of where we’ve come from,” says Real Estate Institute of Victoria’s communications manager Robert Larocca. “Over the past 18 months, the median house price in Melbourne has increased by $160,000, so the fact that it’s now cooled and price growth in the market has moderated is probably a good thing.”
Looking at Melbourne, Larocca points to a good stock level as one factor that’s contributing to the recent slowdown, citing the city’s less-than-spectacular auction clearance rates as a sign of the times.
“When people look at the prevailing clearance rate at auctions in Melbourne of 68 to 70% over the last few months, that has to be viewed in the context that stock levels are quite healthy,” says Larocca.
“This has helped buyers in the market, and has also helped to ensure moderate price growth due to a balance between supply and demand that we haven’t seen in the Melbourne market for some years.”
Buyer’s agent Karin Mackay, of Australian Property Buyers, has also been keeping an eye on the auction situation. She notes that competition for properties has dropped at auction, but believes that there’s still room on the market for more quality stock.
“At auction, instead of having three to five competitors, there are maybe only two to three at the moment,” says Mackay. “There’s a reasonable supply, but as a buyer’s agent I’d like to see more. I have one buyer, for example, where there’s only one property on the market that fits their brief.”
Central units still strong
While the Melbourne market may be relatively flat as a whole (growth over three months to September reached only 1.39% for houses and 0.48% for units, according to Residex), CB Richard Ellis (CBRE) director of residential projects Andrew Leoncelli believes that a certain sector of the property market is deemed hot stuff for investors.
“There are a few different markets, and it’s important not to confuse them,” says Leoncelli. “The apartment market in Melbourne, situated within four kilometres of the city, grew by 18% last year, which is very strong on the back of an overwhelming demand compared to new supply.”
Leoncelli cites new units that are well priced and well located for transport and amenities as being hugely popular with Melbourne investors. This trend has been compounded by the slowdown of new stock coming on to the market as developers feel the GFC squeeze.
“The GFC has restricted development access, as the non-major banks are basically no longer lending to developers. So it’s only the Big Four banks that are currently lending to them, and even then at lower loan-to-value ratios and at a higher price,” explains Leoncelli.
“People keep talking about the potential for a situation of oversupply, but that’s not going to happen until we get a fundamental easing in the volume of debt that banks are prepared to lend to developers.”
Mackay, too, believes that what she labels as the ‘scarcity factor’ is playing its part in Melbourne’s inner suburbs, as more and more people choose to live closer to the areas where they work and play.
“The problem with Melbourne is that when we look at the outer suburbs that are 20 or more kilometres out of the CBD, there’s an abundance of land. And so we’re not seeing huge growth in those areas. It’s the inner-city areas where we’re always going to find good growth, because there’s the scarcity factor,” she says.