Premium Property Report - Quarter 1 2019

PREMIUM PROPERTY

REPORT - QUARTER 1 2019 -

Reach. Relationships. Results.

2 Top insights within this report 3

What happened to interest rates in 2018?

4

The federal election and potential housing policies

5

Budgetary and macroeconomic impacts on real estate

6

Evolving infrastructure and suburb livability

7

International factors at play

8

Risks to property prices in the year ahead

9

Stonnington and Boroondara

10

Port Phillip and Bayside

11

Projects and Developments

The Royal Commission into Banking had a significant impact on the property market throughout 2018, however the recent release of the final report held no directive for banks to further tighten their lending practices.

While previous home price declines have been triggered by rising interest rates, this one has predominantly been caused by the self-imposed restriction of lending due to the Royal Commission. As it appears the impact of the final report has already taken its toll on the market, it’s timely to review all of the important factors at play in the premium property market.

We have compiled this Premium Property Report to assist our clients navigate through the many complex issues currently affecting property prices.

The majority of our clients at Marshall White have a long term interest in property - in fact the average number of years homes are held in our suburbs is over 11 years. Marshall White Director, John Bongiorno says most clients sell and buy properties in which to live so the current market offers some excellent opportunities. “If you want to upgrade your family home, now is the perfect time. While you might need to accept less than you would have 12 months ago, you will also pay less for your new home.”

Investing in property in the long term has certainly yielded significant results in the past and taking a longer term view is prudent. Here are a few examples from the suburbs which we service; the median price of a home in Armadale in 2003 was $728,750, it’s now $1,924,500. The median price of a home in Brighton in 2003 was $875,000, it’s now $2,700,000.

In Albert Park in 2003 the median price was $665,000 and it’s now $2,080,000. While in Hawthorn East in 2003, the price was $615,000 and it’s now $2,028,250. You can see a full list of suburbs and their long term median prices at the end of this report.(1) The broad economic outlook for Australia remains strong.

Unemployment in Victoria is lower than the national average at 4.6%, we are experiencing population growth more than any other state and consumer sentiment is slowly rising.(2) A federal election in May is likely and most commentators are picking a change of government. There will be much focus in the coming months on the issues of negative gearing

and changes to Capital Gains Tax (CGT). Although many of our clients are also property investors, it’s unlikely either of these potential changes in policy will affect the family home.

Amidst the predominantly negative property media coverage, 2018 also saw some key highlights with many $10 million plus sales. In 2018, 9 out of the 20 biggest real estate sales were achieved by Marshall White. One of the directors at Marshall White, Marcus Chiminello, who was responsible for a record number of these sales says there have been solid results in all Marshall White offices. “In 2018 we saw some magnificent homes at the very top of the market find new owners and Marshall White is proud to be leading the industry in these $10 million plus sales,” said Marcus.

So what does 2019 hold? Professor of Economics at the University of NSW, Richard Holden, says the important point is that if there has been a one-off adjustment in the borrowing capacity of Australians, then the price falls should stop fairly soon: predictions of more modest falls in 2019 followed by a reset and rise in 2020 mightn’t be too far off the mark.(3) Many, including the Federal Treasurer, say lending restrictions can now be eased and at the start of the New Year there is already speculation that the banks will be further encouraged to ease back on tough lending conditions. In December the Australian Prudential Regulation Authority (APRA) decided to lift its restriction on banks’ ability to issue interest-only loans, so we may see the big four banks open their books again.(4) To produce this report we asked Domain Economist, Trent Wiltshire, to contribute his insights in addition to having extensive independent research. We hope the content will assist you in reflecting on the 2018 market and allow you to prepare for the year ahead.

(1) Median prices reflect houses only by suburb, Real Estate Institute of Victoria (REIV), sourced 11 January 2019 (2) Treasurer, ‘Victorian Unemployment Rate Falls To 4.8 Per Cent’, Premier of Victoria, published 13 September 2018 (3) Richard Holden, ‘It’s more of a house price blip than a bust in the making’, Property Observer, published 10 January 2019 (4) Josh Frydenberg tells banks to ease up on lending crackdown, Australian Financial Review, published 9 November 2018

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The cash rate isn’t going up anytime soon Actual and forecast cash rate, per cent 2.75 2.50 2.25 2.00 1.75 1.50 1.25 2015

2016

2017

2018

2019

RBA cash rate

Market broadcast in November 2018

Market broadcast in June 2018

Market broadcast in August 2018

2020

Market broadcast in December 2018

Variable mortgage rates increased at the end of 2018 Discounted variable home loan rate 5.3 5.2 5.1 5.0 4.9 4.8 4.7 4.6 4.5 4.4 Jan 2015

Jul 2015

Jan 2016

Jul 2016 Owner occupier

Source: Domain

Jan 2017

Jul 2017 Investor

Jan 2018

Jul 2018

3

What happened to interest rates in 2018?

