McGrath Report 2017

The McGrath Report

Two Thousand Seventeen Published Spring 2016

A Message From John McGrath

2

TRENDS Factors Driving Price Growth The Asia Story Off-Market Selling of Prestige Property

4 8 12

Are We Staying Put Longer?

16

Real Estate of the Future

20

CITIES

Contents

Sydney

24

Melbourne

28

Brisbane & Surrounds

32

Canberra

36

1

A Message From John McGrath

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.

The question that people ask me most frequently is “What's the market doing?” To which of course there is no accurate answer other than to refine the question with the response: “Which market?”

Australia is no longer one market but large cities like Sydney and Melbourne are indeed multiple markets within their own city boundaries. We have seen over the last few years Sydney and Melbourne decouple from the rest of the country. This is not a phenomenon that concerns nor surprises me. Indeed if you follow the trends of most countries around the globe, the largest city or cities often become separated from the rest of the market by the weight of demand. And within these cities we continue to see an increasing “Manhattan Effect” where not only have their lifestyles become more and more in demand but locating as close as possible to the proverbial action within these cities has become a sub-trend.

As commuting becomes increasingly challenging the desire to be close to the business and arts districts is a direction that’s here to stay.

But my honest view is that Sydney and Melbourne are the 'New York’s of Australia' and will be in huge demand as far into the distance as I can possibly see.

In fact with several billion people on the doorstep of this lucky country, many with a huge appetite to enjoy the lifestyle that we have, it would be far easier to mount a sensible argument that both the big cities will look incredibly cheap as we look back in a decade or so. That is assuming that we manage our growth well and find a way to sensibly welcome immigrants and overseas investors into the country.

Which brings me to what I believe is one of the most short sighted initiatives that I’ve seen in my 35 years of real estate. The decision for the three east coast State Governments to impose hefty taxes on overseas buyers seems one of the strangest I’ve seen. This tax could only have been imposed for one of several flawed reasons in my opinion. Was it to allow local buyers to get into the market? Or was it simply to raise more revenue?

Let me emphasise the overall percentage of property in Australia sold to foreign buyers is minimal. The reason Sydney and Melbourne prices have risen has little if anything to do with overseas buyers. It’s a supply issue.

And let’s not forget that we all came from somewhere else. Our multi-cultural society is one of our greatest assets. Why send a message to the world that they’re not welcome to invest alongside us in this great country?

I hope you enjoy this year’s report.

John McGrath

As a result of this people ask me if I think Sydney and Melbourne are overvalued off the recent cycle uplift.

McGrath Report 2017

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A Message From John McGrath

3

Trends

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 ‘village’ atmosphere are key factors in driving prices skyward.

Factors Driving Price Growth McGrath Report 2017

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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

(VIC)

2

Westmead

(NSW) 33.2%

35.4%

3

Ormond

(VIC)

31.6%

4

Fairfield

(VIC)

30.3%

5

Londonderry

(NSW) 29.9%

Factors Driving Price Growth

5

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.

Market Factors

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

Fairlight

(NSW) 46.0%

2

Ultimo

(NSW) 40.7%

3

Chipping Norton (NSW) 38.6%

4

Kirribilli

(NSW) 34.0%

5

Waverton

(NSW) 27.8%

McGrath Report 2017

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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

SUBURB

MEDIAN PRICE

MEDIAN PRICE NSW

12 MONTH CHANGE IN MEDIAN PRICE

NSW

Westmead

$1,225,000

33.2%

Fairlight

$1,285,000

46.0%

Londonderry

$1,150,000

29.9%

Ultimo

$735,000

40.7%

Millers Point

$2,475,000

29.5%

Chipping Norton

$582,000

38.6%

Canterbury

$1,247,500

28.9%

Kirribilli

$1,195,000

34.0%

Croydon Park

$1,380,000

28.0%

Waverton

$1,150,000

27.8%

QLD

QLD

Robertson

$1,005,000

25.6%

Woody Point

$410,000

24.2%

Darra

$440,000

23.9%

Camp Hill

$541,000

18.9%

Wilston

$1,007,500

20.3%

Scarborough

$475,000

14.1%

Chelmer

$1,127,500

19.0%

Newstead

$595,000

11.7%

Banyo

$521,750

17.2%

Teneriffe

$629,500

11.6%

VIC

VIC

St Kilda East

$1,422,000

35.4%

Hampton East

$662,000

27.4%

Ormond

$1,500,000

31.6%

Brighton

$910,000

27.3%

Fairfield

$1,205,000

30.3%

Braybrook

$454,250

23.7%

Carlton

$945,000

29.3%

Mooroolbark

$480,000

23.1%

Keysborough

$624,000

28.7%

Balaclava

$550,000

20.6%

ACT

ACT

O’Connor

$960,000

21.5%

O’Connor

$490,000

15.3%

Ainslie

$925,000

21.4%

Bonython

$455,000

11.9%

Deakin

$1,145,500

19.6%

City

$532,500

11.8%

Narrabundah

$821,000

17.0%

Cook

$502,500

6.9%

Hackett

$790,000

16.2%

Bruce

$425,000

5.7%

Source: CoreLogic RP Data; 12 months to June 30, 2016; suburbs with a minimum of 40 sales during the year

Factors Driving Price Growth

7

Trends

Foreign investment has been a significant driver of Australia’s property market and in many ways a contributing factor to our strong economy, particularly over the past decade as China has boomed and its rising middle and upper class have looked for new ways to invest in a volatile international economy.

The Asia Story – Is it over?

