melbourne up 25% in 2007!
- Thread starter Soren Lorenson
- Start date
While rents have moved up and substantially in some cases, they have not moved up any where near as much as values - so yileds remain low.
But who cares?
The average (median) house has gone up by $100,000 over the last year -so what if you have a cash flow shortage if you manage your LOC well.
Is there still more room to increase - Melbourne's median is still considerably below Pert and Sydney ye it is getting the bulk of migrants.
Also the cost of new development is still considerably below the current market price. This means for a new round of developments to occur to fulfill demand - new apartments townhouses etc will have to cost 25-30% more than current market prices - this will pull up established prices.
This year Melbourne will not perform as strongly and that's good (it was unsustainable) but there is room for more movement
I disagree... Melbourne has more to it than just inner blue chip suburbs.
I bet my bottom dollar that Melbourne will perform well in 2008 (excluding inner) and the increase in values for most middle and some outer suburbs will be as steep as it was for inner in 2007.
This has happened historically when I compared the inner vs outer price growth over the last 25 odd years in Melbourne.
There is a big anomaly in values and history shows it must go down the path of self correction, especially with the rental shortage being uniform across most of Melbourne.
If the correction does not happen, then the sheer growth in rental yield in middle- outer burbs will invite yield investors who will simply flock to the excellent rental yields relevant to prop values in those areas, creating shortage of stock and subsequent increase in values.
Some of the middle ring suburbs have recently started upward march in values due to affordability related reasons and that growth is spiralling out at its perimeters.
Harris
I was reading this post and thought I would offer my thoughts....
I tend to agree with Harris....if you look at th fundamentals and past history. Melbourne is experiencing a classic property cycle....the boom started in the inner surburbs and is now filtering out to the middle surburbs. This year the median price for Melbourne will stablise but this does not mean the boom is not continuing.
What you will see is the price growth in the inner surburbs will stabilise and most middle surburbs will experience 20% plus growth and the outer surburbs will also do well. However, the median price for Melbourne will probably not move as much because a lot of lower priced property will will be selling.....in fact it could bring the median price down.
So if one wants a tip...don't just look at the median prices but look at regions with the property markets in Melbourne and how they are performing. My thoughts are the Western (Werribee, Point, Cook, Hopper Crossing), Northern (Craigieburn, Broadmeadows), Outer Southeast (Packenham, Carrum Downs, Cranbourne)and North West (Baccus Marsh, Melton) will see healthy returns.
I look forward to some interesting comments about how the outer surburbs will falter due to hight interest rates...I am not seeing this yet. As people who are priced out of the inner surburbs will move further out in line with affordability. This has always been the case and will always happen because Melbourne as a city is growing faster than builders can keep up with things.
How do I know this....I have been through 2 cycles....and this time I have stopped listening to the naysayers because last time I missed the boat on the outer suburbs.
I guess only the progress of time will reveal things.....
I tend to agree with Harris....if you look at th fundamentals and past history. Melbourne is experiencing a classic property cycle....the boom started in the inner surburbs and is now filtering out to the middle surburbs. This year the median price for Melbourne will stablise but this does not mean the boom is not continuing.
What you will see is the price growth in the inner surburbs will stabilise and most middle surburbs will experience 20% plus growth and the outer surburbs will also do well. However, the median price for Melbourne will probably not move as much because a lot of lower priced property will will be selling.....in fact it could bring the median price down.
So if one wants a tip...don't just look at the median prices but look at regions with the property markets in Melbourne and how they are performing. My thoughts are the Western (Werribee, Point, Cook, Hopper Crossing), Northern (Craigieburn, Broadmeadows), Outer Southeast (Packenham, Carrum Downs, Cranbourne)and North West (Baccus Marsh, Melton) will see healthy returns.
I look forward to some interesting comments about how the outer surburbs will falter due to hight interest rates...I am not seeing this yet. As people who are priced out of the inner surburbs will move further out in line with affordability. This has always been the case and will always happen because Melbourne as a city is growing faster than builders can keep up with things.
How do I know this....I have been through 2 cycles....and this time I have stopped listening to the naysayers because last time I missed the boat on the outer suburbs.
I guess only the progress of time will reveal things.....
I think alot of people within 10km of the CBD will expect to see the same growth as last year in 2007 countinue on to 2008 which I doubt strongely will happen. The ripple effect will continue now 10-20km from the CBD were you will see good capital growth and see less buyers willing to pay prices like in 2007 within 10km of the CBD.
Take a look at Canterbury, Camberwell, Hawthorn East, even Toorak these are just examples of some suburbs that have come down in price.
http://realestateview.com.au/median/index.html
Take a look at Canterbury, Camberwell, Hawthorn East, even Toorak these are just examples of some suburbs that have come down in price.
http://realestateview.com.au/median/index.html
None of the properties in those suburbs have actually come down in value. This is the settling down effect, where the anomalies get adjusted for any quarters where the high value properties were in majority for the number of properties sold.
Malvern median increased by 90% in 12 mths to Sep 07.... This doesn't mean that prop values in Malvern or Kew doubled within 12 mths to Sep 07, just that the median had gone up dramatically due to very high value prop forming majority of stock sold in that quarter.