Trent Wiltshire - Domain Economist The RBA sat on its hands throughout 2018, with the cash rate remaining at 1.5%. The RBA has not moved the cash rate since August 2016.

However, beneath this stability in the cash rate, the RBA has had to balance an economy with divergent parts. There were signs of an improving economy in 2018, including robust GDP growth, the unemployment rate falling to 5% (the lowest level since 2012), substantial government infrastructure spending and stronger non-mining business investment intentions.

Not all went well in 2018. The trade dispute between the US and China weighed on global confidence, the global economic outlook weakened, inflation remained below the RBA’s 2-3% target range, consumer spending slowed and wage growth remained weak (although there are early signs of a pick-up).

Overall, the economy is performing a bit below what the RBA would see as desirable, but the RBA is forecasting the economy will improve and inflation will increase in the years ahead.

The Australian Prudential Regulation Authority’s (APRA) “macro-prudential” measures over the 2014-2018 period slowed speculative lending to property investors. APRA’s intervention also cooled the Sydney and Melbourne housing markets, which meant the RBA did not have to increase interest rates to slow property price growth, which in turn would have slowed economic growth and increased unemployment.

home loan rates. In 2017, APRA intervened in the mortgage market and set a speed limit on new interest-only lending by banks. As a result, interest rates on interest-only loans increased substantially in early 2017. Average mortgage rates for investors and owner-occupiers increased in late 2018 due to higher overseas interest rates pushing up bank funding costs.

However, interest rates for new borrowers have fallen a bit over 2018 as banks sought high-quality borrowers by offering attractive interest rates. While some home buyers were able to take advantage of lower rates in 2018, it became more difficult for other potential borrowers to obtain a loan in 2018 as regulators encouraged banks to scrutinise income and expenses more closely. Banks also lent more cautiously in response to the public spotlight on lending practices because of the Royal Commission into the banking sector.

The financial markets are currently predicting that the RBA won’t be moving the cash rate at any stage over the next two years, a change from mid-2018 when there was an expectation that the RBA would begin increasing the cash rate in mid-2019.

Indeed, there is a growing possibility that the RBA could cut rates in 2019 or 2020, as there is a good chance the RBA’s relatively optimistic forecasts will not eventuate. The main risks to the outlook that may see the RBA cut interest rates include: slow income growth, weaker-than-expected inflation and wages growth, tighter credit conditions, increasing global trade tensions, and further house prices falls that weigh on consumer spending.

While the cash rate is the most important factor in what rate people pay on their home loan, other factors also influence

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4

The federal election and potential effects on the property market Election results are only certain when all votes are counted, however most polls and betting agents are tipping a win to Labor. However, with the election likely to be held in May, there is a long lead time and a federal budget, which may impact the result. While the implementation of the recommendations of The Royal Commission will be a political battleground, there are also key campaign issues impacting property. The two major items on the agenda are negative gearing and capital gains tax concessions and there will continue to be significant news commentary regarding both.

Labor Party

In a Goldman Sachs report titled “Fear versus Fundamentals” reported by the Australian Financial Review in December, the economists say Labor’s policies would only have a small effect on investments and residential property will remain attractive.

Michael Bleby reported, “the sanguine analysis, which plays down several popular narratives of the slowdown, makes the argument that Australia’s housing market is in an orderly decline and that the flow-on effects for the wider economy will be limited.”(1)

Liberal Party

To begin with the facts, the Labor Party website states:

The Liberal Party website states the following on housing policy:

Labor will limit negative gearing to new housing from a yetto-be-determined date after the next election. All investments made before this date will not be affected by this change and will be fully grandfathered.

We will fight Labor’s plan to punish mum and dad investors who use negative gearing, because this supports the supply of rental housing, placing downward pressure on rents.

Labor’s plan to abolish negative gearing will increase rents.

This will mean that taxpayers will continue to be able to deduct net rental losses against their wage income, providing the losses come from newly constructed housing.

To help older Australians (over 65) who want to downsize, we are now enabling them to make a non-concessional contribution of up to $300,000 into their superannuation fund from the proceeds of the sale of their principal home.

Providing this financial benefit for older Australians who want to downsize will in turn help to free up housing for those who are looking for a larger home for a family.

From a yet-to-be-determined date after the next election losses from new investments in shares and existing properties can still be used to offset investment income tax liabilities.

These losses can also continue to be carried forward to offset the final capital gain on the investment.

Labor will halve the capital gains discount for all assets purchased after a yet-to-be-determined date after the next election. This will reduce the capital gains tax discount for assets that are held longer than 12 months from the current 50% to 25%. All investments made before this date will not be affected by this change and will be fully grandfathered.