McGrath Report 2017

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Foreign investment in Australian residential real estate

$60.75bn

Chinese

investment in Australian residential and commercial real estate

$34.71bn

$24.35bn

$17.16bn $12.41bn

$5.93bn

FY2013

FY2014

Australia’s attractive lifestyle, clean air and food supply, political and economic stability, high quality education and health facilities, safe cities, a similar time zone and attractive property market has proven an irresistible combination for our northern neighbours.

FY2015

Top 10 Hot Spots for Chinese Buyers

According to the latest Foreign Investment Review Board (FIRB) data*, $60.75 billion was invested in Australian residential real estate by foreign buyers in FY2015, up 75% on FY2014^.

By far, New South Wales and Victoria were the favoured destinations and for the third consecutive year, the lion’s share of investment came from China – and at record levels, too.

Chinese buyers invested $24.35 billion in residential and commercial real estate last year*, almost double that of FY2014^ and more than four times the investment of FY2013#.

Clearly, Chinese appetite for Australian property is increasing, so what happens when governments – Australian and Chinese, tighten controls on foreign investment?

In December 2015, the Australian Government introduced fees for foreign real estate acquisitions, starting at $5,000 for purchases below $1 million – which

1

Glen Waverley

2

Doncaster VIC

VIC

3

Box Hill

4

Epping NSW

VIC

5

Mosman NSW

6

West Ryde

7

Chatswood NSW

NSW

8

Burwood NSW

9

Hurstville NSW

10

Toorak VIC

Source: This is where Chinese buyers want to live down under, realestate. com.au and myfun.com, published April 12, 2016

The Asia Story

9

Top 10 Hot Spots for Chinese Buyers by State

represents the majority of foreign real estate purchases.

In June 2016, the New South Wales Government introduced a 4% stamp duty surcharge for foreign buyers and a 0.75% land tax surcharge from 2017.

NEW SOUTH WALES 1

Epping

2

Mosman

3

West Ryde

4

Chatswood

5

Burwood

6

Hurstville

7

Hornsby

8

Killara

9

Lane Cove

10

Carlingford

VICTORIA 1

Glen Waverley

2

Doncaster

3

Box Hill

4

Toorak

5

Balwyn

6

Doncaster East

7

Balwyn North

8

Kew

9

Wheelers Hill

10

Carlton

QUEENSLAND 1

Southport

2

Sunnybank

3

Robina

4

Indooroopilly

5

Surfers Paradise

6

Tallai

7

Helensvale

8

New Farm

9

Hawthorne

10

Carindale

Source: This is where Chinese buyers want to live down under, realestate.com.au and myfun.com, published April 12, 2016

In July 2016, the Victorian Government raised their stamp duty surcharge for foreign purchasers from 3% to 7% and announced an increase in the absentee owner land tax surcharge from 0.5% to 1.5% from 2017.

The Queensland Government also introduced a 3% stamp duty surcharge on foreign purchases in October 2016.

And there’s even more hurdles for foreign buyers to jump with Australian banks tightening their lending criteria and the Chinese Government limiting the amount of capital exiting the country.

While it’s too early for official numbers, anecdotal evidence from our agents suggests mainland Chinese investors have pulled back while Chinese clients already here continue to upgrade to new homes and purchase for investment.

The effect of the new fees won’t be fully realised for another 12-18 months but we think it will be largely limited to the new apartment market. FIRB figures* show about 80% of all foreign purchases are under $1 million – indicating that reduced Chinese demand and settlement defaults will hit the apartment sector most, with some impact also felt in the mid-priced house market too.

As Chinese investment slows down – at least in the short term, FIRB figures show increasing interest from other parts of Asia, primarily Singapore, Malaysia, Hong Kong and Thailand.*^# We are also seeing an increase in investment from emerging economies such as India, Vietnam and Indonesia. * Annual Report 2014-15, Foreign Investment Review Board, published April 8, 2016 ^ Annual Report 2013-14, Foreign Investment Review Board, published April 27, 2015 # Annual Report 2012-13, Foreign Investment Review Board, published February 28, 2014

McGrath Report 2017

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What Does Brexit Mean for Australian Property?

Short Term

Medium Term

Long Term

The United Kingdom’s surprise vote to leave the European Union in June sent shockwaves around the world, with many equity

Unlike equity, currency and commodity markets, real estate is far less affected by investors’ knee-jerk reactions.

Overall, the Brexit decision should work in our favour.

With Brexit expected to take at least two years, it is hard to predict the ultimate impact.

markets taking a sizeable hit after the announcement.

But what will Brexit mean for our property market?

To date, there hasn’t been a noticeable impact on our market and we are not expecting any impulsive moves by investors.

Australia attracts a lot of capital for commercial property and other investments from around the world and we are often competing with Europe for these dollars.

Our residential property market, particularly Sydney, Melbourne and the Gold Coast could benefit as overseas buyers turn away from London, which has been popular with foreign buyers.

The Asia Story

11

Trends

A significant off-market sales trend has emerged in Australian prestige property due to an undersupplied market, better use of database marketing, the rise of the buyers’ agent and increased opportunity for wealthy clients to maintain total privacy.

Off-Market Selling of Prestige Property McGrath Report 2017

12

Most popular in East Coast capital city markets, off-market selling is where a property is sold without any public advertising. Instead, owners quietly list with a trusted professional who then introduces their home to pre-selected clients without ads or open homes.

Australian record for single residence sale

70m

Off-market selling is happening across all price brackets but particularly the prestige sector, where privacy is a priority for high profile clientele.

Impressive record prices have been set off-market, none more so than the $70 million Australian record for a single residence set in 2015 when Chinese-Australian developer, Dr Chau Chak Wing purchased James and Erica Packer’s former home in Vaucluse, Sydney.

