Melbourne Property Cycle Update

Hi there,

Just wondering where people think we are at in the property cycle here in Melbourne?

A good time to buy, or a good time to sell?

My feeling is that the ideal buying window (for those timing the market), has well and truly passed us, even looking further out from the CBD in middle to outer suburbs.

I'm trying to anticipate when might be the best time to do a re-valuation and LOC top-up on my IP's, and also possibly sell one of my earlier purchased IP's (I need a deposit for a PPOR!).

I was thinking maybe in 12-18 months' time we may approach the peak of this cycle?

I don't think it's a bad time to do some re-valuations or selling now (ie. it's a seller's market), but when might be the best time?

(A bit of crystal ball gazing here I know... but let's compare crystal balls!)

btw My view is that the best gains are made by buying ''below market-value'' AND at the right time in the cycle. Though, if you're not in the market at all, sometimes it's best just to get in, regardless of where exactly we are in the cycle.

I think it's heating up, a bit more than a simmer but not quite on the boil yet. :rolleyes:

When is it a good time to arrange revaluations??? Basically any time, but preferrably when agents are scrambling over the top of each other to get your listing!! :p

IMO it's still an "okay" time to buy, granted not the cheapest time, but prices are still reasonable. It is however, certainly a good time to consider selling, if you haven't erected the board on the front lawn yet. ;)
Good time to re-value, I hope so. I revalued one of my properties in Melbourne came under its true value by $70K, but you may get lucky. Those bloody bank valuations, RAMS.....

I still believe Melb has not yet peaked, I don't see IR rises making too much difference at this point in time.

If you can pull your money out and pump up your LOC that is a good way to go, have a bet either way. Good luck

Cheers, MTR
I will give another angle to this and say that its definitely a time to sell and cash up for the coming slump.

And that shouldn't be too far either. IRs will go up in my opinion(even another 1% will be enough with the kind of leverage people have) and that will stretch a lot of people...

My 2c's.

For my two cents worth I think property prices in Melbourne will continue to rise until at least the end of the year.
Just my opinion....

Cheers, Medine
Price in the outer west is still rising strongly with good stocks sold under 24 hours from listing.

Many are sold for more than asking price.

I would delay the valuation for longer :)
Price in the outer west is still rising strongly with good stocks sold under 24 hours from listing.

I know, the place I want to buy next keeps going up and up. :(
I want to buy in about a year and a half, so I hope it does slump a bit as I'm starting to get priced out of houses in the area for the budget I want to spend.
what suburbs in the west are you specifically refering to?

my two cents on the OP: i think the melb market is still moving forward but has slowed a bit. i would get your valuation done asap only if u urgently need access to that equity, otherwise, hold off for a bit if you require more funds than what you can currently acheive now.
Like many I think the Melb market is starting to overheat, BUT, just about the only negative that I can see is the inevitable increase in interest rates.

An increase in unemployment is looking less and less unlikely, as is any other kind of demand side shock, and we know what the supply side is doing.

So, what effect will rising interest rates have? Well, the last IR rate rise cycle had minimal effect, but arguably affordability was a lot better than it currently is, as Melb property has increased by more than wage CPI in that time.

Of course if the aussie dollar falls a bit then property becomes even more afforable for overseas purchasers, which could make the sub $1m property in Balwyn, Kew, Camberwell, etc completely extinct, rather than just the endangered species it currently is.
It always feels like now is better than the next time you think about it, be that next week, next year or 5 years down the track. The question is probably not when, so much as what and where.
Reval's & selling are different things to me. Unless you're in a hurry I would wait with reval's - JIC there are still strong sales coming close your IPs. If you sense the market in your area starting to come off though, you'll need to order the val straight away. There should be strong sales for the prior 3 mths for the valuer to value up the property.

If I was thinking of selling in a hot area right now I would be doing it. I can't see the widespread auction frenzy continuing, I'm afraid. With inner city properties selling 20%+ over reserve there are some happy vendors around.
I was shocked to see a 2 bedroom weatherboard on a slightly smaller block than mine sell around the corner at auction last weekend. Mine is a corner, 3 bedder. Valuer admitted to me 1 year ago (when things were looking dire!) that they were taking 10% off prices for the bank vals (thanks v much :rolleyes:). I thought fair val was $540k. He obviously agreed, as the val came back at $490k. The house that sold on the weekend got $690k. What the? If I was thinking of selling my house in the near future I would be doing it now. A bird in the hand & all that... As they say, no one ever went broke taking a profit.
Agree with MJ above.