This policy change will also not affect investments made by superannuation funds. The CGT discount will not change for small business assets. This will ensure that no small businesses are worse off under these changes.

Labor will consult with industry, relevant stakeholders and state governments on further design and implementation details ahead of the start date for both these proposals.

The policy does not have a start date and many commentators doubt it will pass the Senate, leaving the option for Labor to delay the policy while the property market remains volatile.

Providing investors in affordable housing with greater income certainty by enabling direct deduction of welfare payments from tenants, and increasing the capital gains tax discount to 60% for investments in affordable housing.

Our First Home Super Savers Accounts will let first home buyers save at least 30% faster than they can currently – saving for a deposit by salary sacrificing into their superannuation account (over and above their compulsory superannuation contribution).

Note: the policies noted in this article are only a snapshot of the total housing policies for both parties and selected for their interest to Marshall White clients.

Australian Labor Party, 2019 Liberal Party of Australia, 2019 (1) Michael Bleby, ‘Property to stay attractive despite Labor negative gearing plan: Goldman Sachs’, Australian Financial Review, published 11 December 2018

For those Marshall White clients who predominantly purchase property in which to live, Labor’s proposed changes to CGT will not impact the family home and negative gearing is also not an issue. However, the impact of these policies on the housing market may affect housing prices and the length and severity of the current downturn.

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Unemployment five year trend Australia’s unemployment rate inched higher to 5.1 percent in November of 2018 from a 6 and a half year low of 5 percent in the previous two months. The economy added 37,000 jobs while the number of unemployed increased 12,500.

6.6 6.4 6.2 6.0 5.8 5.6 5.4 5.2 5.0 4.8 2014

2015

2016

2017

2018

Inflation five year trend Australia’s consumer price inflation eased to 1.9 percent year-on-year in the third quarter of 2018 from 2.1 percent in the previous period.

The latest figure was in line with market expectations, mainly due to a marked slowdown in cost of housing.

3.5

3.0

2.5

2.0

1.5

1.0

0.5 2014

Source: Trade Economists, Australian Bureau of Statistics

2016

2018

5

Budgetary and macroeconomic impacts on real estate The Australian economy is performing well. The RBA predicts GDP to grow by 3.5% for the next two years, we have low and stable inflation, low unemployment growth and a low cash deficit. December’s Mid Year Economic Forecast Outlook saw the economy on track to be $15 billion better off over the next four years than previously forecast, largely due to strong corporate profits and employment growth. The economy appears to be in its best shape since the 2008 global financial crisis(1) and is performing better than the OECD average.

So what does this mean for housing and how can these factors influence the real estate market?

Tax cuts Many commentators are expecting pre-election tax cuts in line with the many announcements in the 2018 budget concerning tax bracket changes. These tax cuts may help to balance out the reduction in household spending and negative wealth effects of a declining property market. This could lead to greater confidence in all forms of spending including housing.

Shane Oliver, Chief Economist at AMP Capital says the improved budget outlook provides some scope for the government to announce somewhat bigger and earlier income tax cuts than already legislated following the budget and other pre-election advantages ahead of next May’s election.(2)

Unemployment Unemployment is low at 5% with the RBA tipping a further reduction in unemployment this year coupled with a gradual lift in wages. In order to be in the market to buy a house you need to have a job, so the more people are employed, the more who are able to purchase property.

Tim Lawless of CoreLogic says there are positive signals in employment pointing to the likelihood that this price correction may not be all that different to those seen in the past. “Population growth remains strong and maintaining a consistent migration policy seems to have support from both sides of politics which will continue to support demand for housing… [and] labour markets are reasonably healthy with unemployment holding at 5.3% and likely to trend lower.”(3)

Housing affordability While in previous years the housing affordability issue was addressed in the federal budget, 2018 saw no new measures as the government predicted the market would soften on its own accord. It was correct.

Domain states that house prices in the country’s hottest markets stabilised just in time to let the government off the hook for this year’s (2018) budget.(4) Although with a potential change in government, housing affordability will again be a key issue with the ALP offering a number of policies including a scheme to offer investors in new property a $8,500 per annum subsidy in return for offering a 20% discount to tenants.

Inflation low and stable Low inflation places less pressure on the RBA to increase interest rates. As we have seen in recent years, inflation has less influence over property than previously thought, and we have experienced an extended period of low inflation and growing house prices. However, a gradual increase in inflation could increase rates.

The OECD recommended if the upswing in economic activity continues and inflation is projected to rise gradually, then authorities should gradually remove monetary accommodation through a policy rate increase.(6)

Infrastructure Victoria will receive a record level of $17.3 billion in GST revenue from the federal government mainly due to higher than expected population growth.(5) We will also receive $7.6 billion in federal funding for projects such as the Airport rail link (although this won’t start until 2026) and the North East link.