This year, suburban records have also been set off-market in Sydney’s Longueville ($11.88 million) and Rozelle ($4 million); in Melbourne’s Northcote ($4.3 million); and in Brisbane’s New Farm ($10.5 million) – the city’s highest sale in 2016.

Lack of stock has been a major contributor to stronger off-market selling in 2016. Frustrated buyers are asking agents for early notice of new listings and making premium offers to snap them up and avoid open market competition.

Agents are approaching home owners directly off the back of clients’ requests for a particular street or a home with very specific criteria. This proactivity has given many owners the chance to sell for a premium, avoid marketing costs and remain off the radar.

In Brisbane, off-market selling is occurring more so because vendors are worried they won’t achieve their price in this current market. They don’t want to pay for marketing then potentially face the risk of not selling.

So agents are orchestrating deals using their databases to match listings to buyers in a far more discreet and personalised way.

Database marketing has facilitated the rise in off-market selling. In terms of sales strategy, database marketing is nothing new but today’s technology is enabling agents to do it better.

The size of agents’ databases, built up over many years as our industry has shifted to a more personalised style of marketing as part of the mix, means agents can create real competition and achieve solid prices while also meeting their vendors’ desire for privacy.

Off-Market Selling of Prestige Property

13

We believe prestige property will be the next growth story in Australian real estate.

This sector did not move as much during the boom and price growth is overdue.

Agents are dedicating more time to developing personal relationships with buyers, especially in the high end market, as our industry evolves from a largely transactional to relationships-based business.

Some agencies in Sydney and Melbourne have introduced password-protected online platforms that allow pre-qualified buyers to log in and view properties not advertised on the major portals.

The proliferation of buyers’ agents has also led to more off-market selling. Clients of buyers’ agents are timepoor and looking for a more efficient way of finding a new home. Selling agents often introduce new listings to buyers’ agents first and quick sales can ensue.

Chinese social media, particularly the Facebookequivalent WeChat is also enabling effective international marketing to buyers willing to move quickly to secure the best homes on offer.

Demand for prestige property improved this year, with Chinese buyers continuing to move here for lifestyle and expats purchasing future homes in suburbs delivering solid rental yields until they relocate back home.

Growing demand from foreign buyers, expats and local upgraders should move prestige prices forward as long as the global economy remains stable.

Volatility in the share market, which is directly and immediately hit by events such as Brexit and acts of terrorism, might also attract more investment into Australian real estate over coming years.

It also wouldn’t be surprising to see more people investing greater capital into their homes due to changes to superannuation and the opportunity for tax-free capital gains.

We believe prestige property will be the next growth story in Australian real estate. This sector did not move as much during the boom and price growth is overdue.

McGrath Report 2017

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Off-Market Selling of Prestige Property

15

Trends

Australian home owners are staying put longer, with the average number of years that capital city residents hold their homes trending up since 2005 from 6.7 years to 10.7 years for houses and 5.9 years to 9 years for apartments.

Are We Staying Put Longer?

McGrath Report 2017

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Renovation Spending 1

Melbourne

$1.882 billion

2

Sydney

$1.684 billion

3

Brisbane

$766 million

4

Perth

$500 million

5

Adelaide

$299 million

6

Canberra

$111 million

7

Darwin

$57 million

8

Hobart

$57 million

Source: Australian Bureau of Statistics data modelled by Domain Group Chief Economist Andrew Wilson, domain.com.au, published February 27, 2016

The number of sales transactions has declined in line with this trend, according to CoreLogic RP Data*.

So why are we staying put longer?

Essentially it boils down to financial reasons and changes in the way we live today.

Affordability and the costs of buying and selling are major factors. Stamp duty and agents’ fees alone currently run to about $55,000 on a median priced house in Sydney today.

Renovating is also on the rise, which tends to happen at the end of a boom when affordability falls. Instead of trading up, owners draw on new equity to renovate and extend instead. So it’s not surprising that Melbourne and Sydney are our renovating hot spots right now.

A strong economy is also encouraging people to stay put. Despite the GFC, it’s been 25 years since our last recession so the biggest economic factors that prompt people to sell – unemployment and financial stress – are less at play. People in secure jobs can stay put until personal circumstances demand a change of address.

Which brings us to the second major element affecting hold periods – changes in the way we live.

There has always been a strong correlation between people’s life stages and their housing needs, however in today’s modern world the traditional trends in the way we live are shifting and this is reducing the necessity to move.

Couple-only households and people who live alone are the fastest growing types of households in Australia today and they don’t need to move as much as growing families.

Recent Australian Bureau of Statistics figures^ show 46% of couple-only and lone person households have lived in their current home for 10 or more years compared to 28% of families with kids.

Young people are staying home longer, prompting many parents to delay their downsize or seachange.

When they buy their first home or rent with friends or a partner, they can stay there longer because they are delaying marriage and kids until much later in life.

Are We Staying Put Longer?

17

Previously, as people’s incomes grew, they would look to upgrade to a better property but wage growth is not nearly keeping pace with property prices, so there are plenty of couples staying put in apartments or small houses until their first or second child comes along.

Staying put means avoiding moving costs and preserving pension arrangements, which can change after selling. The GFC also prompted many emptynesters to delay retirement and stay put while they continued working to replenish lost superannuation.

The average family size is also getting smaller, with a steady decline from 3-4 kids in the 1960s to 1-2 kids today#. This means many families can stay put longer in properties with fewer bedrooms.

