Property Report Victoria
Upgraders & investors reap rewards Welcome to this edition of the Westpac/ Property Report, a first hand look at how Australia s residential property market is performing on a state by state basis. This report is based on the observations of s fully qualified registered valuers in over 58 offices across Australia. The Australian residential property market is currently experiencing mixed fortunes. While first home buyers have all but exited the market, investors and upgraders are moving in, reaping the rewards of comparatively low interest rates and high tenant demand a by-product of deteriorating affordability. Population growth continues to underpin many of our state capitals. in particular is becoming home to as many as 2,000 new residents each week, and along with support for owner occupied homes, this influx is fuelling demand in the rental market. As affordability continues to deteriorate amid rising interest rates and ongoing price appreciation, new investor hot spots are emerging. In Sydney, the western and southern suburbs have experienced rental growth of up to 9% in 2009, delivering yields in some areas of 8% a figure once regarded as unthinkable for the harbour city. Not surprisingly, these areas have become immensely popular with investors, and as with other capitals, these tenant hubs are likely to experience strong capital growth. The prestige end of the residential market continues to build confidence following stable job numbers and stronger retail sales. Higher end properties have benefited from the strength of the finance sector and the rebound of the resources sector. The sale of Angela Bennett s Mosman Park home in Perth established a new record, not just for West Australia, but for the Australian market as a whole. The mining heiress achieved a sale price of $57 million, far eclipsing previous records. In regional markets, the drought continues to take its toll on property values, despite flooding in many areas. Cities with broad based economies within commutable distances to major employment centres are enjoying rising values. However in areas heavily reliant on water or rural industries, values have plunged. The mining sector is increasingly becoming a driver of regional property values. In Queensland s Surat Basin, the proposed Wandoan Coal Project is expected to have a significant impact on the surrounding economies and property values, of townships like Chinchilla and Roma. However it s also clear that when mines or other key industries pull out of an area, the effect can be devastating. Tasmania in particular is facing the closure of a number of local industries, with property values likely to stagnate as a result. As we move through 2010, the property market faces the conflicting forces of growing economic prosperity and population growth, versus the effect of higher interest rates and reduced affordability. It s a combination that heavily favours investors and upgraders, with first home buyers likely to remain challenged over the year ahead. Brendon Hulcombe Chief Executive Officer, 1
s property market is making headlines around the country with property values rising by 19.7% 1 last year the strongest growth rate of any state capital. The city s residential market is being fuelled by unprecedented population growth of 1,500 to 2,000 new residents each week. Better than expected economic conditions and construction grants of up to $40,000 have added further support to the metropolitan market. The Deer Park Bypass is also driving up prices by providing greater access to the CBD, and this is supporting price growth in suburbs with close proximity to the bypass. s property market is currently being fuelled by unprecedented population growth of 1,500 to 2,000 new residents each week. Most suburbs with a median house price below $400,000 have shown significant growth over the last quarter. Stand out performers include Glenroy, Broadmeadows and Moonee Ponds, and Point Cook and Werribee in the west. The lowest valuation for the December quarter was $65,000 for vacant land in Broadford. A student apartment in Carlton was valued at $135,000, and a home in Seymour was valued at $150,000 the lowest valuation for a house. The highest valuation was recorded for a $15 million home in Toorak, while a Docklands apartment was valued at $2.5 million. The highest valuation for vacant land was achieved by a block in Kew valued at $1.35 million. Rental yields have softened slightly though areas within a 10 kilometre radius of the CBD continue to command the highest rental yields. Rising interest rates are adding to the city s affordability problem, and declining affordability is expected to create a stronger rental market. 1 ABS Cat: 6416.0 House Price Indexes: Eight Capital Cities, Dec 2009, Released 2 January 2010 Hot Spots The Deer Park Bypass is providing greater access to the CBD, and this is supporting price growth in suburbs with close proximity to the bypass. Most suburbs with a median house price below $400,000 have also shown significant growth over the last quarter. Stand out performers include: Glenroy, Broadmeadows, Moonee Ponds, Point Cook, and W e r r i b e e. 2
Regional Victoria Horsham The major regional centre of Horsham has experienced static growth in line with the lingering effects of the rural drought, though there has been some lift in values. The lowest valuations for the area were recorded in Jeparit, where a freestanding weatherboard residence was recently valued at $17,000. The highest valuation was achieved by a quality brick veneer house in Horsham, valued at $475,000. In the unit market, Horsham values ranged from $125,000 for a 1970s brick veneer unit through to $215,000 for a 3-bedroom, brick veneer unit built in the mid 80s. Despite relatively static capital growth, rental yields remain strong, and in Horsham, investors are enjoying yields in the order of 7% to 9%. remains a strong regional city supported by the education and health industries, both of which underpin strong rental yields. The city s proximity to the state capital is attracting -based workers, many of whom commute by train each day to the CBD. The market is currently characterised by relatively short marketing periods and firming price levels. Gross rental yields of up to 7% are possible. The areas surrounding, which tend to be more reliant on agriculture and tourism have been less fortunate. Moama, for example, was significantly impacted by the recent economic downturn and rental vacancies rose to 10%. The area appears to have bounced back somewhat and the current vacancy rate is holding steady at about 2% to 3%. is attracting increasing interest from buyers who regard the area as a safe investment location. A growing number of -based tradespeople are investing in the area with a view to redeveloping sites in the medium term. Valuations for the region range from a low of $128,000 for a 1940s dwelling in Tatura to $825,000 for a modern brick veneer home in. A 3-bedroom townhouse in central was recently valued at $539,000. The drought continues to exert a significant impact on the property market, and the region has seen little movement in values over the past quarter. The impact of water restrictions has seen a significant decline in the value of rural residential lots and horticultural holdings sold without Water Shares. A depressed wine sector and generally slower economy have also had a negative impact on values. On the plus side, low valuations are seeing plenty of buyer activity especially at the cheaper end of the market. Among the lowest valuations for the quarter was a former Red Cliffs motel unit converted to a residential apartment valued at $50,000, and a basic home in remote Meringur valued at $30,000. At the other end of the spectrum, a new home with waterfront access in Buronga commanded a valuation of $1.2 million. 3
Stage of the property cycle Victoria Houses, March 2010 Declining Market Peak of Market Rising of Market Bottom of Market Start of recovery Rental vacancy trend Victoria Houses, March 2010 Increasing Sharply Increasing Steady Tightening Tightening Sharply 58 Offices, 600 People, Every State & Territory Looking for peace of mind with your property decisions? Ask to help. From pre-purchase property valuations to tax depreciation schedules for investors, from commercial, to residential, to rural property, we have someone in your corner working for you. Ph 1300 880 489 htw.com.au admin@htw.com.au Rental vacancy trend Victoria Units, March 2010 Increasing Sharply Increasing Steady Tightening Tightening Sharply Source: The information in this report has been prepared by. The information is current as at the publication date only. Westpac Banking Corporation accepts no responsibility for its accuracy or completeness. The information contained in this report is provided in good faith and has been derived from sources believed to be reliable and accurate. However, the report is not intended to be comprehensive or render advice and neither Herron Todd White nor any persons involved in the preparation of this report, accepts any form of liability for its contents. This report is Copyright, and cannot be reproduced without written permission of. Copyright 2010 4