M A R C H
2 0 1 9
MARKET REVIEW
Q U A R T E R
RESIDENTIAL
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INSIDE
FROM OUR CEO
DEVELOPMENT SITES
COMMUNITIES
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18 FEATURE STORY:
Industry leaders insights
10
44
APARTMENTS / TOWNHOUSES
52
INTERNATIONAL
56
RESIDENTIAL INVESTMENT
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
Q1 MARKET OVERVIEW
LEAD INDICATORS
4 6
3
FROM OUR CEO
WELCOME TO OUR FIRST EDITION OF RPM REAL
The median land price remained steady at $325,000.
FOR 2019. IN THIS ISSUE WE DELVE INTO THE
continue to feature throughout many estates to drive
Q1 MARKET OVERVIEW
ESTATE GROUP’S RESIDENTIAL MARKET REVIEW NUMBERS AND ANALYSE THE KEY DRIVERS AND
IMPACTS ACROSS MELBOURNE AND GEELONG’S NEW HOUSING MARKET.
Over the March quarter, restrictive lending
conditions and negative sentiment among buyers
KEVIN BROWN
CHIEF EXECUTIVE OFFICER RPM REAL ESTATE GROUP
figure. Although we have already seen prices ease by
up to 5% through incentives and rebates, we believe a further 5% reduction is likely, totalling approximately 10% off the current median land price of $325,000. In the development site market, there is still strong
quarter and 60% to 1,946 lots compared to the
assets albeit with price adjustment factored in given
March quarter declined 18.6% from the previous same period a year ago.
a widespread view that lot prices are overvalued –
demand among developers for quality, de-risked
moderating retail values. They are also negotiating
longer deal terms with a view to launching projects in the next cycle.
particularly given falling values in the established
Macro prudential measures and impositions on
reluctant to significantly reduce prices which
in the apartment and townhouse market, which
housing market – however developers are
would jeopardise sales over the past year that are approaching settlement.
R P M R E A L E S TAT E G R O U P
sales rates, which are not reflected in the headline
continued to impact sales rates. Lot sales for the
The land market remains in a state of flux: there is
4
However, value add incentives including rebates
investors continue to underscore slowing demand is impacting the speed of pre-sales, resulting in projects being delayed or shelved.
Over the March quarter other dwelling approvals
(apartments and townhouses) declined 11.8% from compared to the same quarter 12 months ago.
Overall, subdued market conditions are likely to
remain for the rest of the year. However, there are
green shoots emerging, signalling the worst of the
downturn may be over following a moderation in the pace of decline in established housing values. Lending conditions are also showing signs of
easing, with discussions taking place between the RBA and APRA regarding an interest rate cut and lowering the loan assessment rate which would improve borrowing capacity.
The Federal Coalition’s election victory should
increase market confidence, stability and certainty, which could bring an earlier end to the bottom of the cycle.
MICHAEL STAEDLER
RESEARCH MANAGER
m.staedler@rpmrealestate.com.au
Q1 MARKET OVERVIEW
the previous quarter to 5,246 approvals and 41%
POPULATION GROWTH COMBINED WITH MODERATING SALES IN BOTH THE NEW HOUSING AND ESTABLISHED MARKETS ALONG WITH ACUTE VACANCY RATES POINT TO A GROWING LEVEL OF UNDERLYING DEMAND, WHICH COULD PROPEL AN UPSWING. THE INDUSTRY NEEDS TO ENSURE THERE IS APPROPRIATE SUPPLY IN THE PIPELINE TO AVOID HEIGHTENED AFFORDABILITY CONCERNS THAT HAVE CHARACTERISED THE RESIDENTIAL PROPERTY MARKET IN RECENT YEARS.
+61 434 619 280
The data contained within this report was prepared by RPM’s research team consisting of economists, property experts and GIS analysts.
Research underpins the core strategic decision
making capability at RPM, providing in-depth analysis on current economic and housing conditions,
sales rates and pricing, future supply and demand assessments, and buyer demographics. This rich intelligence enables clients to make informed
decisions that underscore the success of their
developments. RPM’s research is also highly valued in assisting clients to secure capital funding and
enhance their ongoing marketing and ROI strategies.