Buying and holding is the key to success in Australian real estate. Although owner-occupiers are primarily motivated by lifestyle factors, it’s important to remember that your home is your greatest financial asset and the best capital growth always occurs over the long term.

We’re also seeing a rise in multi-generational households with couples and in-laws pooling funds to buy a large home that will suit them for the long term. ABS data^ shows the majority of multi-family households stay put for 10-20 years or more.

Our ageing population is also contributing to longer hold periods. Mortgage-free home ownership is highest amongst older Australians and they prefer to stay put long term if they can, with 47% of owners^ without a mortgage living in their homes for more than 20 years.

FY2014

*

Property Pulse, CoreLogic RP Data, published March 30, 2015

^ Housing Mobility and Conditions 2013–14,

Australian Bureau of Statistics, published December 10, 2015 # Births, Australia 2014, Australian Bureau of Statistics,

published October 29, 2015

Source: Housing Occupancy and Costs 2013-14, Australian Bureau of Statistics, published October 16, 2015

FY1995

Australians Who Own Their Homes

Australians Who Are Private Renters

71%

67%

26%

18%

McGrath Report 2017

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East Coast Capitals with the Longest Hold Periods Houses SUBURB

Apartments YEARS

NSW

SUBURB

YEARS

NSW

Dawes Point

29.7

Bella Vista

14.9

Regentville

22.6

Haberfield

14.1

Ellis Lane

22.2

Russell Lea

13.1

Vineyard

22.0

Drummoyne

13.1

Maraylya

20.9

Schofields

13.0

QLD

QLD

Pinjarra Hills

16.4

Grange

11.8

Rochedale

15.7

Kenmore

11.3

Macgregor

15.3

Sunnybank

11.3

St Lucia

14.6

St Lucia

11.2

Nathan

14.5

Macgregor

11.2

VIC

VIC

Cranbourne South

22.2

Braeside

17.5

Belgrave South

18.2

Wheelers Hill

15.9

Vermont South

18.2

Ivanhoe East

15.7

Noble Park North

17.7

Hadfield

15.3

Warrandyte

17.4

Viewbank

14.9

ACT

ACT

Bonython

14.7

Reid

14.3

Gowrie

14.4

Monash

14.2

Hawker

13.2

Holt

13.9

Chapman

13.2

Higgins

13.5

Palmerston

13.1

Greenway

12.9

Source: CoreLogic RP Data; 12 months to June 30, 2016

Are We Staying Put Longer?

19

150

Trends

The average Australian checks their phone 150 times a day^

2020

By 2020 80% of all content on the internet will be video#

Australian homes have more mobile devices than toothbrushes**

Since the advent of internet marketing and mobile technology in the 1990s, the nature of buying and selling has been turned on its head.

Real Estate of the Future McGrath Report 2017

20

A huge range of digital platforms continue to change the method and pace of real estate transactions, with buyers and sellers more informed and better prepared than ever before and the best agents harnessing innovation to improve their marketing power and service style. Specialised apps, price predictors, social media, free market research and cheap independent property reports available for purchase online have all worked to benefit the consumer.

Email, SMS, database marketing and big data has enabled agents to better engage with buyers and global property portals have expanded their audience.

A raft of business software and bluetooth gadgetry has increased their efficiency and shortened response times to enquiries.

Real estate technology began with search and has now extended to service. Consumers want a less stressful experience and are intolerant of agents who can’t provide it.

For example, the experience of opens is changing, with names and numbers still taken at the door but on an iPad that syncs with the agent’s phone and database for more effective follow-up. Buyers can use apps to pre-register their attendance and skip the queue; and can request and receive a contract via email before they have even left the property.

Scores of small innovations are often quickly superseded. The evolution of the signboard provides an example – once a simple board, it was then given an overhead light, a QR code, then full background lighting and now touch screen.

Photos on a webpage are no longer enough, with 360-degree photography and fly-through technology providing a more complete perspective and the opportunity to inspect every part of a room.

Location analytics are helping buyers purchase in unfamiliar locations with greater confidence. Buyers can discover an area’s demographics, traffic data, property developments, points of interest, drive times, walk times and street and aerial views with ease.

And there is so much more to come.

According to CoreLogic’s Future of Real Estate Report*, push technology, artificial intelligence, virtual reality and blockchains will be the next big tech trends in real estate.

Push technology will alert home hunters to nearby properties for sale and unlock special content to heighten their engagement.

Virtual reality will provide an on site experience for off site clientele. VR stations in real estate offices will make open inspections an everyday convenience for buyers.

Artificial intelligence will use algorithms to help buyers search, all the while learning from each interaction to understand what the user really wants in their next home.

Blockchain technology and smart contracts will simplify the transaction process and automate procedures traditionally undertaken by intermediaries like banks and inspectors.

Platforms allowing customers to send a single loan request to a multitude of lenders will result in more competition and a better deal on finance for borrowers.

Technology will undoubtedly continue to raise clients’ expectations and the best agents are meeting this challenge through a more holistic approach, including building long term relationships with their clients and focusing more on ‘outcomes’ over simple sales transactions. *

Future of Real Estate and Property Finance Industries Report, CoreLogic published April 13, 2016

^ Google Mobile Forum, 2016 #

realestate.com.au Strategy Forum, 2016

** realestate.com.au Momentum, 2016

A huge range of digital platforms continue to change the method and pace of real estate transactions.

Real Estate of the Future

21

Friday 5pm

Saturday 9am

It’s been a busy week at work but behind the scenes your Amazon Echo has been automatically preparing your Saturday open inspection schedule. At 5pm, Amazon’s Alexa asks you to approve your schedule while simultaneously booking a self-driving single seat Uber for a stress free all day chauffeur experience.

