REIV Melbourne Sep2010 Quarter Median House Price

[forumite]

Today the Age has published the REIV Melbourne Sep2010 Quarter Median House Price on page 14.

I have been keeping hard copies of these tables. If you go to REIV website, you can only search suburb by suburb and can't get any comparative table of all the suburbs.

I am interested in knowing changes in the median house price of the suburb that I am living in, that is, Altona as well as that of Hoppers Crossing and Mont Albert. I am pleased with this Quarter results.

forumite

 

[Kennyjaiz]

forumite,

You may find this useful:
http://data1.reiv.com.au/trendchart/default.aspx

Cheers,
Kenny

 

[meconium]

Thanks, that's a great link. With Melbourne prices at record highs it will be interesting to see if the bottom end of the market outperforms the top end. I'm heavily into Frankston & Seaford (older homes on dual occ sites) and am happy with the latest REIV median figures.

 

[Kennyjaiz]

Good point, Meconium. My thoughts:

1, The level of First home buyer (FHB) activity is relatively low at the moment (AFG reported FHB comprised ~15% of all loan applications - from between 30-35% last year). This is probably due to the fed and state government stimulus (e.g. FHOB) last year, which induced FHB to bring forward their purchasing decision (reducing demand from FHB this year). This is further compounded by the lower affordability and increasing interest rate. Bottom end is typically the entry market for FHB. This explanation suggests the bottom end may suffer.

2, That leaves the investors and upgraders dominating the current property market. Investors tend to make more logical decisions when it comes to investments (based on return). Despite expectations of higher rent in the near future, it is still insufficient. Melbourne metro yield is relatively low around 3.5-4%. Several analysts and data providers (RP data, APM and even RBA) anticipate a lower than average capital appreciation in Melbounre in general, over the coming years. It suggests the top end might not be performing as well as previous.

Looking at the REIV median price graphs linked, the bottom end in general has outperformed the top end (with exceptions) in terms of capital growth in the sept quarter. I suspect this trend will continue until the end of the financial year (assuming interest rate and unaffordability continues its current trend). Given the stable economy, relatively low cash rate, low unemployment rate, housing supply constraint, unpredictable alternative investment classes, relaxed rule re properties in SMSF, I think the Melbourne property market will experience a more subdued growth and possibly even negative growth. Like all investment classes, property market runs in cycle.

Personally, I think short term vanilla property investors (i.e. investors with no intention of adding value to their proeprties) may be disappointed with the total property return in the next 12-18 months - in both top or bottom end.

You seem to be doing well, but taking just your last comment on face value, you may like to consider a bit of diversification.

________________________________________________________________
The above material is only general in nature and not intended to be specific to the individual circumstances. Seek independent professional advice before making any decisions or relying on the information provided.

 

[zed_kid]

Great post Kenny, agree with both your points. I think the bottom end has its run as the FHOB stimulus has worked its way through the system. I’m also seeing flat to negative growth for Melbourne and I’m fine with that, indicates a healthy market, ups and downs, I’d be more uncomfortable if Melbourne had another growth spurt.

 

[sash]

From where I sit the affordable end of the market in built out areas such as Hoppers Crossing, Werribee, and Melton South will continue to grow, albeit not at the same pace is 2009-2010.

You are correct in saying that the new area housing will slow.

Overall, I see the established suburbs in Western Melbourne (mostly 15-35 klms out) will continue to grow due to the high amount of immigrants coming to Victoria.

Great post Kenny, agree with both your points. I think the bottom end has its run as the FHOB stimulus has worked its way through the system. I’m also seeing flat to negative growth for Melbourne and I’m fine with that, indicates a healthy market, ups and downs, I’d be more uncomfortable if Melbourne had another growth spurt.

 

[Deltaberry]

As usual, inner ciy Carlton outperforms.

http://bordermail.domain.com.au/Property/For-Sale/House/VIC/Carlton-North/?adid=2008586574

This sold for $935k last weekend... Probably could've picked this up for $600k last year. Go figure. Funny this time last year so many forumites were predicting inner city, high-end market would underperform. I still remember being challenged to come back in a year's time and prove them wrong. Well here I am...

 

[Kennyjaiz]

Great post Kenny, agree with both your points. I think the bottom end has its run as the FHOB stimulus has worked its way through the system. I’m also seeing flat to negative growth for Melbourne and I’m fine with that, indicates a healthy market, ups and downs, I’d be more uncomfortable if Melbourne had another growth spurt.