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
5
ECONOMIC ACTIVITY GROSS DOMESTIC PRODUCT (GDP)
2.81% 2.61% 12 month change to Dec qtr. 2018
5 year average
CONSUMER PRICE INDEX (CPI) Q 1L E M AA DR KI N ET D I OC VA ET RO VR ISE W
1.33% 1.90% Mar-19
Source: ABS
Same month year earlier
VIC POPULATION
STATE FINAL DEMAND (SFD) - VIC
4.97% 4.03% 12 month change to Dec qtr. 2018
5 year average
RETAIL TURNOVER - VIC
4.06% 4.89% Mar-19
Same month year earlier
NATURAL INCREASE
10,087 Sep-18
8,924
Same qtr. year earlier
CASH RATE
1.50% Mar-19
1.50% Dec-18
1.50% Mar-18
Source: RBA 6
R P M R E A L E S TAT E G R O U P
VARIABLE RATE
OVERSEAS MIGRATION
24,339 Sep-18
24,565 Same qtr. year earlier
5.37% Mar-19
5.34% Dec-18
5.22% Mar-18
4.68% 4.05% Mar-19
Mar-19
4.65% 4.07% Dec-18
4.51% Mar-18
Dec-18
4.13% Mar-18
5.9%
84,827
12 months to Sep-18
% change - same qtr. last year
0.9%
% change - 12 months earlier
7.1%
2,599
3 YEAR FIXED RATE
13.0%
% change - 12 months earlier
Sep-18
DISCOUNTED RATE
12 months to Sep-18
% change - same qtr. last year
NET INTERSTATE MIGRATION
BORROWING RATES
40,863
2,930
Same qtr. year earlier
13,985
12 months to Sep-18
% change - same qtr. last year
11.3%
% change - 12 months earlier
22.2%
NATIONAL TOTAL CHANGE
VIC TOTAL CHANGE
395,101
change from Sep-17 to Sep-18
1.60%
% change - same qtr. last year VIC share
139,675 2.20%
35%
■ Negative change ■ Positive change
TOTAL POPULATION
AUS 25,101,917
VIC 6,497,700
VIC EMPLOYMENT EMPLOYMENT GROWTH (JOBS CREATED) Jobs (‘000s) TOTAL Dec-18 to Mar-19
FULL TIME Dec-18 to Mar-19 Last 12 months PART TIME Dec-18 to Mar-19 Last 12 months
31.53 124.80 -13.67 -2.12
0.5% 25.1% 3.8% 40.3% 1.4% 28.2% 5.7% 43.1% 1.2% 33.6% 0.2% 14.2%
$1,625 $1,607 $1,581 May-18
1.1% Source: ABS
4.6% 4.2% 5.2% Mar-19
Source: ABS
Dec-18
Same time last year
CONSUMER SENTIMENT
98.8 Mar-19
103.0 Mar-18
Source: Westpac-Melb institute
BUSINESS SENTIMENT
4.9 Mar-19
14.5
Source: RBA/NAB
Mar-18
The Westpac-Melbourne Institute Consumer Sentiment
WAGES
Nov-18
UNEMPLOYMENT RATE
Q 1L M E AA D R KI E N TD IOC VA ET ROVR I SE W
Last 12 months
17.86 122.68
% Change
Vic contribution to AUS
Nov-17
Index is the most widely quoted barometer of consumer sentiment in Australia. A score of greater than 100 means that optimists outnumber pessimists, with readings of below 100 indicating that pessimistic consumers are in the majority.
NAB’s Business Survey has been tracking Australian
2.8%
business confidence levels for more than two decades. Businesses are approached quarterly, with two smaller
monthly surveys conducted in the intervening months to capture changes on a more regular basis. The panel now exceeds 2,700 businesses.
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
7
VIC FINANCE NO. OF FHBS FINANCED
7,199
8,172
Mar-19
Same qtr. year earlier
NO. OF NON-FHBS FINANCED
17,367 20,618 Q 1L E M AA DR KI N ET D I OC VA ET RO VR ISE W
Mar-19
Same qtr. year earlier
FINANCE FOR NEW DWELLINGS
6,269 7,327 Mar-19
Same qtr. year earlier
VALUE OF LOANS - OWNER OCCUPIERS
$9.99B $12.13B Mar-19
Same qtr. year earlier
12% 16% 14% 18%
AVERAGE LOAN SIZE (FHBS)
$356,073 $347,864 Mar-19
Same qtr. year earlier
AVERAGE LOAN SIZE (NON-FHBS)
$427,469 $450,463 Mar-19
Same qtr. year earlier
FINANCE FOR ESTABLISHED DWELLINGS
18,297 Mar-19
21,463
Same qtr. year earlier
VALUE OF LOANS - INVESTORS
$3.52B Mar-19
$4.89B
Same qtr. year earlier
2% SHARE OF FHB LOANS
5% 15% 28%
29.3% 28.4% Mar-19
Same qtr. year earlier
Source: ABS
MELBOURNE PROPERTY MEDIAN HOUSE PRICE
MEDIAN UNIT PRICE
MEDIAN LAND PRICE
AUCTIONS HELD
Mar-19
Mar-19
Mar-19
Mar-19
$793,000
$804,500 Previous qtr.
$845,000
Same qtr. year earlier Source: REIV 8
R P M R E A L E S TAT E G R O U P
$586,500 1.4% 6.2%
$589,500 Previous qtr.
$601,000
Same qtr. year earlier
$325,000
0.5% 2.4%
$325,000 Previous qtr.