Your Uber turns up and you slip into the seat. Meanwhile, your phone syncs with the car’s TV for a cinematic introduction to your first property.

Saturday 11am

Saturday 11.45am

Saturday 12pm

The next property you visit has DA approval for an extension. At the door, the agent hands you a headset that talks you through the changes allowed. A builder, architect and designer are all standing by on Skype so buyers can ask questions via a group conference call.

No need to pre-register your attendance here, a fingerprint scanner collects your details.

Using your iPad, you register to bid at a live streamed auction in Hong Kong. You’d love to invest in this city but affordable apartments are hard to find. You place the opening bid but the offers soon surpass your budget. You watch proceedings and log off when the hammer falls.

You’re meeting your buyers’ agent at the next one. It’s an off-market listing that is only being shown to a few clients. As you drive down the street, an e-alert tells you that No 8 is in pre-launch and the first open will be next week. You click a button to save the details.

A Day in the Life of a 2027 Buyer

McGrath Report 2017

22

You swivel the seat for the perfect angle and flick through the 360-degree photos before taking the virtual tour.

Amazon’s Alexa provides a comprehensive rundown of the home’s best features and answers a few of your questions before you arrive out front.

Saturday 9.30am

Saturday 10am

Saturday 10.15am

This place is awesome – a fully equipped smart home with all the latest features to enjoy.

Back in the car, you press a button to request a contract, which arrives in 60 seconds.

You’re impressed by the green features, including bioadaptive lighting that activates upon entering a room and the air purification system that tells you the pollen count and directly attacks odours.

You liked that house and want to find out more. An app shows you the home’s latest survey, information on zoning and nearby development applications.

Now you’re on your way to an apartment.

A quick search of public strata records alerts you to an upcoming special levy that explains why two other owners are also selling. You cancel this stop and voice command Alexa to find the next best option for that timeslot.

CBUS technology is a given these days, incorporating lighting, security and surround sound. As you test out the control pad, your mind drifts back to the days of wall-mounted powerpoints and light switches. So old school now.

Your Green app shows the home’s sustainability rating, the latest electricity and water bills and the noise pollution recorded within 500 metres.

You check the agent’s price guide against recent sales on a per square metre basis, providing a much clearer picture of the home’s true worth.

Saturday 12.30pm

Saturday 1pm

Saturday 1.30pm

The next stop is a developer’s office for a VR presentation of a new apartment block. It has a 5-star sustainability rating which bumps up the price but energy costs will be halved long term.

The last property of the day is a real contender. You’ve finally found that big entertaining space but the vendor’s clutter makes it hard to imagine as your own. You take a photo and upload to your interior design app, which inserts your furniture and shows the space in a variety of colours.

On your way home, you press a button to turn on the lights and air-conditioning for your arrival. You flick two contracts to a legal app where freelance solicitors bid to provide written advice by Monday.

You select an apartment and ‘virtually’ stroll out to the balcony, where you change the time of day to night to see the cityscape views. You play with the colour and fixtures

You’re on your way to buying your next home. Much easier than in 2016.

menu to design your perfect kitchen and bathroom. You save your changes, email them to your iPad and collect glossy colour print-outs at the door.

Real Estate of the Future

23

Cities

Sydney Sydney remains Australia’s strongest and most enduring property market. It's powered by long-standing fundamentals of undersupply and population growth, providing every type of lifestyle possible including beachside, harbourside, CBD living and suburban neighbourhoods for almost 5 million residents.

Sydney real estate is like gold and in my opinion, despite the phenomenal boom of 2012-2016, Sydney property prices will continue to rise.

Latest figures from CoreLogic RP Data* tell us that Sydney property prices have risen 64% in four years.

This is spectacular growth and well ahead of the second best result in Melbourne at 44%.

For many Sydney property owners, the boom has delivered extraordinary gains for those in the market.

But how do you best capitalise on this newfound wealth?

Meantime, the market is showing signs of plateauing but price growth has continued due to a significant undersupply of stock and strong demand buoyed by further falls in interest rates.

McGrath Report 2017

According to CoreLogic RP Data*, the pace of price growth in Sydney has halved this year but median property values are still up 12.8% to $880,000 for houses and 7.5% to $665,500 for apartments over the first eight months of 2016. Pretty impressive for a slowing market.

Record low listing numbers have contributed to very strong auction clearance rates between 70% to above 80% all year.

Local upgraders have been the greatest buying force, aiming to use new equity to upgrade their homes and potentially refinance while interest rates are so low.

However, fear of selling and not being able to buy back in is resulting in a determination to buy first, so stock remains low.

24

Many would-be upgraders are staying put and renovating instead, with Sydney and Melbourne owners spending more than twice the money of owners in other capital cities, according to the ABS and Domain research.

While investors are still out there, we have definitely noticed a drop-off due to tighter lending criteria. The APRA-led changes introduced in early 2015 aimed to limit growth in the banks’ property investment lending to less than 10% per year and this has now been achieved.

The top end of the market improved this year. The lower dollar has encouraged expats and foreign buyers; and locals who purchased wisely post-GFC are now looking to cash in and upgrade.

In Sydney, Eastern Suburbs owners who bought in the $2 million-$4 million bracket are now selling for $7 million and upgrading to $10 million. In the Lower North Shore harbour suburbs, young families are selling for $4 million -$5 million and upgrading to $8 million-$10 million.

Affordability remains an issue across Sydney. The traditional migration west for cheaper housing continues, with the greatest population growth over the next 20 years expected in Camden, Parramatta, The Hills and Liverpool regions, according to new figures from the NSW Department of Planning#.