New infrastructure is always good for property prices and a suburb’s livability.

The Sydney Morning Herald commented Victoria’s funding represents a third of Mr Morrison’s updated infrastructure spend in the 2018 budget, and comes after a startlingly parsimonious allocation of less than 10% (over five years) in 2017. So, having the federal government partner with the state government to pump money into roads and public transport is good news, and should pay handsome economic and social dividends – on the condition that projects are selected on merit and need, and are managed with transparency and accountability.(6) (1) Key economic indicators snapshot, Reserve Bank of Australia, published 5 December 2018 (2) Stephen Letts, ‘Australia’s economic growth slows rapidly to 2.8pc’, ABC News, published 5 December 2018 (3) Tim Lawless, ‘From Boom To Doom...But Is It Really That Bad?’ CoreLogic, published 21 September 2018 (4) Ingrid Fuary-Wagner, ‘Federal Budget 2018: No pill for housing pain as government uses house prices as get out of jail free card’, Domain, published 8 May 2018 (5) Peter Martin, ‘GST surprise puts Victoria a billion dollars ahead’, The Age, published 5 April 2018 (6) Michael Heath, ‘Be prepared for a housing market price dive, OECD warns’, Sydney Morning Herald, published 10 December 2018‘

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Victoria’s future growth Planning for a Victorian population of over 10 million, population growth will increase demand for services such as health, education and transport.

In 2051, the population will also be older with the number of people aged 65 years and over expected to almost triple, from 800,000 in 2011 to almost 2.2 million.

0.5 million 23%

0.5 million 25.3%

10.1 Million Projected Victorian Population in 2051

2.1 million Victoria’s regions 2051

1.8 million 22.5%

1.7 million 20.5% 8.0 million Metropolitan Melbourne 2051

4.6 million 57%

1.1 million 51.7%

1 million 24.3% 0.4 million 25.9%

0.5 million 13%

0.3 million 17.3% 1.4 million Victoria’s regions 2011

4.2 million Metropolitan Melbourne 2011

Age Groups 0-19 years 20-64 years

0.8 million 56.8%

2.6 million 62.7%

65+ years

Source: Victorian Infrastructure Plan

Melbourne’s projected population Melbourne’s been bigger before and at this rate it will, sometime in September 2048, eclipse Sydney as Australia’s most-populous city.

10,000,000

9,000,000

8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

1901

1911

Melbourne

1926

1936

1946

Sydney

Source: Australian Bureau of Statistics, SMH

1956

1966

1976

1986

1996

2006

2016

2026

2036

2046

2056

2066

6

Evolving infrastructure and suburb livability Melbourne is one of the fastest growing cities in the developed world and one of the major factors affecting house prices in the medium to long-term is infrastructure. Suburbs that gain infrastructure funding such as new roads, public transport, schools and healthcare will have significant advantages over those that are left behind. For example, buyers will be less attracted to areas that have traffic concerns and more attracted to suburbs which are close to multiple school options and hospitals. Similarly, the delivery of new train or light rail services can increase higher density housing which potentially raises the value of standalone housing.

So what is in-store for Melbourne, and specifically the suburbs serviced by Marshall White in the coming months and years?

Transport The return of the Andrews government has confirmed transport projects such as the $63 million streamlining of Hoddle Street and the upgrading of Swan Street, Brunton Avenue, Johnson Street and the Eastern Freeway. The Caulfield to Dandenong level crossing removal project will see the $1.6 billion “skyrail” project will add 22.5 hectares of new linear park.

The $11 billion Metro Tunnel project is currently under construction with the Eastern entrance to be located at Siding Reserve. South Yarra station will also be given a $12 million upgrade. There will be five new underground stations at Arden (North Melbourne), Parkville, CBD North (State Library), CBD South (Town Hall) and Domain (Anzac). The tunnel and other network improvements will provide 48% more peak capacity on the Sandringham line and 45% more peak capacity for the Cranbourne/Pakenham lines.

Victoria may also receive more funding for infrastructure projects via the recently signed Memorandum of Understanding with China, under China’s Belt and Road Initiative. This initiative aims to lend funding to governments to improve infrastructure and Victoria is the first state government to sign the understanding.

Schools Victoria’s Catholic and private schools are set to receive an extra $1.49 billion over the next decade from the federal government’s surplus, more than any other state.(1) The funds will be paid directly to Catholic and independent schools and spent as they see fit.