$322,000
Same qtr. year earlier
3,318 0% 0.9%
CLEARANCE
3,118 Dec-18
5,089
Same month year earlier
56% 45% 67%
VIC BUILDING DETACHED HOUSE APPROVALS 8,409 Mar-19 9,666 Same qtr. year earlier 38,284 Last 12 months
OTHER DWELLING APPROVALS
13.0% 0.3%
HOUSE COMMENCEMENTS
3.5%
HOUSE COMPLETIONS 9,932 Dec-18 8,885 Same qtr. year earlier 38,986 Last 12 months
28.9%
OTHER COMMENCEMENTS
6.9%
11.4%
Mar-19
18,559 26.4%
Same qtr. year earlier
62,939 13.9%
Last 12 months
TOTAL COMMENCEMENTS
5,189 Dec-18 7,205 Same qtr. year earlier 33,313 Last 12 months
14,446
28.0% 11.1%
OTHER COMPLETIONS
11.8%
13,655
41.0%
Dec-18
17,144 15.7%
Same qtr. year earlier
Q 1L M E AA D R KI E N TD IOC VA ET ROVR I SE W
9,257 Dec-18 9,939 Same qtr. year earlier 37,884 Last 12 months
5,246 Mar-19 8,893 Same qtr. year earlier 24,655 Last 12 months
TOTAL DWELLING APPROVALS
71,197 6.9%
Last 12 months
TOTAL COMPLETIONS
6,407 Dec-18 7,708 Same qtr. year earlier 25,597 Last 12 months
16,339
16.9% 18.3%
Dec-18
16,593 1.5%
Same qtr. year earlier
64,583 2.6%
Last 12 months
Source: ABS
MELBOURNE PROPERTY VACANCY RATE - MELB
2.2% 2.1% Mar-19
Mar-18
AVERAGE DAYS ON MARKET - METRO MELB
41
Mar-19
33
Mar-18
MEDIAN METRO HOUSE RENT
$450 Mar-19
$450 Mar-18
0%
MEDIAN METRO OTHER DWELLING RENT
$430 Mar-19
$420 Mar-18
2.4%
Source: REIV Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
9
FEATURE STORY:
INDUSTRY LEADERS INSIGHTS THE FOCUS AMONG THE MAJOR BANKS TO
TIGHTEN MORTGAGE LENDING CRITERIA HAS Q1 MARKET OVERVIEW
CREATED A RISE IN NON-BANK LENDERS, WHICH
MARK POLATKESEN
DIRECTOR AND SENIOR MORTGAGE BROKER MORTGAGE DOMAYNE
RPM: Firstly, tell us a little about yourself and Mortgage Domayne.
IS GOOD NEWS FOR BUYERS, ACCORDING TO
MP: I’ve been in the property industry for more than
MORTGAGE BROKER AT MORTGAGE DOMAYNE.
of $800 million. I started Mortgage Domayne 6
MARK POLATKESEN (MP), DIRECTOR AND SENIOR
WE SAT DOWN WITH MARK TO FIND OUT MORE
ABOUT CHANGES IN THE LENDING LANDSCAPE AND WHAT IT MEANS FOR PROSPECTIVE BORROWERS.
15 years and made mortgage settlements in excess
Purchasing a house and land package can be
quite complex given the customer is dealing with 2 different contracts (ie: land and house) and
timeframes. So we hold the client’s hand throughout the entire process.
years ago. We specialise in construction finance in
RPM: How would you describe the current lending
Our buyer profile is mostly first home buyers seeking
MP: Before the Financial Services Royal Commission,
for construction. We work alongside the likes of RPM,
the inquiry resulted in sudden and sharp changes
greenfield areas in Victoria’s growth corridors.
to purchase a block of land then selecting a builder helping buyers to implement a strategy to obtain finance. We look after our client from the initial
point of sale all the way to when they move in. We
environment?
the big lenders had the lion’s share of loans. However, to lending policy, which has made accessing credit harder among the major banks.
tailor solutions based on the right lender at the right
They’ve put the brakes on policy exceptions due to
establishing borrowing capacity, structuring the right
focus on exploring other options for clients with
rate with the right product. We advise on areas like loan or developing a savings plan.
APRA and ASIC requirements. This has shifted our
second tier lenders. People are now definitely looking to brokers to find a solution because banks don’t really have the appetite at the moment.
10
R P M R E A L E S TAT E G R O U P
Policies from non-bank lenders have always been
the major banks – therefore it seems a lot worse than
aggressive with interest rates. They have to have a
on the segment of the lending market that is tougher – what it is. The banks are scrutinising things like account
conduct from 6 months ago and in my opinion are being a little heavy handed.
RPM: What is buyer sentiment like? MP: Clients are well aware of the Royal Commission and are feeling the pinch of credit because they’re so used to the traditional lending options from the banks.
From our perspective, we feel it’s the opposite and
we’ve never been busier. It’s about educating clients
on what’s available and workshopping loan scenarios. There’s been an influx of other lenders through which we’re able to find solutions for our clients. In fact, in
2018 market share of non-major lenders has increased by 10% to 42%, with the major lenders sitting at 58%.
more flexible than the banks and they can be more
MAJOR LENDERS VS NON-MAJOR LENDERS MARKET SHARE
Q1 MARKET OVERVIEW
There’s a lot of negative press, which mostly focuses
Non-major lenders
point of difference. There’s real value in dealing with non-prime lenders in terms of interest rates and ongoing costs.
RPM: Can you explain the key changes to lending criteria?
MP: The main changes include a new system called
Comprehensive Credit Reporting which gives banks
much greater visibility into applicants’ credit history. For example, banks will know if you had a credit card from 5 years ago that you forgot to disclose on the
58%
42%
application, if you pay your bills on time, or if you
ever go over your credit card limit. All this data is now much more visible to lenders and therefore they can profile clients more comprehensively.
Major lenders
In 2018 non-major lenders increased market share by 10% to 42%.
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
11
FEATURE STORY: INDUSTRY LEADERS INSIGHTS
Another measure is the introduction of HEMs – the
Now the expense rate has gone from 3% to 3.8%,
RPM: Can you also explain the changes to the
were a single applicant and earning $40,000 or
$40,000 and $60,000. We have to educate clients on
Royal Commission, and what effect it may have?