However, limited greenfield development space on Sydney’s western fringe means we need to get creative

Median House Price Median Apartment Price $895,000

$813,000

$708,000 $678,750 $630,000

$570,000

2014

2015

2016

S ource: CoreLogic RP Data; 12 months to June 30, 2016 Sydney

25

3

5

2

1

4

John McGrath’s Top Picks

1

Canterbury

3

Rouse Hill

Forestville

Once an average suburban

Follow the money. At the minute

This has been a favourite suburb

precinct best known for its equine

it’s all heading to the North West

for several years now. If you

interests; Canterbury is fast

ahead of the soon-to-be-completed

crossed the leafy North Shore

becoming an Inner West bolthole

new rail line. The surrounding

with the vibrant Northern

attracting young families and

areas are equally as attractive

Beaches, Forestville would be the

professionals alike. Buy, sit and

for both lifestyle and capital

outcome. Relatively easy access

watch your asset grow in value.

growth but the Rouse Hill Town

to the CBD, just 7 minutes to the

Centre is worth seeing for that

surf and surrounded by trees, its

address alone.

ideal for homemakers.

2

Hunters Hill

4

ans Souci / S Dolls Point

We still can’t work out why the values here for some of the country’s best real estate are materially below her peers in the East and North? This attractive garden enclave is private and discreet with beautiful homes and perfumed gardens. If you want to see some of the best homes in the country, you better check it out.

McGrath Report 2017

5

Surrounded by water and with all the appeal and benefits of Sydney’s southern suburbs yet only minutes to the bay and airport with easy access to the CBD. Leaves little doubt that this area will continue to be one of the most desirable in Sydney.

26

in housing a predicted 1.7 million new residents over the next two decades#. Among the options is subdivision of traditional blocks in established suburbs to enable more terraces, townhouses and dual occupancies; and more high rise apartment living around suburban CBDs. Meantime, a growing cohort of young families are leaving Sydney altogether in favour of affordable lifestyle locations, with ABS figures showing the most popular spots are the Richmond-Tweed region, Mid-North Coast, Central Coast and Hunter Valley**.

Chinese buyers remain a force in Sydney, however new fees levied by both federal and state governments on top of tighter lending criteria for foreigners has resulted in reduced demand and settlement risk on new apartments.

This is where young people want to live and over the next few years, they will be spoilt for choice and finally have some negotiating power on their side.

We see a bright future for the Sydney property market.

There is plenty of long term price growth ahead even as we approach a major affordability hurdle for younger buyers today.

We believe the burgeoning global audience for Sydney real estate will be a key contributor to future price growth; and the long term stability of the market and opportunity to create significant personal wealth will sustain the aspirations of Sydneysiders to own their own homes for generations to come. * Hedonic Home Value Index, CoreLogic RP Data, published September 1, 2016

There’s a two-year pipeline of 82,000 new apartments to be completed in Sydney, according to CoreLogic RP Data^^. To put that in perspective, 43,500 apartments are sold in Sydney per year but that includes established apartments, which represent a bigger share of the pie.

#

NSW Population Projections 2016 Update, NSW Department of Planning and Environment, published September 12, 2016

** Is family-led sea and tree change back in vogue? CoreLogic RP Data, published April 18, 2016 and Migration, Australia 2014-15, Australian Bureau of Statistics, published March 30, 2016 ^^ Record high unit construction increases settlement risk, CoreLogic RP Data, published May 16, 2016

This wave of new supply will be concentrated around the inner city and suburban employment and shopping hubs such as Strathfield, Parramatta and Ryde.

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.

1

Zetland

2

Parramatta

3

Mosman

4

Five Dock

5

Artarmon

6

Pennant Hills

7

Sutherland

8

Newcastle West

9

Wollongong

10

Coffs Harbour

S ource: Audi Australia

Sydney

27

Cities

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^^.

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.

Melbourne’s median house price rose by a modest 8.6%

McGrath Report 2017

28

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

$560,000 $540,000

$470,000

$472,500

2014

2015

$485,000

2016

S ource: CoreLogic RP Data; 12 months to June 30, 2016 Melbourne

29

4

5

1

3 2

John McGrath’s Top Picks

1

Windsor

3

Wheelers Hill

5

A bbotsford

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 Melbourne’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

2

McGrath Report 2017

Oakleigh South

4

Northcote

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

and developers.

increasingly popular.

30

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.

1

Melbourne

2

Bentleigh

3

Doncaster

4

Burwood

5

Berwick

6

Ballarat

7

Glen Iris

8

Brighton

9

Geelong

10

Glen Waverley

S ource: Audi Australia

Melbourne

31

Cities

Brisbane & Surrounds South-East Queensland continues to offer outstanding opportunity for growth but a sluggish economy, political upheaval, low population growth and an impending apartment oversupply is delaying significant price growth overdue in Brisbane today.

The end of the mining boom has hit Queensland hard.

Brisbane is no longer experiencing the strong flow of money that came from regional areas where mining workers earning big salaries were investing in Brisbane real estate or buying family homes in Brisbane for a fly-in fly-out lifestyle.

But through all this, the property market is showing resilience. According to CoreLogic RP Data, median property values (houses and apartments) along the Brisbane to Gold Coast corridor rose by 5.7% to $482,000 in FY2016^ compared to 3.5% growth in FY2015 and 6.7% in FY2014.