While we are blessed with some of Melbourne’s finest private schools, there are also upgrades for public schools which are always beneficial for local desirability (take Balwyn High School as an example). Plans include: »» »» »» »» »» »» »» »» »» »» »» »»

Bentleigh West Primary School upgrade East Bentleigh Primary School upgrade Ormond Primary School upgrade Sandringham East Primary School upgrade McKinnon Secondary College additional campus works Abbotsford Primary School upgrade Albert Park Primary School upgrade Elwood College upgrade Richmond Primary School upgrade Richmond West Primary School upgrade Spensley Street Primary School upgrade St Kilda Primary School upgrade

Suburbs State government planning also significantly affects housing prices and the longer term livability of suburbs. The largest development on the Victorian horizon is Fisherman’s Bend with the government releasing details of the 480 hectare project late last year. For residents in the neighboring suburbs of Port Melbourne and South Melbourne, height restrictions of four storeys were announced. In other parts of the project 30 storeys are planned and developers will be allowed to increase density if they make a 6% allowance for affordable housing. The new suburb also aims to increase use of public transport with only one car space provided for every two homes.

Prahran locals will look forward to the Cato Street development which is due for completion later this year. The Stonnington Council is transforming the existing Cato Street car park into a public space which is good news for residents as Stonnington currently has the second-lowest amount of open space per capita in Victoria.

Coupled with the upgrade of the Chandler Highway Bridge which connects Kew to the Northern suburbs, the new Yarra Bend Development will see 2,500 new homes across a mix of house and land, apartments, townhouses and lofts. The old Amcor Papermill site was acquired by Glenvill in 2012 and the 16.5 hectare “mini-suburb” will be completed over the coming five years.

(1) Catholic and independent schools given extra $4.6bn in funding peace deal, The Guardian, published 20 September 2018 Victorian Infrastructure Plan, June 2018

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7

International factors at play How much of an impact does the global economy have on house prices? The International Monetary fund released a report in late 2018 stating Australian house prices have increasingly become determined at the global level. The Biannual Global Financial Stability Report said local factors, such as land use regulations, tax policy and demographics, still account for most of the variation in house prices, but during the past three decades house prices have become increasingly synchronised across countries, especially among major cities.(1)

Chinese property buyers

The US economy

The changes to foreign property investment rules introduced in 2016 reduced demand for housing from foreign investors, especially from China. The Foreign Investment Review Board (FIRB) reported in 2015/16 there were 40,149 foreign residential real estate approvals and a year later the number was down to 13,198. In addition, the Chinese government last year tightened its foreign exchange rules requiring foreign currency exchanges to be used for genuine consumption needs, not for pure investment. These two factors combined could mean an ongoing decline in the number of Chinese buyers in the Australian property market, potentially impacting house prices.

The USA is still the world’s largest economy so any downturn in America creates ripples around the world. While it’s impossible to guess what will happen next in the US, the one clear Trump factor for the Australian economy is his ongoing trade tensions with China. This is particularly difficult for Australia given China is a key trading partner and the US is a key ally.

Some commentators claim the tensions are already having an impact on markets and point to both the US and Australian sharemarket’s poor performance in the last quarter of 2018.(3)

The Chinese economy

A document prepared by the NSW Treasury and obtained by the Australian Financial Review showed lower migration levels would lead to lower house prices nationally.(4) Depending on the outcome of the election, we may have immigration levels cut and the modelling in the report indicates this would not be positive for housing. In the lead up to the federal election, we can expect plenty of noise from politicians on this issue with Labor citing immigration cuts as potentially reducing house prices and Liberal citing changes to negative gearing and CGT.

Australia is one of the most China dependant economies in the world with 24% of our total trade being with China, rising by 16% in 2017 to $183 billion and figures released for 2018 were $194.6 billion. Much of these exports are from mining and commodities, but $11 billion was from tourism and $9 billion was from education. Therefore a downturn is the Chinese economy is bad news and the latest December figures show China’s exports were down 4.4% and imports down 7.6%, the biggest monthly fall in two years.(2)

Immigration

(1) Global Financial Stability Report, The International Monetary Fund, 2018 (2) David Chau, ‘Australia’s fortunes are linked to China’s economy — for better or worse’, ABC News, published 15 January 2019 (3) David Chau, ‘Australian share market loses $41 billion as market drops to twoyear low’, ABC News, published 10 December 2018 (4) John Kehoe, ‘Lower migration will reduce house prices, NSW warned’, Australian Financial Review, published 26 November 2018

Foreign investment approvals Australia’s Foreign Investment Review Board (FIRB) reported in 2018 that foreign residential real estate approvals dropped significantly in the 2016-17 period from previous years during the foreign property investment boom. 2015-16 saw 40,149 approvals granted, totalling A$72.4 billion, the figure for the following year was just 13,198 approvals, totalling A$25.2 billion.