Q1 MARKET OVERVIEW
Household Expenditure Method. In the past, if you $200,000, the linear expense calculation was the same. Now, if you’re earning more, you’re likely
spending more to live which is being taken into consideration.
whether they really need a high limit credit card. RPM: Is this the new normal for prospective borrowers?
As a secondary measure, a lot of lenders now review
MP: If I compared this to the GFC in terms of sudden
lenders now want to see 30 to 90 days of a client’s
things changed. Banks went from lending 95% to 90%
living expenses assessed by bank statements. Most bank statements, which is about vetting them to
ensure the linear expenses they are declaring line up with bank statements on what they’re spending day to day.
Certain banks have also lifted the expense of a credit card repayment. So if you had a credit card with a
$10,000 limit, in the past banks used to expense it at about 2.5% to 3% of that limit as a repayment every month. That’s irrespective of whether you used the card or not.
12
it reduces what a client can borrow by between
R P M R E A L E S TAT E G R O U P
changes in policy, they definitely got tougher and overnight.
In terms of the current situation, some of the changes will stay but not all will be permanent. Buyers will need to be induced back into the market and banks will want market share back at some point.
mortgage broking industry as a key outcome of the
MP: A lot of the findings were targeted at the broker channel. But if you look at both sides of parliament, the Liberal party wants to keep upfront and trailing
commissions in place. Labor originally said it would implement all 76 recommendations before the
findings were delivered. Now they’ve softened their stance and said the broker channel is important as
it will keep competition alive but they will abolish the
trailing commission and make a standardised upfront commission of 1.1% on loan amounts.
I don’t feel it will change too much. We (as in brokers) have got way too much market share and there’s a much greater benefit to have us around than not.
The interest margin before the growth of the broker
channel versus now was a lot higher so people were paying a lot more for a home loan. The channel also allows non-major banks a distribution facility that they otherwise wouldn’t have access to.
RPM: Any final comments you’d like to make?
As an indication, our business is in line for a record
MP: One of the biggest impacts of the Royal
loan amounts have gone up 5% in the last financial
look at affordability in the context of what lenders are
prepared to lend, which is why we are going to lenders
for certain policy requirements as opposed to lenders who will be heavy handed.
Many lenders have increased their Loan Assessment
Rates to 7.25% or even 8%. That’s because they want to ensure applicants can afford a fluctuation in the interest rate.
HAVING SAID THAT, THERE ARE MANY MISCONCEPTIONS ABOUT HOW HARD THE LENDING LANDSCAPE IS. SECURING FINANCE IS NOT AS HARD AS MANY PEOPLE THINK.
Q1 MARKET OVERVIEW
Commission was the level of borrowing capacity. I
month for new lending applications. Our average year and the volume of lending applications has increased by 20%.
We are inundated with new loan enquiries. So
absolutely there are a huge number of people
out there wanting to buy and there are definitely alternative options if you engage with a broker.
For example, 3 years ago, for a loan with a 4% interest rate, the Assessment Rate was only 1.5% higher at 5.5%. Now, with an interest rate of 3.8%, the
MARK POLATKESEN
Assessment Rate is 7.25%.
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
13
OVERVIEW
AGAINST A BACKDROP OF A CONTINUING CORRECTION IN THE RETAIL MARKET,
DEVELOPMENT SITES
GREENFIELD DEVELOPMENT SITE VALUES
ARE ALSO ADJUSTING TO THE REALITY OF A SUBDUED SELLING ENVIRONMENT.
There is an understanding that for the market to
operate efficiently long term, and given falling prices
in the established market, there is a risk that lot prices are over-valued and need to moderate further to drive
sales velocity. This is a key component for developers when assessing development opportunities.
That said, there is still strong demand for well-
located, well-priced sites. Many developers are seeking to negotiate longer deal terms when
acquiring sites to allow for longer timeframes
required for sales in the changed retail environment, with a view to launching their projects in 1.5 to 2 years’ time.
14
R P M R E A L E S TAT E G R O U P
CHRISTIAN RANIERI
DIRECTOR, TRANSACTIONS & ADVISORY christian@rpmrealestate.com.au +61 416 445 078
The recent $22.5 million sale of a 30 hectare
This is a key difference from previous downturns and
The 1,790 sqm site in Brunswick is permit-approved
to retail amenity and infrastructure, reflects the
returns from the land boom – not only have access
Rothelowman architects. Aimed at both investors and
landholding in Wallan in Melbourne’s north, close
adjusted price. The sale reflected a rate of $750,000 per hectare which is seen as real value in a market
where rates per hectare have previously exceeded $2,500,000 in some corridors.
In addition, 2 large-scale PSP-approved development sites in Strathtulloh in Melbourne’s west and Wollert in the north, with a combined potential yield of more than 1,300 lots, presents de-risked, price-adjusted opportunities with 3 to 4 year terms, enabling
purchasers to build their pipelines for the next medium term cycle.
There is still significant capital available from a
swathe of private lenders who have taken market
share from the banks. Not only do many offer more creative, tailored, end-to-end solutions, they are
entrepreneurial in nature and understand the market.
to more capital options when funding development sites, but have shifted from developing to lending. In the infill market, quality assets that are priced
appropriately and ‘make sense’ continue to draw the attention of developers and transact well. There is a strong view in the market that Melbourne is heading for an under-supply of apartments resulting from a
combination of factors including macro-prudential
changes, uncertain planning outcomes and stalled/ shelved projects due to the prolonged downturn in retail apartment sales.
