Newsletter - Inner Circle January 2018
Happy New Year!
Welcome to 2018! We hope you had a great Christmas and that you’re enjoying a well-earned break. We’ve been putting our feet up over the festive season too, but we’ve still got our eye on the property market and we’re excited about the year ahead.
While price growth slowed around Australia towards the end of last year, Melbourne has remained in the positive. CoreLogic figures to the end of November show Victoria’s capital sitting at 10% for growth over the past year, double that for Sydney and second only to Hobart, which had 11.5%.
Data shows Victoria is now the state’s leading market for property loans, with growth of 11% over the June quarter, according to AFG, compared to a 1% increase in New South Wales, so activity is strong.
So what lies ahead for next year? I don’t have a crystal ball of course, but I expect markets in the sub $750,000 price bracket and within 15 kilometres of the CBD will continue to perform strongly, driven by first homebuyers, investors and CUBBs (cashed up baby boomers). The rest of the market may slow down a little, but A-grade properties in sought-after locations will continue to draw strong competition and achieve strong prices. What will also drive the market to surprising results at times is the limited amount of stock versus high demand.
Clearance rates have come down in Melbourne and Sydney and there has been a slowdown in Chinese demand. These cities have been the highest performers for several years, however foreign buyers are reducing in numbers and as a result, those areas in Melbourne that have been thrashed, such as Mt Waverly, Blackburn, Box Hill, North Balwyn and Glen Waverley are at risk of their hero run possibly being over.
Critical market drivers are first homebuyers and first-time upgraders. The middle to outer ring suburbs where you can buy for $1 million or less, especially for houses, will continue to perform well due to demand from these buyers. This includes suburbs such as Preston and Sunshine that have more land and space for kids and schools.
Overall, townhouses and villa units will continue to be in strong demand this year due to the price point and properties built 10 to 12 years ago that have more space and are better built will also be attractive to homebuyers and investors alike. But on the flipside, small CBD apartments of 40sqm or less will continue to struggle and owners in buildings with polyethylene cladding which is substandard or poorly applied can expect to see more class actions against builders and developers. As these problems become more widely known, buyers will see the cladding and walk away.
Transport routes and train lines will be key, as traffic is becoming more horrendous and commuters want faster commute options. Regional centres such as Geelong and Ballarat will continue to benefit from Vic Rail train commutes to Melbourne. Meanwhile, suburbs with level crossings removed will spur interest, resulting in potential price increases, especially as commuters can have their travel times cut as a result of these changes.
A market slowdown could occur in the event increases in unemployment, falls in migration to the state or rate rises – in particular, properties worth over $1.5 million will struggle with any rate rises in 2018.
There’s a lot of watch this year, but we’ll be keeping an eye on developments in the market and bringing you regular update throughout 2018. If you intend on making a purchase this year, contact us today to find out how we can help.
Things are not always as they seem
There are affordable suburbs in Melbourne, and they are proving to be popular, with more auctions and higher clearance rates in the city’s middle to outer-ring suburbs, according to CoreLogic. But there are also plenty more expensive areas, with Real Estate Institute of Victoria figures showing one in three Melbourne suburbs now has a median house price of at least $1 million, with 44 suburbs breaking the million-dollar mark over the past year.
If affordability in Melbourne has led you to consider looking at suburbs substantially outside the city this year, make sure you do your homework, by researching properly and correctly interpreting data.
A region might have one strong growth driver, such as population growth, but this alone isn’t sufficient to invest in the local property market, and if you’re looking to do so, it can lead to big mistakes. Multiple growth drivers are essential to ensure ongoing capital growth over the long term.
A case in point is the City of Hume, part of which is in metropolitan Melbourne and encompasses suburbs including Broadmeadows, Sunbury and Yuroke. One growth driver is seemingly the population, which is exploding largely due to migrants moving to the area. But this won’t lead to ongoing sustainable growth if the local council and infrastructure can’t keep up. Migrants arriving to the area with families much larger than councils have planned for has resulted in schooling being inadequate, unemployment levels in some areas being high and dependency on welfare escalating due to both limited local jobs and a lack of public transport.
Hume City Council has received State Government funding for a $45 million aquatic centre, but much more is needed before this area can prosper.
How long this may take is anyone’s guess, and it will also be affected by ongoing migration to the area.
While buyers can get access to a wealth of information about property nowadays, it’s quite another thing to interpret that data accurately to make informed decisions about investing. Skilled buyers’ agents such as Property Mavens help to interpret it correctly and put it into context, to ensure you avoid making a costly mistake while also buying an investment grade property that will have sustainable and ongoing capital growth.
While we’re confident the market in Melbourne and in certain Victorian regions will continue to perform well, no matter where you buy careful selection will be important. Some areas – and properties - will make for better investments.
Buyers often make foolish decisions under pressure. We recently put a time limited offer in on a Ballarat property before it went on the market, which was supported by the agent we were dealing with. Once presented, the vendor wanted to wait until after the first open to entice more offers, under a deadline. We did a building inspection in the interim and discovered in excess of $15,000 of works to be done. Our offer included special conditions to protect our client and was adjusted to allow for major works in lieu of walking away.
The eventual buyer (a neighbour) made an emotional and unconditional purchase for more than $37,000 (10%) over the top of the quote range, and therefore overpaid. They also bought without undertaking a building inspection and therefore not realising they were up for at least another $15,000 in major structural repairs. I wouldn’t want to be in their shoes when they find out!
A licensed and professional buyers’ agent will ensure their clients only make fast, unemotional evidence-based decisions to secure the best possible outcome. If you want to avoid making a very costly mistake, contact us for an obligation-free discussion about how we can help you.
Single mum Molly procrastinated for years before she was ready to buy her first investment property. She lacked the courage and didn’t have the time or confidence to fully appreciate all the components that make up a wise investment purchase.
But when she engaged Property Mavens in December last year she purchased a fantastic investment grade property in Glenroy before auction and $28,000 under our appraised value – all within 7 days of appointing us!
Today, she is $96,000 better off, having enjoyed 21% capital growth in only 12 months. We are certain she will be celebrating her massive gain over the festive season!
If you want similar results this year, click here to book a time with us to discuss your requirements. It’s 100% obligation free.