2017 in review

2017 has been a mixed year for the Victorian housing market.

With 100% Stamp Duty Concessions on offer for eligible Victorian property first home buyers up to $600K and subsidised Stamp Duty up to $750K purchases, the market has seen a dramatic resurgence of first home buyers since the concessions took effect on 1 July 2017.

With no easing in sight from this contingent, we’ve seen dramatic price increases throughout the villa unit and small townhouse segment of the market (particularly in the inner to middle ring north and west, foothill suburbs to the Dandenongs and the southern beachside regions from Aspendale to Frankston. One noticeable change to 2017 which I feel will continue through 2018 is the recovery of the boutique and dated apartment market.

First home buyers are voting with their feet and returning to the inner-ring in the quest for lifestyle-driven café precincts, proximity to rail and easy access into the CBD.

Combined with the increasing values driven by first home buyers, along with the difficulty in obtaining investor finance due to increased bank servicing scrutiny, I believe that investors alike will turn to the apartment market in 2018 and we can anticipate a narrowing in the divide between median house prices and median unit prices.

Baby boomers who seek the inner-urban café lifestyle and like the idea of ‘Lock and Leave’ property are turning to the inner-ring and targeting renovated cottages and townhouses alike. This continued demand will be heightened by lack of supply and for this reason 2018 should continue to exhibit strong performance in the inner-10km suburbs.

Opportunities for sub $750,000 house purchases within an 18 km radius still exist and such gentrifying areas include St Albans, Ardeer, Deer Park, Thomastown, Lalor and Broadmeadows.

Above left in Ardeer for $574,000 in April this year, and right; first home buyers return to the inner-ring suburbs and select boutique older style apartments again.

Geelong has shown attractive growth, particularly around the city centre and leafy nearby suburbs. For commuters who have work flexibility, those who can work remotely or any workers who have relocated to the state’s second largest city, Geelong represents an exciting sea change and the growth in the area demonstrates that many people feel positively about a lifestyle in a more affordable and amenity-rich city.

This sea-change purchase (left) in Geelong’s Belmont was an exciting acquisition in September for a couple who have made the decision to move to the City by the Bay. This cute Miner’s cottage on the southern side of Ballarat’s CBD grid was purchased by investor clients of ours mid year for sub-$300,000 and exhibits a 5% gross rental return.

With the introduction of new decentralized jobs into our regions we can anticipate that they won’t outperform Melbourne but will exhibit growth.

All in all I feel that the positive growth will continue, but not at quite the same pace as it has been for the last four years. We have had some heady growth in Victoria, (and in particular Melbourne) and I believe growth will moderate in 2018 to a more sustainable and historically normal level.

Lastly, rental yields are likely to increase in our city in 2018 as supply and demand swings in favour of landlords. This swing can be attributed to the ongoing level of lender scrutiny on investment borrowings (adversely affecting investor numbers), combined with tougher servicing criteria from the lenders for owner-occupier borrowers, and relative low pay increases. These conditions will reduce investor numbers (and in turn available investment properties for rent) and create a stronger ratio of tenants to properties.

Buying property is tougher now than it was a year ago and the tenant/landlord ratio is due to adjust slightly.

In turn this will increase rents as supply and demand adjusts. Melbourne has been known to investors as a city with one of the lowest average gross rental yields, and while we aren’t about to drastically change that, I feel that investors will finally see some rental increases across the board in 2018.