RPM recently launched 2 development sites in
Brunswick and Kew, both priced in accordance with
new market conditions at both a retail and wholesale level, which are attracting strong interest from local and offshore investors.
for a 7-storey residential development designed by
DEVELOPMENT SITES
demand for strategic sites with growth potential at an
hence many developers – having achieved significant
owner occupiers, it represents a quality, de-risked asset within 7kms of the CBD.
OUTSIDE OF BIG PROJECTS, THERE’S AN INCREASING MIX OF OWNER OCCUPIER AND INVESTOR PRODUCT IN EACH DEVELOPMENT. DESIGNING THE RIGHT PRODUCT BY INTIMATELY UNDERSTANDING THE TARGET BUYER PROFILE IS CRUCIAL TO THE SUCCESS OF A DEVELOPMENT IN CURRENT MARKET CONDITIONS. Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
15
OUTLOOK
Developers remain confident in the medium to long QD1E V M EA LROK PE M T EONVT E S R IVTI EE SW
term outlook given the economic fundamentals –
population and employment growth and low interest rates – are sound.
They understand the Victorian land market was
undervalued over a long period which underscored the significant price increases and quantums involved, but which are unlikely to return to the same levels while impositions on investors remain.
While the market remains subdued, there will likely be further adjustments to create more favourable
conditions; lot values may reset further and macro prudential measures that impacted investors are starting to ease.
Many developers will buy against the trend, seeing
opportunities others don’t in preparation for the next
upswing following the exceptional returns achieved over
the last few years and are in a position to buy and hold to capitalise on the market when it stabilises. 16
R P M R E A L E S TAT E G R O U P
HIGH QUALITY INFILL ASSETS CLOSE TO CBD AN ATTRACTIVE PROPOSITION THE LAUNCH OF A WELL-POSITIONED INFILL
The site is planning permit-approved for a 7-storey
MARKET UNDERSCORES A CONFIDENCE AMONG
and 5 shops on the ground floor and is designed
DEVELOPERS TO BRING DE-RISKED PROJECTS TO
MARKET, ACCORDING TO HEAD OF TRANSACTIONS & ADVISORY, CHRISTIAN RANIERI.
residential development incorporating 61 apartments by Rothelowman architects. The approved permit exceeds the height set out in the Brunswick Structure Plan.
RPM recently closed a tender for a 1,790 sqm
Currently trading as Northside Harley Davidson, the
one of the largest remaining properties along the
to Sydney Road plus rear laneway access. The
development site on Sydney Road, Brunswick, coveted locale.
The 1,790 sqm site in Brunswick is permit-approved for a 7-storey residential development designed by Rothelowman architects.
rare development opportunity features 37m frontage property is currently returning $270,000 +GST and,
QD1E V M EA LROK PE M T EONVT E S R IVTI EE SW
DEVELOPMENT SITE PRICED IN LINE WITH TODAY’S
DEVELOPERS ARE TAILORING THEIR PRODUCT TO A NEW BREED OF BUYER – OWNER OCCUPIERS WHO ARE INTERESTED IN MORE THAN JUST A DWELLING, BUT RATHER THE ETHOS OF THE DEVELOPMENT AND HOW IT SERVES THEM AND THE BROADER COMMUNITY.
with a high quality internal fitout including retail and
office space, is suited to a wide range of uses in the short term.
CHRISTIAN RANIERI
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
17
OVERVIEW
THE CORRECTION ACROSS GREATER
MELBOURNE AND GEELONG’S LAND MARKET
CONTINUED TO BE DRIVEN BY TIGHTER ACCESS
COMMUNITIES
TO FINANCE AND WEAKER BUYER SENTIMENT FUELED BY NEGATIVE MEDIA COVERAGE AROUND FALLING HOUSE VALUES.
In March quarter 2019, across all growth corridors gross lot sales declined by 60% to 1,946 lots
compared to the same period a year ago, and 18.6% from the previous quarter.
While RPM data indicates enquiry numbers through website visits and project marketing material are
still strong across new housing estates – indicating potential underlying demand – purchasers are delaying their decision to buy, which is likely
attributed to reduced borrowing capacity and
awaiting the outcome of the Federal Election which has allowed more time to save.
18
R P M R E A L E S TAT E G R O U P
LUKE KELLY
DIRECTOR, COMMUNITIES luke@rpmrealestate.com.au +61 400 688 520
Comparing price movements, Greater Melbourne’s
There is much commentary about the cancellation
Michael’s analysis shows that for the March quarter,
from the previous quarter and 6.2% (-$52,000) from
However, an analysis by Michael Mammen, Partner at
within 2 weeks, with a further 9.3% within 2-4 weeks.
median house price contracted by 1.4% (-$11,500)
March quarter. The median lot price of $325,000 across Greater Melbourne’s growth corridors
remained unchanged from the previous quarter and
increased by just under 1% (+$3,000) from the same quarter a year earlier.
