Melbourne: The next big thing?
Sydney may have been the boom city over the last few years, but could Melbourne be poised to steal its crown?
Sydney may have been the jewel in the Australian property market crown over the last two years, but Melbourne is poised to take its place.
Both confidence and momentum are picking up in the Victorian capital ahead of the key spring selling season, with the market about to ‘shift up a gear’.
Melbourne’s capital growth has run second only to Sydney’s in the last 12 months. Median capital growth for all dwellings in the year leading up to 31 August 2015 was 10.6%, according to the latest CoreLogic RP Data figures, with houses increasing in value by 11.4% on average and units by 4.4%.
The median dwelling price in Melbourne at end August was $563,500, with the average house price $620,000 and the median unit price $475,000.
Domain chief economist Andrew Wilson highlights that the signs are positive for a bumper spring despite a noticeable slowdown across Melbourne over the winter.
“Clearance rates rose and prices grew over the autumn due to an improvement in the local economy,” says Wilson.
“We did see a moderation through early winter which looked like the market flattening out, but overall Melbourne has reinforced itself.”
Wilson says clearance rates during the winter were higher than they were a year ago – indeed, they were on par with the post-GFC boom years of 2009–10.
“The market’s full of confidence working its way into spring,” adds Wilson. “We’re seeing rising numbers of first-time buyers looking at house and land packages on the fringe, and a lot more investors in the market as well.”
Melbourne’s improving prospects are being driven by the glut of apartment developments in and around Port Melbourne, the South Bank and the CBD, although it isn’t the owners in those suburbs who are reaping the rewards.
“Growth isn’t necessarily being driven by the mid- to higher-priced market segments in the east. There’s more widespread buyer activity in the budget markets to the north and to the west,” says Wilson. “That’s probably down to the CBD apartment boom providing a lot of jobs, particularly to tradesmen and in the manufacturing sector.”
Property researcher John Lindeman, founder of Property Power Partners, agrees that the best investment prospects are outside of the CBD.
“There is strong demand for units away from central Melbourne,” says Lindeman. “There is significant demand for rental properties from overseas immigrants, especially in middle-distance suburbs with good infrastructure links and amenities, like Caulfield, Doncaster and Sunshine.”
Those apartment developments occupying the South Bank and Docklands could be the albatross around Melbourne’s neck. Valuer Herron Todd White (HTW) warns of a growing concern about oversupply.
“There were 1,518 new apartments settled in the CBD over the past 12 months to May 2015,” says HTW’s September Month in Review. There is even more to come too, with a “plentiful” supply of apartments likely to emerge in the CBD and inner suburbs in the next few years.
“It is estimated that there will be 160,000 established contemporary apartments in the market by 2018, a 43% increase compared to 112,000 apartments in 2015,” says HTW. “Demand will need to remain strong in order to match the large influx of new apartments over the short to medium term.”
That demand may well come from overseas. HTW highlights that 95% of 941 apartments within the proposed 92-storey Aurora skyscraper were sold in a fortnight, and approximately 75% of the buyers were from Southeast Asia and China.
However, it’s worth noting that established inner-city apartments can already be purchased at a lower price than new apartments. With the number of apartments coming onstream in the next few years set to soar, prospective buyers should keep their feet on the ground when it comes to urban skyscrapers.
Forecast: Plain sailing ahead
They say a rising tide lifts all boats. Despite concerns over the CBD unit market, it seems that may be the case where Melbourne is concerned.
The general trend is upwards, with the Victorian capital perceived as good value as we enter the final months of 2015.
“Those perceptions of value will keep driving buyers, with especially solid results from the lower end of the market,” says Domain’s Wilson. “There’s a real momentum in the market.
“Melbourne may not get ‘boom time’ price growth this spring, but it will be solid – and certainly ahead of where it was at the end of last year.”
SUBURB TO WATCH
- Market conditions: Excellent
- Segments to watch: Budget suburbs; middle-range unit suburbs with good amenities
- Segments to avoid: CBD, South Bank and Docklands apartments
- Potential hotspots: Caulfield, Doncaster, Sunshine
Boronia: Popular leafy suburb on the rise
Pick the right spot in this suburb and you can get magnificent views of Mount Dandenong. Situated 29km from the Melbourne CBD, Boronia has some excellent amenities, including a wide selection of shops, schools, medical centres, childcare centres, parks and a train station.
It’s all these features that help make it a popular suburb with families and retirees.
It also neighbours Wantirna South where the Westfield Knox Shopping Centre has received approval for a $450m expansion starting in 2016. The upgrade should create about 8,000 jobs and it is set to become Australia’s second-largest shopping centre.
Houses in Boronia typically spend just 32 days on the market, which is low for both Melbourne in general and the Knox LGA, according to CoreLogic RP Data. Other indicators of tight demand include the vacancy rate of 1.34% and the fact that there’s just 1.02% of stock on the market, according to DSRdata.com.au.
Elevated houses on Rankin Road have stunning views of the Dandenong Ranges. They are also very close to St Joseph’s Primary School and the suburb’s popular amenities on Boronia Road.
There are also nice and quiet family homes on Helene Court and Currawa Drive. Four-bedroom houses can be bought in this part of Boronia for around the median price. They have the additional factor of being close to nice walking tracks and the Tim Neville Arboretum.
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