The McGrath Report
Two Thousand Seventeen
All information has been obtained from sources believed to be reliable. McGrath Limited and its subsidiaries, together with their directors, officers and agents have used their best endeavours to ensure the information passed on in this report is accurate; however they have not checked the information and have no belief either way as to the accuracy of the information contained in this report. Any recommendations and forward looking statements are statements of opinion only, not guarantees of future performance, and should not be relied upon. Prior to relying on the information in this report, you should make your own inquiries. ÂŠ 2016 and the McGrath trade mark are property of McGrath Limited and its subsidiaries. All other names and trade marks are the property of their respective owners. Published Spring 2016
A Message From McGrath Sandringham
Another compelling year in Australian real estate is behind us so what do we take out of it? In our annual report we try to understand the movements in the market and pinpoint the trends that seem to be having the greatest impact on us now and into the future. The last few years have been a fascinating time for Australian residential property with a number of trends emerging and indeed driving different markets in different ways. This year’s report will delve into a number of these in an attempt to share our insights including why we’re staying in our homes longer, the rise in off-market prestige sales and how technology is and will continue to change the way we transact real estate. Australia is no longer one market but large cities like Sydney and Melbourne are indeed multiple markets within their own city boundaries.
McGrath Sandringham 03 8080 1588
The East Coast capital city suburbs with the highest price growth prove that lifestyle options, strong or improving infrastructure, good schools, local jobs or proximity to employment hubs, public transport and a vibrant â€˜villageâ€™ atmosphere are key factors in driving prices skyward.
Factors Driving Price Growth McGrath Report 2017
Figures compiled by CoreLogic RP Data reveal the suburbs with the greatest house and apartment price growth over the 12 months to June 30, 2016*. A key element in the price growth of many suburbs this year has been a lack of stock, which has intensified competition. In Sydney, Westmead recorded the strongest house price growth for FY2016 at 33.2%. We attribute this to the $900 million Westmead Hospital redevelopment project currently underway and a growing resident population of well-paid health service professionals.
In Melbourne, St Kilda East house prices rose 35.4% due to improved amenities, a changing residential profile, gentrification and increased demand from buyers priced out of Albert Park, Middle Park and Elwood. Carlisle Street in Balaclava, a small suburb in the St Kilda East postcode, has been transformed over the past decade into a buzzy café village where locals love to hang out.
Westmead is also home to an expanding campus of the University of Western Sydney and is situated right next door to Parramatta, Sydney’s second CBD.
There are shops, major supermarkets, schools, the recently upgraded train station and easy access to the city and St Kilda foreshore. There are beautiful period houses and apartments protected by heritage order. It’s a great place to live and gaining appeal as a destination suburb.
Fairlight recorded the strongest apartment price growth at a staggering 46%. A shortage of stock combined with a large difference between house and apartment prices and the ripple effect from its beachside neighbour, Manly all contributed to this phenomenal price rise.
Brighton had the second highest apartment price growth at 27.3%, reflecting demand from downsizers who have lived and loved the location for 30 years and are now selling their family homes and moving into apartments and townhouses in the same area.
Top 5 House Growth 1
St Kilda East
Factors Driving Price Growth
Identifying Price Growth Hot Spots
Macro Factors • Strong population growth • Good local employment or access to job hubs • Gentrification of housing stock • Growing household incomes • Lifestyle amenities – cafes, shops, entertainment and recreation • Schools and catchment zones • Presence of big retail brands
In Brisbane, house price growth was greatest in Robertson at 25.6%; while beachside Woody Point on the Redcliffe peninsula achieved the best apartment price growth at 24.2%. Wilston recorded the third best house price growth at 20.3% over FY2016. Wilston is a highly regarded area with a great café village, excellent schools and spectacular homes – many with city views due to the suburb’s elevated position. Camp Hill enjoyed the second best apartment price growth at 18.9% due to strong demand from first home buyers. In the nation’s capital, it’s all about O’Connor, which had the highest price growth for both houses at 21.5% and apartments at 15.3% in FY2016.
O’Connor is close to everything and has a great café and shopping precinct. Families love the tree-lined streets and good sized blocks and it is in the catchment areas for Turner School and Lyneham Primary School. Being walking distance to the CBD and the Australian National University is also a major drawcard for young buyers and investors.
• R ising tenant and buyer demand
• P ublic transport and walkability
• Low or falling days on market • Low or falling vacancy rates • More auctions and rising clearance rates • Reduced vendor discounting • Limited supply of future housing
Top 5 Apartment Growth 1
Chipping Norton (NSW) 38.6%
McGrath Report 2017
CoreLogic RP Data; 12 months to June 30, 2016; suburbs with a minimum of 40 sales during the year
Top 5 Suburbs for Price Growth by Capital City Houses SUBURB
Apartments MEDIAN PRICE
12 MONTH CHANGE IN
MEDIAN PRICE NSW
12 MONTH CHANGE IN MEDIAN PRICE
St Kilda East
Source: CoreLogic RP Data; 12 months to June 30, 2016; suburbs with a minimum of 40 sales during the year
Factors Driving Price Growth
Melbourne Melbourne and Sydney have long been the engine rooms of Australia’s property market, with Sydney traditionally leading the way. But the southern capital is looking more appealing than ever before due to its superior value for money and glowing reputation as the world’s most liveable city for the past six years*.