Historically the land price has sat below the established housing market at a ratio of 35%. This has increased
to 41% in the March quarter 2019 which suggests land prices are overvalued and need to adjust accordingly. Developers continue to offer value-add incentives such as rebates or low deposit terms to stimulate
sales. However, these inducements are proving to be
ineffective in a competitive market, with many estates
reducing price – in some cases considerably on already titled lots – to achieve reasonable sales rates.
law firm HWL Ebsworth reveals a default rate of only
4.6% based on 1,000 land settlements reviewed across all growth corridors during the March quarter.
The industry broadly applies the term cancellation based on re-advertising of lots month to month.
However, stock returning to market may not all be
cancellations, or a default. Lots are re-advertised for
86% of lots were settled on the due date itself or
In terms of supply, there were 53 more active estates
in March quarter 2019, compared to the same quarter in 2018. However, new releases fell 58% to 2,031 lots compared to the same quarter 12 months ago as
developers slow releases to avoid higher unsold lots on the market.
many reasons including developers taking stock off
The median lot size remained unchanged at 400sqm
allocating lots to referrers or builders which can also
new masterplans being designed with an average
the market then putting lots back on at a later date, be returned to market, purchasers deciding not to proceed after paying a holding deposit, or, given
lending restrictions, signing contracts that are ‘subject to finance’ and then being unable to secure a loan.
Cancellation rates can also appear distorted and not a true indication of the current market as it includes
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
the same quarter in 2018, falling to $793,000 in the
rate in the land market, with reports as high as 27%.
for the fifth consecutive quarter. We are seeing
of 350sqm with a higher percentage of medium
density and smaller conventional lots under 300sqm, which will skew the average land size down to about 350sqm. These lots, however, are taking time to be released to the market while larger existing stock slowly moves through.
sales from 12-15 months ago when volumes were
much higher which are now coming up to settlement. Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
19
OVERVIEW
MELBOURNE GROWTH CORRIDORS
180
7,000
5,000
120 100
4,000
80
3,000
60 40
MAR 16
Active Estates
JUN 16
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
325K>
1,000
350,000
425
300,000
420
MEDIAN LOT PRICE �$�
415 410
200,000
405
150,000
400
100,000
395
50,000 0
390
MAR 16
Median Lot Size
JUN 16
SEP 16
Median Lot Price
R P M R E A L E S TAT E G R O U P
301K 325K
Gross Lot Sales
New Estates
250,000
20
% OF TOTAL GROSS LOT SALES
2,000
20 0
GROSS LOT SALES
6,000
140
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
275K 300K
MEDIAN LOT SIZE �SQM�
Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
NUMBER OF ESTATES
160
251K 275K
<250K
385 0%
10%
Mar Qtr 2019
20%
Mar Qtr 2018
30%
Mar Qtr 2017
40%
50%
Source: RPM
Mar Quarter ‘19 Median Lot Price $ Change from Mar Quarter ‘18
% Change from Mar Quarter ‘18 CASEY
CARDINIA
HUME MITCHELL
CASEY CARDINIA
15% 4%
HUME MITCHELL
14% 3%
15% 2%
13% 2%
WHITTLESEA 8%
WHITTLESEA 9%
MELTON MELTON
20%
WYNDHAM 21% MOORABOOL 2%
GREATER GEELONG
15% MAR QUARTER 2019
MAR QUARTER 2018
GREATER GEELONG
$313,500
$310,000
$356,000
$275,000
3.5%
-4.6%
0.3%
14.2%
$10,500
-$15,000
$1,000
$34,100
400.0
395.0
404.0
448.0
% Change from Mar Quarter ‘18
0.0%
-1.2%
1.0%
-1.1%
Change from Mar Quarter ‘18
Mar Quarter ‘19 Gross Lot Sales Change from Mar Quarter ‘18
0.0
776
-1,341
-5.0 497
-613
4.0
377
-471
-5.0 296
-553
% Change from Mar Quarter ‘18
-63.3%
-55.2%
-55.5%
-65.1%
Mar Quarter ‘19 sales contribution
39.9%
43.0%
25.5%
22.5%
19.4%
15.2%
80
45
39
29
Mar Quarter ‘18 sales contribution Mar Quarter ‘19 Active Estates Mar Quarter ‘19 Lot Releases
Change from Mar Quarter ‘18
% Change from Mar Quarter ‘18 Mar Quarter ‘19 No. of Trading Days
17%
SOUTH EAST
Mar Quarter ‘19 Median Lot Size
Change from Mar Quarter ‘18
WYNDHAM 18% MOORABOOL 2%
GREATER GEELONG
20%
NORTHERN
Change from Mar Quarter ‘18
% Change from Mar Quarter ‘18
31
977
-1,091
14
370
-838
17.2% 7
388
-506
17.2% 2
296
-358
-52.8%
-69.4%
-56.6%
-54.7%
118
140
175
131
501%
466%
99
115
130
292%
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
% CONTRIBUTION TO TOTAL GROSS LOT SALES
WESTERN
108
459%
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
21
WESTERN GROWTH CORRIDOR THE WESTERN GROWTH CORRIDOR RECORDED
776 GROSS LOT SALES IN MARCH QUARTER 2019,
ACCOUNTING FOR 40% OF TOTAL GROSS LOT SALES ACROSS ALL GROWTH CORRIDORS – DOWN FROM 43% IN THE SAME QUARTER A YEAR AGO. THIS
Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
CONTINUES TO BE THE HIGHEST SHARE AMONG
ALL 4 GROWTH CORRIDORS, WITH SALES ACTIVITY UNDERPINNED BY A GREATER NUMBER OF ACTIVE
MOORABOOL
ESTATES AND SUBSEQUENT HIGHER LOT SUPPLY. MELTON
While lot sales activity in the Western growth corridor continues to outperform other regions, annual gross
sales declined by 63%, equating to 1,341 fewer lot sales. The contraction in new lot releases and gross lot sales has been more pronounced in Wyndham compared to Melton.