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

7 20 16 /1

6 20 15 /1

5 20 14 /1

4 20 13 /1

3 /1 20 12

2 /1 20 11

1 20 10 /1

0 9/ 1 20 0

0 8/ 0 9 20

20 07 /0 8

20

0 6/ 07

0

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Risks to property prices in the year ahead Trent Wiltshire - Domain Economist 2019 looks likely to be a year of greater stability for Australia’s property market after a tumultuous 2018. We predict that prices will continue falling in 2019, but that the pace of those falls will slow mid-year before we move into a phase of modest growth.

We predict that Sydney and Melbourne will be two of the weakest markets in this year. Brisbane, Perth, Adelaide and Canberra should see modest house price growth in 2019 and Hobart house prices should stabilise after rapid growth in recent years.

We expect the falls experienced by Sydney and Melbourne over the 2017-2019 period will prove to be the largest since the late 1980s. But it’s worth remembering these falls have come on the back of an extraordinary period of rapid growth.

These predictions of a modest turnaround in 2019 are based on projected strong population growth, the RBA not changing the cash rate in 2019, lower unemployment, faster wage growth and increasing first-home buyer activity. Investor caution and tighter bank lending practices have weighed on prices, however we think that banks and potential borrowers should begin to adjust to new lending standards in 2019, with lending growth to resume at a more moderate pace.

There are a number of downside risks to property price growth picking up over the year ahead. First, there is the possibility that mortgage rates could increase earlier due to banks passing on higher funding costs as global interest rates rise.

There is also the possibility that the RBA increases the cash rate earlier than market expectations, as senior officials have signaled that the next cash rate move is more likely to be up than down. Second, the banking Royal Commission’s findings

Historical median property prices A longer term outlook on the median house price performance in Marshall White’s areas of Stonnington, Boroondara, Port Phillip and Bayside.

Source: REIV

Total Properties Sold (Combined Municipalities)

Median property price

Stonnington Boroondara Port Phillip Bayside

0

Year

8

could result in banks further tightening lending criteria. This has the potential to slow lending for new home loans further, which would weigh on property prices. Other events that could push property prices lower are slower population growth, forced selling by investors switching from interest-only loans to principal and interest loans and a slowdown in the Chinese economy.

On the other hand, some outcomes could see property prices grow at a faster pace. First, some approved housing construction projects may be abandoned or delayed if investors struggle to obtain finance or sell enough apartments prior to construction. If these delays and abandonments occur in significant enough numbers, and as a result the construction pipeline is lower than expected, this could push prices up. Second, if price declines continue, governments may introduce policies such as first-home buyer grants, stamp-duty

concessions, or a reduction in taxes and charges on foreign investors, to support prices. Third, if the RBA’s optimistic economic forecasts eventuate, the negative sentiment that is contributing to falling property prices may turn around faster than expected.

The impact of the Labor Party’s proposed changes to negative gearing is more uncertain. The reform will likely push prices lower eventually, however, may actually support prices in the next 6-18 months.

One thing for sure is that owners, investors and would-be buyers will all be watching the market closely in 2019 for signs of a turnaround.

18,000

16,000

14,000

12,000

10,000

Total properties sold (combined areas)

8,000

6,000

4,000

2,000

0

Reach. Relationships. Results.

Stonnington The Marshall White Stonnington office had a successful year ranking number one in sales for all properties above $1 million. In total, the office sold 369 properties in 2018 and with a relatively even spread of sales across all suburbs. Suburbs which sold a high number of properties over $3 million include Toorak, Malvern and Malvern East, with Marshall White achieving 59 of these sales. The median prices for all properties in Stonnington for 2018 was $1,899,500, an increase of 31% from five years ago when the median was $1,450,000.

Highlight Sales

140 Kooyong Road, Toorak

9-11 Ashley Grove, Malvern

This contemporary Toorak home sold for $13,190,000 (having previously sold for $9,980,000 in 2015). Unique in its striking architecture and with over 1200sqm of land, the owners were downsizing to an apartment. The successful purchasers were a growing family seeking a comprehensively appointed home.

Having over 250 inspections, the campaign demonstrated that great properties always attract premium prices irrespective of market conditions.

Located in a coveted pocket on a substantial 1,651sqm (approx.), the rarity of this home with a 30m street frontage provided an abundance of opportunity to leave as is, renovate, extend or rebuild. With an excellent presence across print and digital, Ashley Grove was well-marketed, received generous press coverage and resulted in an exceptional result selling for $7,100,000 at $800,000 above reserve with 36 bids.