Latest statistics from the ABS and CoreLogic RP Data show Brisbane’s population growth is at its lowest point since 2001*. Continuously strong economic conditions in New South Wales and Victoria and uninspired state management following the Liberal National Party’s removal after one term and now a minority Labor Government provides no incentive for big business to set up and expand into Brisbane.

Despite all the big picture challenges, the market is currently seen as affordable, safe, steady, reliable and doing well in tough economic conditions.

McGrath Report 2017

32

As always, some suburbs have exhibited exceptional results. Those with more than 15% house price growth in FY2016 include Robertson (25.6%), Darra (23.9%), Wilston (20.3%), Chelmer (19%), Banyo (17.2%), New Farm (16.8%), Sandgate (16.8%) and Carina Heights (16.2%)#.

In the apartment market, Brisbane is facing an oversupply with a two-year pipeline of 44,511 dwellings to be completed, according to CoreLogic RP Data**. This is significant when ordinarily about 30,000 apartments would be sold in this timeframe and that includes a combination of old and new.

ladder through a buy, renovate, sell and repeat strategy.

In the more affordable suburbs, a huge range of buyers including local upgraders, downsizers, renovators, first home buyers and some Sydney and Melbourne lifestyle buyers are targeting up-and-coming areas particularly on the southern Gold Coast.

The oversupply will be primarily around the city and inner ring areas. Investors are increasingly wary of this and some developers have delayed their projects. However, it does present an opportunity for owner-occupiers with a long term view. The newly boosted First Home Owners’ Grant, up from $15,000 to $20,000 until June 30, 2017 should help young buyers in this market.

Buyers are especially drawn to areas such as Miami, Palm Beach and Tugun where good quality houses that are walking distance to the beach are selling for well below $1 million.

On the Gold Coast, plenty is happening and it’s all positive.

These suburbs offer exceptional value and opportunities for growth. A Palm Beach home worth $600,000 is worth $1 million just 9 km up the road in Mermaid Beach. On the beachfront, Palm Beach buyers are paying $2.5-$3 million compared to $5-5.5 million in Mermaid Beach.

Locals who bought highly discounted properties in prime areas post-GFC have now renovated or re-built and are selling with a view to buying again in a better location. They are making money and moving up the

In the prestige market, there have been very few sales above $10 million since 2009 but this year six were recorded over the first three quarters alone, reflecting rising confidence particularly among locals.

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.

1

Fortitude Valley

2

Southport

3

Indooroopilly

4

Slacks Creek

5

Currimundi

6

Townsville

7

Springwood

8

Cairns

9

Toowoomba

10

Hamilton

S ource: Audi Australia

Brisbane & Surrounds

33

The biggest deal was the $25 million sale of a Mermaid Beach mansion in September. There was also the $15.5 million sale of a riverfront Isle of Capri residence to Chinese buyers and two other sales in Mermaid Beach for $13.25 million and $11.45 million. There was also an $11 million sale on Cronin Island and a $10.9 million sale at Sanctuary Cove.

* Melbourne leads population growth, CoreLogic RP Data, published April 11, 2016 and Regional Population Growth, Australia 2014-15, Australian Bureau of Statistics, published March 30, 2016

We remain very optimistic about the Gold Coast. In the lead-up to the 2018 Commonwealth Games, billions is being spent on infrastructure and the economy is becoming more diversified with health and education jobs supplementing the more volatile retail, tourism and construction industries.

# CoreLogic RP Data; 12 months to June 30, 2016; suburbs with a minimum of 40 sales in the year

^ Hedonic Home Value Index, CoreLogic RP Data, published July 1, 2016

** Record high unit construction increases settlement risk, CoreLogic RP Data, published May 16, 2016

On the Sunshine Coast, there is a lot of demand at the upper end in Noosa and Sunshine Beach. Local upgraders and lifestyle buyers from Queensland, Sydney and Melbourne are spending up to $5 million for properties to either occupy now or use as holiday homes ahead of retirement. A new record for beachfront homes on the coast was set in September with a $9.3 million sale at Sunshine Beach.

John McGrath’s Top Picks

1

Gordon Park

3

Mermaid Waters

Maroochydore

Brisbane’s smallest suburb, Gordon

This suburb offers very good

This is a town on the move with its

Park offers fantastic value and great

value and a mix of waterfront and

CBD undergoing a complete

infrastructure. Access to the CBD

non-waterfront homes. We are see-

makeover. Just 2 km from the

has become much easier with the

ing at least 4-5 registered bidders

ocean, there is already a fresh,

Clem7 and Inner City Bypass. New

across all auctions in this suburb.

exciting new vibe on the main

cafes are popping up and a ripple

This is an ideal location for second

street with lots of new roads, retail,

effect is occurring from the more

home buyers who don’t have the

commercial spaces and community

established and pricier neighbouring

budget for Mermaid Beach. A lot

facilities on the way.

suburbs of Grange and Wilston.

of buyers are renovating so the suburb is undergoing a facelift.

2

Taringa

4

Sunrise Beach

Situated next to St Lucia and Indo-

With a median house price of

oroopilly, Taringa has access to all

$675,000, it offers better value

the same amenities as its blue chip

than neighbouring Sunshine Beach

neighbours but offers better value

(median $1,015,000) but probably

for buyers. According to CoreLogic

not for long! Just a few minutes

RP Data, Taringa house prices rose

outside Noosa, Sunrise Beach has

10.2% in FY2016* but we think

had a noticeable kick in activity

there is more growth to come.

and 12.5% house price growth in FY2016*.

McGrath Report 2017

5

34

4

5

1

2

3

Brisbane & Surrounds

35

Cities

Canberra The market has improved significantly in Canberra, with a 7.6% spike in property values over the first eight months of the year compared to a decline of -0.9% for the same period in 2015*.