Melbourne’s relative affordability is contributing to record high net interstate migration, as well as strong net overseas migration, making it Australia’s fastest growing capital city with an average of 1,760 people moving in per week in FY2015, according to the ABS^. Although Sydney outshone its southern cousin in the boom with 64% growth in home values compared to 44% since 2012#, Melbourne arguably offers greater prospects for growth in the future. Its median house price is $287,000 cheaper## and a projected population surge from 4.61 million in 2016 to 7.91 million in 2053 will see it overtake Sydney as the most populous city in Australia^^. Melbourne’s median house price rose by a modest 8.6%
McGrath Report 2017
in FY2016 to $608,000, with the median apartment price up 2.5% to $485,000##. However, some areas experienced much stronger price growth due to a lack of supply in 2016. According to CoreLogic RP Data, Melbourne’s top 10 suburbs for house price growth in FY2016 all experienced more than 25% gains in value##. The dominant buyers in Melbourne today are upsizing families, most of whom are targeting the catchment zones of top performing public schools to avoid private school fees. This trend is so strong that new REIV research** shows there is now a significant price difference between homes located within top catchments and those that border them.
In Parkville, homes within the catchment for University High have a median house price of $1,395,000 compared to $799,000 for homes that are 1 km outside the zone. Similarly, homes in the catchment for McKinnon Secondary College have a $305,000 premium over those outside the zone**. With interest rates continuing at record lows, young buyers are stretching their budgets to get into premium areas. They’re targeting small inner ring cottages with a bit of character and paying well over reserve to secure a piece of prime land while they can. Some vendors are leveraging strong selling conditions to upgrade to larger homes in more affordable areas with change to spare. For example, vendors in Doncaster, Mitcham, Blackburn and Box Hill are selling
in the early $1 millions and buying in Croydon for $800,000-$900,000. Given Melbourne’s tight supply and rising prices, we are seeing the ripple effect in many areas. For example, buyers priced out of the highly desirable Bayside area are purchasing next door in Bentleigh and McKinnon, leading to several sales above $2 million this year – a price level not thought possible just a few years ago. APRA restrictions have impacted investor demand but we are still receiving enquiries from Sydney, Perth, Brisbane and ex-Melbourne locals living overseas. Many investors have now put Sydney into the ‘too hard box’ due to affordability and switched focus to Melbourne.
Median House Price Median Apartment Price $608,000
S ource: CoreLogic RP Data; 12 months to June 30, 2016 Melbourne
John McGrathâ€™s Top Picks
A hidden gem neighbouring
Wheelers Hill has a median house
This inner city precinct less than
Prahran, Windsor was once con-
price that is $250,000 less than its
3km from Melbourneâ€™s CBD has
sidered the grungy end of Chapel
neighbours of Glen Waverley and
been though significant gentrifica-
Street but now the hipster crowd is
Mount Waverley, yet it is only 5-10
tion over the past decade. With an
moving in. We see great potential
minutes away. Buyers are
abundance of leisure and lifestyle
for this trendy pocket, which has
increasingly looking for better
amenities, it also has cycling and
easy access to trains and shops and
value here and we anticipate solid
running routes alongside the
is conveniently close to the CBD.
price growth as a result.
Yarra River. Young professionals and families enjoy its walkability and accessibility well serviced by
McGrath Report 2017
Change is on its way with a
Just 6 km north of the CBD,
noticeable uplift in buyer demand
Northcote has undergone major
over the past 12-18 months. This
change and is now a destination
suburb is full of mid-century
suburb for young professionals and
homes on big blocks with plenty of
families. High Street village offers
potential for knockdown/re-builds
many restaurants and the tram
and development. Downsizers are
runs straight through to the city
capitalising on a 10-15% jump in
with a train station also close by.
land values over the past few years
Local schools including Northcote
and selling to young families
High and Santa Maria College are
trams and trains, while cashed up downsizers are now discovering this gem.
The southern capital has long been the favoured destination of offshore Chinese buyers but demand has softened this year following changes to lending criteria for foreigners and forced sales of properties purchased in breach of Foreign Investment Review Board regulations. Despite this, Melbourne’s prestige market remains strong with a new house price record for the city set in Toorak at $24.1 million and Victoria’s highest residential sale ever occurring in South Yarra with the exchange of three homes in one line for $33 million – both this year.
Melbourne is facing an oversupply of apartments, which currently represent 49% of stock for sale compared to 42% a year ago and 29% in 2011^^^. CoreLogic RP Data figures show a pipeline of 80,500 new apartments due for completion over the next two years when only 61,500 apartments (old and new) are usually sold over this timeframe###. This presents a great opportunity for owner-occupiers with a long term view but they need to choose wisely.
Sales above $25 million are expected for the penthouses in South Yarra’s glamorous Capitol Grand development, which would break the national apartment record.
* Global Liveability Ranking 2016, The Economist Intelligence Unit, published August 18, 2016
^^ Population Projections, Australia 2012 to 2101, Australian Bureau of Statistics, published November 26, 2013
^ Regional Population Growth, Australia 2014-15, Australian Bureau of Statistics, published March 30, 2016
Hedonic Home Value Index, CoreLogic RP Data, published September 1, 2016
** Top of the class: School zones boost prices in 2016, Real Estate Institute of Victoria, published June 27, 2016
CoreLogic RP Data; 12 months to June 30, 2016; suburbs with a minimum of 40 sales in the year
^^^ Units are increasingly making up a higher proportion of overall stock available for sale, largely driven by the nation’s two largest capital cities, CoreLogic RP Data, published August 2, 2016 ###
Record high unit construction increases settlement risk, CoreLogic RP Data, published May 16, 2016
Audi Benchmark As they often say, “Follow the smart money if you want to get ahead”. So what better barometer than taking a peek at where the smart drivers garage their Audis each night.
S ource: Audi Australia