Prop are still selling well in inner suburbs however the inner ring is going through a consolidation phase and I expect prop values to settle/ stagnate at current levels for the next few years.
Harris
Im assuming your talking to about will we see the same Capital Growth as last year, yes and no. No one can really answer that question, as who really knows whats going to happen this year. I do know that alot of people with 10km of the CBD are expecting and they can keep continuing to expect to see the same Capital Growth as in 2007 but it wont happen. but home owners within 10km of the CBD will just hold on to there homes and there might be shortage of homes on the market which could easily push prices up.
I think what you will see this year that some suburbs that had good Capital Growth in 2007 have a correction this year and come down a little, and we will start seeing the ripple effect this year were all the suburbs 10km or futher will see good capital growth.
Hi Harris,
You say that none of the prices have come down, I know of 2 houses in toorak which they have lowered one by 500k plus and these homes are still on the market, and there are plenty more out there that they come down in price after being passed in at auctions.
There could always be exceptions.. I have not heard from anyone re values in inner melbourne actually coming down. The consensus amongst all stakeholders is that inner is still strong.
Harris
We are also going to see the completion in 2008 of some major roads projects which will change the dynamics a little. For example...
- Pakenham and Officer have been integrated with greater Melbourne.
- Ringwood and Vermont will become only five minutes further out from the CBD than Blackburn.
- Wantirna and Scoresby will have a direct link to the Monash and Eastern freeways.
- Frankston and surrounds will have a CBD and airport link.
If it hasn't already, the ripple could arrive in areas that are also about to get a huge infrastructure boost.
- Pakenham and Officer have been integrated with greater Melbourne.
- Ringwood and Vermont will become only five minutes further out from the CBD than Blackburn.
- Wantirna and Scoresby will have a direct link to the Monash and Eastern freeways.
- Frankston and surrounds will have a CBD and airport link.
If it hasn't already, the ripple could arrive in areas that are also about to get a huge infrastructure boost.
Are you saying that they are selling for less than equivalent houses sold in the past 6 - 12 months or just that they were unable to achieve their desired selling price and are responding by lowering their price. At the upper end pricing is very subjective!
Totally Agreed.
We will definitely see some good growth in Outer SE suburbs especially Berwick due to the past history of the suburb and the fact that people in Outer SE consider Berwick as an upgrade to their PPOR.
No, Im saying that these houses were listed for auction you could say 6 months and and has been from the internet and then listed again on the internet so it dosent become a Dummy house and now relisted for far less then what the vendor was asking for 6 months ago.
There have been many houses removed from the internet and the for sale boards have come down so its not classified as a dummy house but still on the market if you go see the agent.
A house around the street from me, vendors asking 1.35mill I offered 1.1mill and they will glady sell it after it got passed in, lm guessing they owe alot to the bank. I got a bank valuation and the bank valued it at 1.3mill.
I've seen alot of private sales across MELB and I bet that if you went to there door and offered them 10-15% less then the asking price they will sell.
Alot of builders and investors are not willing to pay $1-2mill for a house if they cant do anything with the land.
Have to agree, the SE is to going really see great Capital Growth.
I've always imagined the "classic property cycle" to be in the context of lowering interest rates. As rates drop, people have more money to spend so they can afford to pay more for houses. It also stimulates the economy --> more jobs --> more people have more money. Both of these lead to increased demand and higher prices. As the difference between paying a mortageg and rent narrows, ownership also starts looking more attractive so more people enter the market creating a relative under supply. The cycle that happened from 1998 - 2003 would be "classic" IMHO (I appreciate it also has some boosts from improving economic conditions and FHOG).
The current property cycle is happening in the context of rising interest rates. Under normal cicumstances this should be depressing / stagnating the market so it actually seems quite unusual to me that the market is so strong. The drivers of the strength seem based on 3 pillars
1) Money flowing in from a strong economy and share market increasing demand
2) A chronic under supply
3) High Migration adding to the under supply. Many of the migrants are cashed up so this is also raising demand.
Alot of this strength is skewed towards the top end - the top end are paying cash for houses as are rich migrants. They are also disproportionately reaping the benefits of a strong ecomony. Alot of the weakness is skewed towards the bottom - interest rates, increased living costs hurt them alot more.
I'm not saying there wont be some upside to the outer suburbs but I think that the situation we are in is far from classic. While some people will get priced out of the inner suburbs and will start competing for outer suburbs, there are also now alot of people getting priced out all together and looking to rent. They are getting priced out even if the $ value of the property does not rise. As such I'd see price rises as being modest. Yields on the other hand should do increasingly well based on current market price.
And the increasing yields will become catalyst for attracting investors who are nervous about investing in inner suburbs due to the recent massive growth and lower yields.
For the inner ring to become attractive again to investors, there must be an increase in the rental returns by over 30% from its current levels to be around 5% gross yield.
For the outer ring to become appealing to investors, the yields only need to go up by around 10-15% to be around 6% gross yield or higher. Coupled with an absence of recent growth spurt and you have a classic case of the necessary ingredients for the outer to start its growth cycle in top gear.
Harris
I think it does, this is the median value not the mean where large values will have a smaller affect on the dollar amount.
pieman