Thanks zed_kid. I'm a strong believer that smart investors can take advantage of any phase in the market cycle. Provided investors have a long term perspective and have the ability to hold onto their properties, property investment is still an attractive investment option. However, investors will need to be a lot more creative to retain a similar level of return as we have experienced in Melbourne in the past couple of years (40% in 18 months)

While I understand the extra-ordinary growth was likely to be due to the disparity between supply and demand, the demand seem to be artificially stimulated by speculation and facilitated by easy credit (which makes property investment volatile). This is unsustainable in the long run. Therefore, I agree with you - I am more comfortable to see a slow down in growth.

 

[Kennyjaiz]

From where I sit the affordable end of the market in built out areas such as Hoppers Crossing, Werribee, and Melton South will continue to grow, albeit not at the same pace is 2009-2010.

You are correct in saying that the new area housing will slow.

Overall, I see the established suburbs in Western Melbourne (mostly 15-35 klms out) will continue to grow due to the high amount of immigrants coming to Victoria.

Don't disagree with you in general re the Western suburbs.
But there has been a significant reduction in the level of net immigration and other forms of temp visas (student and working) into Victoria. Also the strong AUD and higher interest rate are not helping in terms of direct foreign investment from overseas investors, which ultimately reduce the excess demand to a more normal level pre 2008/09.

 

[pickle pickle]

As usual, inner ciy Carlton outperforms.

http://bordermail.domain.com.au/Property/For-Sale/House/VIC/Carlton-North/?adid=2008586574

This sold for $935k last weekend... Probably could've picked this up for $600k last year. Go figure. Funny this time last year so many forumites were predicting inner city, high-end market would underperform. I still remember being challenged to come back in a year's time and prove them wrong. Well here I am...

When a downturn starts, you can find examples where people have probably paid too much. I say the above is true.

Inner City houses are unique as there is a real limited supply. However the yields on these are pretty crap. The only way prices can go up substantially in the long term on inner city houses, is if rent goes up by a similar amount. I can't see yields gettting worse. If they get worse than 3% than that is a sign of a bubble.

The other issue with inner city houses for investors is that investors have only a limited supply of money. I think people are better off having a million dollars of houses in the outer suburbs with 5% yield than one inner city place with 3% yield ($1,000,000). Yes it maybe possible on capital growth the one inner city property will outperferom the outer suburbs properties, but the risk is greater.

Wait until we have an economic downturn. Property will crash.

 

[meconium]

Property will crash.

Better to day OVERPRICED property will crash, come any economic slump. Cheap stuff will stay strong as it is more affordable.

 

[Deltaberry]

Inner city are more desirable locations and when people buy a PPOR they look at it and go, "hmm I'm going to live here for the next 20 years, so don't really mind what the yield is"... can't really take the mentality of a poor suburb and apply it to a rich suburb

 

[investwest]

people say that every boom time

When a downturn starts, you can find examples where people have probably paid too much. I say the above is true.

Inner City houses are unique as there is a real limited supply. However the yields on these are pretty crap. The only way prices can go up substantially in the long term on inner city houses, is if rent goes up by a similar amount. I can't see yields gettting worse. If they get worse than 3% than that is a sign of a bubble.

The other issue with inner city houses for investors is that investors have only a limited supply of money. I think people are better off having a million dollars of houses in the outer suburbs with 5% yield than one inner city place with 3% yield ($1,000,000). Yes it maybe possible on capital growth the one inner city property will outperferom the outer suburbs properties, but the risk is greater.

Wait until we have an economic downturn. Property will crash.

Just curious, when was the last crash ? was that when interest rates were at 18% and nobody had a chance in hell of holding on, really has there been a "crash" since? I cant see it happening, could be wrong, who knows what can happen in a big city, or Melbourne.

 

[csc2]

Innerwest.....re crash...you must also take into consideration home prices, wages, jobs data etc when discussing previous crashes............compared to any future crashes people summise will happen...........no doubt it will happen but not going by current form of the economy...........things may slide slowly, who knows but a crash...no chance currently......

a crash a correction or normal market marking time are three totally different things...

rates in my opinion are only a small reason why markets crash and sometimes have little actual bearing...............

 

[Deltaberry]

Yea well you'd have to wonder if blue collar or more affordable suburbs on avg 90% LVR will survive or older suburbs with arguably more stable jobs and a suburb avg LVR of say 20% (since a lot are old owners).