Lot supply and lot sales volumes in March quarter 2019 are comparable to respective volumes 6 years ago in
WYNDHAM
March quarter 2013 in Wyndham, and 3 years earlier in March quarter 2016 in Melton.
Both Wyndham and Moorabool were the only Greater
Melbourne growth areas to record a quarterly decline in PORT PHILLIP BAY
lot prices this quarter. This is on the back of Wyndham being the only growth area that saw median lot prices continually rise through 2018 and peak in December quarter, before edging down during early 2019.
22
R P M R E A L E S TAT E G R O U P
PETER GRANT
DIRECTOR, COMMUNITIES
peterg@rpmrealestate.com.au +61 411 494 499
WYNDHAM Wyndham recorded 348 lot sales in March quarter 2019,
Developers have slowed lot releases in response to the significant decrease in lot absorption. As a result, the
attributed to a 2.9% fall in the median lot size to
400sqm, hence per sqm lot prices still increased. Moreover, Wyndham’s median lot price has also increased by 1.6% over the year to March 2019.
500
MAR 16
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
414 412
MEDIAN LOT PRICE �$�
410
250,000
408 406
200,000
404
150,000
402 400
100,000
398
50,000 0
Median Lot Size
0
Gross Lot Sales
300,000
total of 34 active estates.
correction within Greater Melbourne. This is partly
10
350,000
increasing by 8 over the 12 months to March 2019 to a
previous quarter, which was also the biggest quarterly
1,000
15
Active Estates
2018. This is despite the number of active estates
quarter 2019 was 1.5% below its peak value in the
1,500
20
0
reflected commensurate declines of 39% from the
Wyndham’s median lot price of $328,000 in March
25
5
371 new lot releases in Wyndham during the quarter previous quarter and 65% from the same quarter in
2,000
30
GROSS LOT SALES
terms across all Greater Melbourne growth areas.
NUMBER OF ESTATES
the largest contraction in both absolute and percentage
35
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
quarter and 66% from the same quarter a year ago was
2,500
40
However, this 35% decline in lot sales from the previous
MEDIAN LOT SIZE �SQM�
which was the second highest among all growth areas.
396 MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
394
Source: RPM
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
23
WESTERN GROWTH CORRIDOR
MELTON The number of active estates in Melton increased by 7 over March quarter 2019 to a total of 42 - the highest
Atkinson Precinct Structure Plans in late 2017/early 2018. New lot releases, however, fell significantly during the second half of 2018, only beginning to turn around in March quarter 2019 to 570, which saw a 15%
NUMBER OF ESTATES
Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
following the approval of the Plumpton, Kororoit and Mt
improvement in new lot supply from the previous quarter.
45
1,600
40
1,400
35
Gross sales of 389 lots in Melton during the March
quarter was the highest among all growth areas, despite
previous quarter and a solid 8.3% from the same quarter a year ago. While this increase is partly attributed to
the median lot size edging higher over both periods to 400sqm, per sqm lot prices have also risen. 24
R P M R E A L E S TAT E G R O U P
MEDIAN LOT PRICE �$�
reflecting an annual decline of 61%. With new supply
value for Melton increasing 3.2% to $306,500 from the
600
15
400
10
Active Estates
Nevertheless, lot prices are holding, with the median lot
800
20
0
the same quarter in 2018.
unsold lots is almost triple the number of quarterly sales.
1,000
25
200
5
This still reflected a sizeable 38% decrease compared to
thoroughly outpacing lot absorption, the volume of
1,200
30
MAR 16
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
0
Gross Lot Sales
400,000
460
350,000
450 440
300,000
430
250,000
420
200,000
410
150,000
400
100,000
390
50,000 0
Median Lot Size
MEDIAN LOT SIZE �SQM�
22. Most of these new estates came onto the market
GROSS LOT SALES
among all growth areas - lifting the annual gain to
380
MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
370
Source: RPM
ROD ANDERSON
DIRECTOR, COMMUNITIES rod@rpmrealestate.com.au +61 417 595 859
onto the market across 4 active estates. A total of 39 lots were sold.
Although Moorabool is the most affordable new
broader property market.
and the highest annual growth rate across Greater Melbourne’s growth areas.
Moorabool’s median lot size is also the equal largest at 448sqm.
