Melbourne

In August 2014, Cohen Handler proudly opened a new office in Melbourne located on Level 19, 60 Albert Rd, South Melbourne as a dedicated outreach to the Victorian client base.

Located in the south-eastern part of the Australian mainland, Melbourne is the second most populated city in Australia. Currently, Melbourne is experiencing a significant increase in population growth, resulting in a sustained, strong response by a housing construction boom. Over the first quarter of 2014, the housing prices in Melbourne rose by +2.8% with unit prices recording a subtle growth of 0.2%. In the year ending March 2014, Melbourne house prices recorded a growth of +11.7% with units recording +5.4%. Over the last 10 years, Melbourne has seen an average of 5% p.a. increase in Capital Growth and an average of 2.8% p.a. Rental Yield. The data clearly points to a market where rates of growth are slowing. It also points to the fact that, as the unaffordability level has gradually increased, the duration and peak growth rate in any growth cycle has also been reducing.

Annual & Quarterly Change in Melbourne Residential Values

Annual @ quarterly

Source: REIV, June 2014

Melbourne Residential Capital Growth
Median Value Quarter 12 Month 5 Year From Peak
Houses $800,000 -1.7% 10.2% 5.0% 0.0%
Apartments $576,000 -3.1% 7.9% 3.6% 0.0%
Source: RP Data, June 2014

 

Melbourne Residential Rental Growth
Median Rent Quarter Change 12 Month Change Rental Yield
Houses $445 1.0% 2.3% 3.4%
Apartments $396 0.9% 1.3% 4.4%
Source: RP Data, June 2014.


Population Growth

According to projections by the Australian Bureau of Statistics, Melbourne’s population is expected to reach 8.6 million by 2061; exceeding Sydney in 2053. By 2031, population is estimated to increase by 77,600 people to 181,325, within the City of Melbourne. It is forecast that a further 40,400 households will be required to accommodate this population growth.

Source: Urban Property Australia, June 2014.

Population Growth (States)

Population Growth (States)

Source: CBA, April 2014

Net Population Change (Melbourne)

Net-Population-Change-(Melbourne)

Source: Residex, March 2014

Some suburbs of interest for our clients have included:

Is the South West on the rise?

With exceptional growth in house value over the last 5 years in suburbs like Yarraville (7.2%pa) and Spotswood (7.6%pa), strong long term growth prospect in the South West of Melbourne have been earmarked.

Whilst suburbs such as Altona and Seaholme do not presently portray a market glamour, the proximity to Melbourne’s CBD supported, access to Phillip Bay and infrastructure support will no doubt attract heightened buyer demand. Generally, South West prices compared to similar properties in the South East are $200 to $300k lower.

Cohen Handler are keenly observing earmarked development and gentrification of this non-traditional pocket.

Melbourne Apartment Supply

In 2002, the residential apartment stock was recorded at 22,000. Today, the residential apartment supply in the Inner Melbourne region (CBD and 4km surrounds) has doubled and now comprises of over 44,000 apartments.

53% of the apartments that are currently under construction at the moment (under 51 new developments) are located in the CBD Core. These are followed by 18% in Southbank.

Source: Urban Property Australia, June 2014.

Analysts are warning that inner city apartment prices could fall because of supply that is in the pipeline. Furthermore, higher dwelling development approvals, low rental yields and rising vacancy rates could put downward pressure on rents and prices.

As to infrastructure improvements, as part of Plan Melbourne 2050, $27 billion has been committed in the 2014/2015 State budget. Footscray, Werribee and Dandenong are some of the suburbs predicted to benefit from Plan Melbourne 2050.

New Apartment Developments (Neighbourhood v High Rise) 

In the surge of approaching completions within the Inner Melbourne precinct, capital growth for several years is likely to be restrained with developments in locations and designed to be popular with owner occupiers’ not just renters. This owner occupier appeal can said to be differentiated by developers creating a cultural neighbourhood and village lifestyle not just a tower of residences.

One neighbourhood stand-out developers to observe is Little Projects. Founded in 2006 and currently one of Melbourne’s biggest developers is set to build a 900 apartment complex in the Sandridge precinct which is a part of the Fisherman’s Bend redevelopment project.  Based off their previous work, the release will be anticipated by keen market participants. Little Projects truly focus builds to sense of community and lifestyle for the end user without playing a pure numbers game.

 Inner Melbourne Apartment Supply

Vacancy Rates: Melbourne CBD

Vacancy-Rates-Melbourne-CBD

Source: SQM Research, June 2014

Melbourne Performance of Houses v Apartments

Performance Map (4 Bedroom Houses) – 12 Months ending March 2014

Performance Map (2 Bedroom Apartments) – 12 Months ending March 2014

 

Median Price

Suburbs

Share

 labels-03

Below $400,000

65

16%

 labels-04

$400,000 – $500,000

77

20%

 labels-05

$500,000 – $650,000

92

23%

 labels-06

$650,000 – $900,000

78

20%

 labels-07

$900,000+

82

21%

 

4 Bedroom House

Median Price (March 2014) Quarter Change

5 Yr Av Capital Growth

Inner Melbourne

$1,420,000 1.4% 5.2%
Middle Melbourne $800,000 3.2% 6.8%
Outer Melbourne $533,588 2.6%

5.5%

Source: REIV, May 2014.

 

A high volume of sales transactions have been recorded in the $500,000 to $800,000 price point, especially in suburbs such as Bentleigh East in the middle south-east, Thornbury in the middle north, and Yarraville in the inner west.

While optimism and demand have remained quite stable in the overall market both buyers and sellers should remain cautious of the apartment dominated markets of Melbourne CBD, Docklands, and Southbank.

Source: Herron Todd White, June 2014

Performance Map (2 Bedroom Apartments) – 12 Month ending March 2014

Performance Map (2 Bedroom Apartments) – 12 Months ending March 2014

 

 

 

Median Price

Suburbs

Share

 labels-03

Below $300,000

53

21%

 labels-04

$300,000 – $350,000

30 12%

 labels-05

$350,000 – $450,000

61

24%

 labels-06

$450,000 – $550,000

69

27%

 labels-07

$550,000+

42

16%

 

4 Bedroom House

Median Price (March 2014) Quarter Change 5 Yr Av Capital Growth

Inner Melbourne

$540,000 0.9% 4.7%
Middle Melbourne $445,500 1.8%

5.5%

Outer Melbourne $345,000 3.0%

5.6%

Source: REIV, May 2014

With the help of our experienced buyer’s agents, our clients are guaranteed to achieve the best results to accommodate for their lifestyle interests and investment objectives.

 

 

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