Record auction results and stronger growth than Sydney’s have fortified Melbourne’s identity as one of Australia’s most desirable cities to live in
The Real Estate Institute of Victoria reported that March 2016’s auction bonanza had “broken the record for the highest number of homes sold in a single weekend”. The weekend saw 1,667 auctions held and an all-time high number of homes sold, at 1,004.
CEO of REIV Enzo Raimondo said statistics reported to REIV showed the clearance rate for Melbourne in April was 73%, adding that “there have been 11 suburbs with clearance rates above 90% this year, including Collingwood, Dingley Village and Seddon”.
A report compiled for Westpac by Herron Todd White also attested to Melbourne’s stunning auction results throughout 2015, stating that “the calendar year saw $27 billion worth of homes sold at auction – an increase of $6 billion from 2014”.
Melbourne’s demand is typified by its annual home value growth, which notched up the highest capital city appreciation from February 2015 to February 2016 at 9.82%, surpassing Sydney’s by almost 2%, CoreLogic RP Data reports.
REIV data shows that the final quarter of 2015 saw regional Victoria outgun Melbourne’s growth, with an increase in house prices of 2.2% and 2.3% for units. “We’ve seen prices in major regional areas within 90 minutes of Melbourne grow in price, suggesting city commuters are looking further afield for lifestyle and value reasons,” said REIV’s Enzo Raimondo in a January news release.
The data also revealed an uptick in towns and cities further from the metropolitan area, such as Bairnsdale, Echuca, Swan Hill, Mildura and Warrnambool.
Echuca’s unit prices have experienced growth of 8% in 12 months, February CoreLogic statistics state, which can be attributed in part to firm unit demand in central Echuca.
Mildura saw positive growth values in all suburbs over the 12 months, and Warrnambool houses increased 2% in the same timeframe. Warrnambool units were unchanged.
Buyer’s agent Wendy Chamberlain, co-founder of Amalain Buyer’s Agents, says investors looking for regional properties should look for areas with economic diversity. “If you’re looking at an area with only one key driver, such as a mining town, you’re putting all your investing eggs in the one basket, with reliance on a single industry,” warns Chamberlain.
In metropolitan Melbourne, Chamberlain describes the market as “many-tiered”, with demand high for family homes but weak for units due to excess supply on the market.
CoreLogic data shows Melbourne, North Melbourne and Docklands units reporting negative growth between 3% and 4% from February 2015 to February 2016. Units were winners in Kensington and West Melbourne, with growth of 10% and 13% respectively. East Melbourne netted the highest 12-month growth in metro dwellings, rising by 23%.
Due to high development in some locations, buying inner-city off-the-plan dwellings may take some time to realise growth, says Chamberlain. “Stick to well-located, in-demand properties that are not your run-of-the-mill ‘cookie cutter’ apartment,” she advises.
“Go for originality and something a little unique, such as art deco features, warehouse conversions, and older-style apartments in boutique blocks.”
For example, Elwood provides an eclectic mix of large family homes, period detached and semi-detached dwellings from various eras, and distinctive art deco apartments. A quickly gentrifying suburb close to the CBD, Elwood’s house growth spiked 21% in the year to February 2016, CoreLogic data states.
A Westpac report compiled by Herron Todd White notes that some areas of Melbourne are recording higher volumes of sales in the wake of foreign investor withdrawal, and estimates that
Glen Waverley and Mount Waverley prices dropped between 5% and 10% at the beginning of 2016.
“We are seeing more stock on the market in these locations and buyers can afford to be picky. It’s quite a different situation from early 2015, when buyers often felt compelled to grab any property that fell within their budget,” the report states.
“This presents a clear opportunity for upgraders to enter these highly sought-after markets.”
While changes to lending criteria and dwelling prices outpacing wage growth are conspiring to subdue investor input, Chamberlain says employment opportunities provide a counterbalance, with the healthcare and social assistance and other sectors looking set to grow.
“This, coupled with low interest rates, may continue to frustrate regulators’ attempts to temper the market.”
SUBURB TO WATCH
Werribee: 58,000 job boost for West Corridor suburb
Located in Greater Melbourne’s southwest corner, Werribee is home to a mixture of dwelling types, from 100-year-old houses to new estates on the outskirts, which feature house and land packages with entry-level prices of $350,000–$400,000.
James Antonio, director of YPA Estate Agents Werribee, says demand is good in the family-friendly suburb, with investors “snapping up the bigger blocks for townhouses”.
“We find lots of people are doing long-term rentals,” Antonio says. “And the vacancy rate is low. To illustrate, we manage over 500 properties, and only two of them are empty.”
Its location at the midway point between Melbourne (32km) and Geelong makes it an ideal spot for commuters, who enjoy the suburb’s quiet lifestyle along Werribee River.
Antonio says there’s huge potential for Werribee’s future. The new Wyndham Harbour in Werribee South will provide further transport options for residents, and potential overflow from neighbouring suburb Wyndham, which is one of the fastest-growing municipalities in Victoria, according to ABS statistics.
The city has revived plans to develop 775ha in Werribee East – a move that will create 58,000 jobs and add further modern amenities to the Werribee region.