I don't see much value in Melbourne right now from the perspective of silly prices and comparatively lowish rents. That yield balance needs to return and it will only do so with steadily increasing rents and a cooler market to ensue later this year.

Ms Jade's strategy is very valid. If you need to sell (or want to harvest) I would be thinking about doing it now or in the near future. :)

If you want to stockpile LOC or offsets then wait a while for these ridiculous prices to register on the system as settled transactions and be well armed for your broker/bank/valuer ;)
I think prices are still peaking in certain areas and may slowly stablize in the near future.

If the government changes the laws on foreigners buying property then it might be a different market.

Otherwise, it is so heated - went to auction in burwood.. it went from 450K to 575K. Likewise for places in the CBD.
From what I see and hear, foreign money is the overwhelming driving force behind the recent surge in Melb prices, following the recent foreign investment rule changes. Foreign cash buyers are totally blowing the locals out of the water on auction day.

Just my personal observation only.

What happens if foreign buyers decide to offload their Aussie property?
Melbourne market is bloody ridiculous at the moment. No matter how the numbers are crunched, I can't seem to get a decent yield on anything when it comes to houses on a decent size bloke that can be subdivided. Anybody else finding this, say within 15km's of the city?
Melbourne market is bloody ridiculous at the moment. No matter how the numbers are crunched, I can't seem to get a decent yield on anything when it comes to houses on a decent size bloke that can be subdivided. Anybody else finding this, say within 15km's of the city?

Bludger, if people only thought about 'houses' as 'yield only feasible' investments, you'd probably find most houses wouldn't even hit the 7 figure mark today. But clearly they do.

You are only coming from the point of view of a 'predominately yield only' investor, but bear in mind that there are many capital growth investors (me included) within the 'total property investment population'. However, most people are owner-occupiers so to them, why would yield be as important as it is to you? Also, number crunchers like yourself often fail to price intangible features as well. Let me give you a few examples:

1. How do you value lifestyle, living close to parks, shopping strips, top private schools, streetscape etc.?
2. How do you value time? (time saved to get to work, less travel time wasted so you can spend more time with family and leisure because you supposedly live close to the CBD, or close to amenities and transport)
3. How do you value ego? (i.e. by saying you live in a premium suburb like Toorak or Brighton and the feeling of inviting guests to your 'Toorak' house)
4. How do you value the thought of living near other successful people
5. How do you value living amongst the rich history of particular suburbs and the nostalgic feel?

People obviously value these features differently, hence why we have successful and unsuccessful bidders at auctions because they value the holistic aspects differently.

You may also ask, why on Earth would someone pay $2 or $3mil for a house? Well, besides the fact that they could, is that this house is probably one of the only 'massive' purchases made by a couple in their lifetime. Hence, why would it be 'unreasonable' to pay that sort of amount, when you can enjoy it for 30-40 years? Not everyone invests in property (or shares, or whatever investment vehicle there is). Some people simply just work, and live in a nice multi-million $ house.

Anyways, houses in premium suburbs have generally had sh*t yields for decades, so if your argument held, these places would have been overpriced w.r.t yield decades ago, but clearly people still buy them and a correction has not reverted these houses back to your 'number crunching methods'.

All I can say, good luck to you if you find anything within 15kms with a reasonable yield (whatever that is to you), but I am pretty sure that with your thinking, you would probably end up doing nothing, and still complain about this dilemma in the next 5, 10, 15, 20 years.
Bludger, 4% yield is OK. I do agree with you that it's getting a little overheated but as DeeHwa said, it depends on what/where you're talking about. If you are concerned about yield, then you should look at those properties with a high rental population like Carlton/Parkville, Bundoora, Prahran etc. Our family bought in those areas and we've done well due to that high rental demand. However, forget premium suburbs like South Yarra, Albert Park, Toorak et al because in those areas, people just buy them because they want to live there. $2m is nothing for those owner-occupiers. No one cares about investment yield there.

If you pay 4-5% for an IP house then at least you are keeping some of the upside for the person down the track who wants to pay you 3%. Once you get into ~2% mark then you cap the potential upside.