Median Prices by Suburb Industry statistics for median house prices in Stonnington between 2003-2018

Suburb

2003

2008

2013

2018

Armadale

$728,750

Glen Iris

$645,000

$1,340,000

$1,651,000

$1,924,500

$1,000,000

$1,300,000

$1,910,000

Kooyong

$1,200,000

$1,084,250

$1,135,000

$1,827,500

Malvern

$762,000

$1,400,000

$1,470,000

$2,610,000

Malvern East

$621,000

$930,000

$1,160,000

$1,773,750

Prahran

$522,500

$800,000

$868,000

$1,540,000

South Yarra

$664,000

$912,000

$1,023,000

$1,627,500

Toorak

$1,550,000

$2,750,000

$2,850,000

$3,800,000

Windsor

$484,300

$750,000

$801,000

$1,400,000

Source: Property Data Business Analyst, median house prices by suburb for indicated calendar year

9

Boroondara The Boroondara office of Marshall White sold 456 properties and sold more premium homes over $2 million than any other agency.

The median price for Boroondara sits at $1,900,000 which is up 27% from five years ago when the median price was $1,500,000.

Suburbs well above the area median in 2018 included Deepdene at $2,700,000, Balwyn at $2,393,500 and Canterbury at $2,390,000.

The suburbs that are primarily accountable for properties sold at $3 million and above include Hawthorn, Hawthorn East, Kew, Balwyn and Balwyn North.

Highlight Sales

239 Union Road, Surrey Hills

34 Edgevale Road, Kew

With lush surrounding gardens on 753sqm approx., this stunning single-level Californian family home was meticulously renovated and extended, transforming it into a sublime entertaining domain. Comprising 4 bedrooms, the successful purchasers were a young family and they and participated in a very competitive auction being 1 of 5 bidders.

Located in the private school belt, this 4 bedroom timber Edwardian had been recently renovated yet still retained scope to enhance and make a family’s own. With 80 prospective buyer inspections, the vendors’ expectations were realistic and set the scene for a competitive auction with 5 bidders on the day resulting in a sale price of $2,260,000. The successful young family had recently sold with Marshall White in the same area and were upsizing from a single fronted home.

Median Prices by Suburb Industry statistics for median house prices in Boroondara between 2003-2018

Suburb

2003

2008

2013

2018

Ashburton

$528,000

$780,000

$985,000

$1,650,000 $2,393,500

Balwyn

$668,500

$1,185,000

$1,505,500

Balwyn North

$570,000

$900,000

$1,237,500

$1,760,000

Burwood

$417,500

$655,000

$770,000

$1,320,000

Camberwell

$685,500

$1,020,000

$1,381,500

$2,100,000

Canterbury

$920,000

$1,453,000

$1,915,000

$2,390,000 $2,700,000

Deepdene

$792,500

$1,255,000

$1,975,000

Glen Iris

$645,000

$1,000,000

$1,300,000

$1,910,000

Hawthorn

$675,000

$1,290,000

$1,445,000

$1,922,000 $2,028,250

Hawthorn East

$615,150

$954,100

$1,085,000

Kew

$750,000

$1,260,000

$1,751,000

$2,116,944

Kew East

$570,500

$877,500

$1,255,000

$1,787,500

Mont Albert

$612,000

$1,010,000

$1,290,000

$2,020,000

Surrey Hills

$600,000

$925,000

$1,302,500

$1,900,000

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Port Phillip Marshall White retained the number one agency ranking for houses sold above $1 million in Port Phillip during 2018 selling over double the amount of properties than our nearest competitor. While median prices for all houses sold in the Port Phillip area reduced slightly from $1,769,000 to $1,740,000, there were some notable exceptions for median prices by suburb including Middle Park at $2,685,000, Albert Park at $2,080,000 and Elwood at $2,057,500. Looking at the longer term trend for Port Phillip, the median price in 2014 was $1,114,000 which represents an increase of 52% to 2018, surpassing our other office areas in terms of accumulated growth.

Highlight Sales

382 Ross Street, Port Melbourne

13 Ward Street, South Melbourne

Completed only 2 years ago, this modern town residence across 3 levels featured an exceptional floor plan and outstanding build. Providing city edge living with 3 bedrooms and a fabulous private outdoor entertaining precinct, the successful buyers were seeking a Melbourne base. A total of 83 prospective buyers inspected the property and 5 bidders competed on Auction day to secure Ross Street at $75,000 above reserve.

Located in one of South Melbourne’s best pockets. Initially quoting a buyer guide of $1,650,000 - $1,750,000, this was increased to $1,700,000 - $1,800,000 following a high level of interest. Following the price adjustment, exceptional buyer communication was vital. The home was professionally styled and was in need of some work which presented a great value opportunity to the market and 5 repeat inspections ensued.

The successful buyers were a family from Williamstown that had inspected a number of Marshall White homes.