Underpinning this growth is an undersupply of houses for sale; greater stability in Federal Government following many years of unrest; and a very low unemployment rate of just 3.6% ^, boosted by the lifting of a two-year hiring freeze in the public service in mid-2015.

gearing or capital gains; and a tax cut that would benefit a large proportion of residents, who are among the highest paid workers in the country.

There is a distinct new confidence in the marketplace following the Federal Election.

Opens have been well-attended and auction clearance rates for houses have remained just shy of 70% for the 12 months to June 2016, according to Domain research#.

Canberra is always directly affected by elections because one in three workers are employed in the public service.

Unlike the last Federal Election, there was no threat of mass job cuts on either side of politics so the market maintained its momentum during the long campaign.

Interest rate cuts are no longer having a stimulatory effect, with buyers now used to record lows.

However, young couples and families are leveraging rates to stretch their budgets further and buy in premium locations close to the best schools.

The Coalition’s return meant continuing stability for government employees; no changes to negative

The $1 billion ‘Mr Fluffy’ buyback and demolition of 1,022 homes across 56 suburbs by 2018 continues and is

McGrath Report 2017

36

having a big impact on the market. Approximately 260 homes have already been demolished with 176 scheduled for demolition between July and December 2016 **.

The scheme has displaced hundreds of families who all need to buy or rent. They have been paid well for their homes and the stamp duty concession on their next purchase is giving them extra buying power and the ability to buy quickly and compete strongly at auction.

Some are staying in their area, others are upgrading elsewhere. For example, many ‘Mr Fluffy’ sellers in Belconnen are heading to nearby Gungahlin where they can purchase bigger, newer homes.

Meanwhile, the incredibly rare opportunity to buy vacant land in premium established suburbs following the demolition of ‘Mr Fluffy’ homes is really exciting buyers.

The first 10 blocks were taken to auction in April.

Among the sales was a block in Pearce for $605,000 and one in Chapman for $610,000 – both close to the city’s median house price of $607,000.

This signalled to other home owners just how valuable their land has become due to limited release of new supply in recent years.

Median House Price $607,000

Median Apartment Price $572,000

$545,000

$415,000

$419,900

2014

2015

$415,000

2016

S ource: CoreLogic RP Data; 12 months to June 30, 2016 Canberra

37

4

3

5

2

1

John McGrath’s Top Picks

1

Kambah

3

O’Connor

Cook/Aranda

Underrated and primed for

Adjoining Turner where houses

These two suburbs are well

growth, Canberra’s largest suburb

are in very short supply, O’Connor

positioned to benefit from

with 6,140 homes offers better

offers great value. However,

Belconnen’s gentrification. A lot of

value than Woden and Weston

strong buyer demand has made it

new townhouses and apartments

Creek and a diverse range of prop-

Canberra’s No 1 suburb for growth

are being built in the area, creating

erties. Centrally located, it is the

in FY2016, with house prices rising

residential precincts with great

most northern suburb of Tuggera-

21.5% to a median of $960,000

amenities including shops,

nong with good access to arterial

and apartment/townhouse values

restaurants and cinemas.

roads for the CBD commute.

up 15.3% to $490,000##.

2

Curtin

4

Franklin/Harrison

Big money is being spent in Curtin,

Sitting on opposite sides of

which has undergone a changing

Flemington Road, the main

of the guard over the past few

arterial road leading out of

years. Ex-Government housing has

Gungahlin to the city, these two

been sold off, knocked down and

suburbs will directly benefit from

re-built and family buyers priced

the new light rail. Both are

out of Deakin, Hughes and Garran

family-oriented neighbourhoods

have bought and renovated.

with good schools and close proximity to the CBD.

McGrath Report 2017

5

38

Original housing stock in Canberra’s prized inner north and south is more than 60 years old and due for an overhaul.

Owners are realising the best way to capitalise on their land value is to re-build; and families are out in force looking for knockdown opportunities in prime locations.

Downsizers are among these buyers, with many not ready for apartment living. Townhouses are hard to find so many downsizers are looking to build dual occupancies instead – sometimes in joint venture deals with friends.

The median apartment price has risen 1.7% in calendar year 2016 and rental yields are among the highest in the country at 5.1%*.

The rental market is being supported by extra demand from ‘Mr Fluffy’ sellers as well as usual strong demand from young workers, students at two universities and public service contractors who do not want to settle in Canberra permanently. * Hedonic Home Value Index, CoreLogic RP Data, published September 1, 2016

The Over 60s Home Bonus Scheme provides downsizers with a market advantage due to a substantial discount on stamp duty. On a $660,000 purchase, just $20 is payable. We are finding that many people are still unaware of this opportunity but once informed they feel incentivised to sell.

Canberra’s apartment oversupply continues, comprising 51.2% of all homes for sale, according to CoreLogic RP Data^^. However, property values and rental yields are holding up well.

^ Labour Force Australia, August 2016, Australian Bureau of Statistics, published September 15, 2016 #

Property Research Report for ACT, Domain, 12 months to June 2016

** Houses to be demolished by district and year, Asbestos Response Taskforce, published July 29, 2016 ^^ 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 ##

CoreLogic RP Data; 12 months to June 30, 2016; suburbs with a minimum of 40 sales in the year

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.

1

Phillip

2

Kingston

3

Yarralumla

4

Forrest

5

Jerrabomberra

6

Kambah

7

Canberra

8

Griffith

9

Fadden

10

Deakin

S ource: Audi Australia

Canberra

39

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. Š 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.

McGrath Report 2017

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