Median Prices by Suburb Industry statistics for median house prices in Port Phillip between 2003-2018

Suburb

2003

2008

2013

2018

Albert Park

$665,000

$1,110,000

$1,360,000

$2,080,000

Elwood

$665,000

$1,036,500

$1,271,000

$2,057,500

Middle Park

$818,750

$1,430,000

$1,610,000

$2,685,000

Port Melbourne

$570,000

$775,000

$950,000

$1,470,000

St Kilda

$500,000

$810,000

$615,000

$1,602,000

St Kilda East

$490,000

$837,500

$1,085,000

$1,485,000

St Kilda West

$940,000

$1,340,000

$1,300,000

$1,675,000

Source: Property Data Business Analyst, median house prices by suburb for indicated calendar year

10

Bayside In 2018, our Marshall White Bayside office achieved the highest number of sales for properties over $3 million in the market. Suburbs in the Bayside area enjoyed average price increases of 3% in 2018, which defied the overall market downturn. The median prices for all properties sold in Bayside was $1,733,000, a significant increase of 49% from five years ago when the median was $1,160,000. The hot suburb in the over $3 million market was Brighton where 108 of the 155 total market sales were achieved at this level. Sales for homes between $2-3 million were also dominated by Brighton and Brighton East with other notable suburbs being Beaumaris, Black Rock, Hampton and Sandringham.

Highlight Sales

8 Hector Street, Brighton

17 Avelin Street, Hampton

This environmentally sustainable home included an electric Nissan Leaf car in the sale. In just over 2 weeks, 35 prospective buyers inspected the home and it sold prior to auction for $2,820,000 following international (vendor) and interstate (purchaser) negotiations. The buyers were a family from Perth who had been looking for some time and had finally found the right home.

A beautifully restored and warm Californian Bungalow, Avelin Street is essentially the iconic Hampton property situated within the desirable Castlefield Estate. The property had been occupied for over 30 years by a family who had raised their 3 children in the home. Moving on to the next generation, a young couple upsizing from Brighton with 2 children purchased the home for $2,475,000.

Median Prices by Suburb Industry statistics for median house prices in Bayside between 2003-2018

Suburb

2003

2008

2013

2018

Beaumaris

$662,000

$930,000

$1,042,500

$1,660,000

Black Rock

$745,000

$1,090,000

$1,215,000

$2,095,500

Brighton

$875,000

$1,600,000

$1,710,000

$2,700,000

Brighton East

$640,750

$980,000

$1,225,000

$1,935,000

Cheltenham

$390,000

$550,000

$645,000

$1,035,000

Elsternwick

$695,000

$875,000

$1,345,000

$1,925,000

Hampton

$654,250

$1,100,000

$1,238,500

$1,900,000

Hampton East

$408,000

$635,000

$745,000

$1,257,500

Highett

$400,000

$600,000

$730,000

$1,301,000

Sandringham

$665,000

$1,045,000

$1,100,000

$1,810,000

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Projects and Developments Throughout 2018 Marshall White Projects continued to dominate in and around our residential offices of Stonnington, Boroondara, Port Phillip and Bayside, whilst expanding into suburbs along growth corridors where townhouses or ‘house and land’ packages continue to be increasingly popular. An exciting extension of the Marshall White Projects brand is Marshall White Living, created to service such developments as ‘The Grace’, a collaboration with Australian Unity and their landmark building catering to the over 55’s retirement living requirements.

Highlight Developments

42 Nelson Street, Ringwood

185 Rosslyn Street, West Melbourne

Marketed throughout 2018, in three buildings, Eden Square, Valley Square and Garden Square totalling 197 apartments and townhouses ‘Nelson’ proved that location will always drive demand. With an average sale price of $625,000, the CHT Architect designed floor plates still allowed purchasers to combine and create luxury apartments at over $2 million.

With builder Hamilton Marino anticipating delivery prior to March this year, it will create a benchmark by which all other developments in and around Ringwood are judged.

Marketed throughout 2018, in five buildings, the Foundry, the Adderley, the Mailhouse, the Spencer and Adina, totalling 389 apartments, ‘West End’ creates a city within a city, with unparalleled common facilities that provides everything a purchaser needs without having to leave the confines of your home. With demolition underway (a large undertaking for over a hectare of land) and the financier agreeing on a builder, West End will soon rise and take it’s rightful place as the best development outside the CBD.

2017-2018 Comparison 2017

2018

Per Cent Difference

Average off the plan sale price

$909,560

$980,533

7.8%

Sales up to $750,000 (of total)

52%

40%

-23%

31%

35%

13%

Sales over $1,250,000 (of total)

17%

25%

47%

Buyer appointments

2,333

2,248

-3.6%

Sales betweem $750,000 $1,250,000 (of total)

All information in this report has been obtained from sources believed to be reliable and is to be used as a guide to the performance and outlook for the real estate market in Marshall White’s areas of operation. Any recommendations and forward looking statements are opinion and do not intend to predict future performance of suburbs, areas or properties. Prior to relying on the information in this report you should obtain independent professional advice and consider your personal circumstances.

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