120
5
100
4
80
3
60
2
Active Estates
40 20 MAR 16
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
0
Gross Lot Sales
530
250,000
510 200,000
MEDIAN LOT PRICE �$�
the corresponding value in the same quarter in 2018
140
6
0
The median lot price decreased marginally in March quarter 2019 to $224,000, which is still 10% above
160
1
housing market in Greater Melbourne, it is not
immune from weaker buyer sentiment impacting the
180
7
490 470
150,000
450 430
100,000
410 390
50,000
MEDIAN LOT SIZE �SQM�
March quarter 2019, with just 36 new lots coming
NUMBER OF ESTATES
new lot releases (57%) and gross lot sales (59%) in
200
8
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
Moorabool recorded considerable annual falls for
9
GROSS LOT SALES
MOORABOOL
370 0
Median Lot Size
MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
350
Source: RPM
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
25
NORTHERN GROWTH CORRIDOR
THE NORTHERN GROWTH CORRIDOR RECORDED
New lot supply in the Northern growth corridor
2019, WHICH WAS 55% BELOW SALES VOLUMES
numbers remain static in Hume, while the frequency
Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
497 GROSS LOT SALES IN MARCH QUARTER
ACHIEVED IN THE CORRESPONDING QUARTER IN
2018. NEVERTHELESS, THE PROPORTION OF TOTAL LOT SALES INCREASED FROM 23% TO 26% GIVEN THE SMALLER OVERALL DECLINE COMPARED TO OTHER GROWTH CORRIDORS.
Hume and Whittlesea were the only Greater
and size of new lot releases across estates along
Craigieburn Road in Wollert and Donnybrook Road in Donnybrook diminish as these estates focus on delivery of sold lots. Consequently, the Northern
growth corridor had the fewest new releases totaling 370 lots in the March quarter.
Melbourne growth areas to record an increase in
The correction in median lot prices has also been
10 lots or 6% in Whittlesea. This growth, however,
In both Hume and Whittlesea, the median lot price in
gross lot sales, rising by 40 lots or 17% in Hume and came off a long term low in quarterly sales volumes in both growth areas in December quarter 2018. In
addition, while the uptick in sales activity is positive, it needs to be sustained for a recovery to emerge.
26
continues to struggle for momentum. Active estate
R P M R E A L E S TAT E G R O U P
more apparent compared to other growth corridors. March quarter 2019 was 6.9% below corresponding
peak values in June quarter 2018 and March quarter 2018 respectively. Mitchell’s median lot price also
decreased by 4% from its peak value a year earlier.
LUKE KELLY
DIRECTOR, COMMUNITIES luke@rpmrealestate.com.au +61 400 688 520
HUME
25
353 lots from March quarter 2018.
Active estates in Hume increased by just 1 to a
total of 15 over the 12 months to March 2019. The
0
new supply, with 215 recorded lot releases in
Active Estates
compared to the same quarter in 2018. As a result,
areas within Greater Melbourne.
This has offset some of the downward pressure in lot prices from weaker purchaser sentiment. The
median lot price of $326,000 in March quarter 2019
remained unchanged from the previous quarter and increased by 1% annually. Moreover, the median lot size shrank by 6.5% annually, resulting in stronger per sqm lot price growth.
MEDIAN LOT PRICE �$�
the volume of unsold lots has remained steady in Hume, unlike recorded increases in other growth
600 10
400
5
relatively low number of active estates has impeded March quarter 2019 representing a 68% decrease
800
15
200
MAR 16
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
0
Gross Lot Sales
400,000
460
350,000
450 440
300,000
430
250,000
420
200,000
410
150,000
400
100,000
390
50,000 0
Median Lot Size
GROSS LOT SALES
growth areas, gross sales were still down by 56% or
1,000
20
NUMBER OF ESTATES
largest quarterly increase in sales activity among all
1,200
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
273 lot sales in March quarter 2019. While this was the
MEDIAN LOT SIZE �SQM�
Gross sales in Hume increased by 40 lots to a total of
380
MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
370
Source: RPM
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
27
NORTHERN GROWTH CORRIDOR
MITCHELL
8
with continued falling sales activity. Gross sales
declined for the fifth consecutive quarter to 54 lots or 16% in March quarter 2019 – less than half the
prices actually decreased. Furthermore, the median lot price in Mitchell remains 4% below its peak value in March quarter 2018.
2
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
0
Gross Lot Sales
550 530 510
250,000
490 470
200,000
450
150,000
430 410
100,000
390
50,000
Median Lot Size
R P M R E A L E S TAT E G R O U P
MAR 16
300,000
0
28
50
350,000
MEDIAN LOT PRICE �$�
median lot size to 448sqm, which meant per sqm lot
100
3
Active Estates
unsold lots has not diminished significantly to lead
prices was primarily attributed to 14% growth in the
4
0
lot releases in March quarter 2019, the volume of
to upward pressure on lot prices. The increase in lot
150
5
1
corresponding figure in the same quarter in 2018. Subsequently, although there were virtually no new
6
GROSS LOT SALES
compared to the previous quarter, which contrasts
200
7
MEDIAN LOT SIZE �SQM�
largest rise in both absolute and percentage terms
NUMBER OF ESTATES
Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
Mitchell’s median lot price increased by 10% to
$291,000 over March quarter 2019. This was the
250
9
370 MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
350
Source: RPM
PETER GRANT
DIRECTOR, COMMUNITIES
peterg@rpmrealestate.com.au +61 411 494 499
WHITTLESEA 25
In March quarter 2019, active estate numbers in
recorded lot releases in March quarter 2019 down by
Active Estates
per sqm lot price growth was greater given the
median lot size diminished by 7% to 373 sqm - the lowest of all growth areas.
MAR 16
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
420 410
250,000
400
200,000
390
150,000
380
100,000
370
50,000 0
Median Lot Size
0
Gross Lot Sales
300,000
MEDIAN LOT PRICE �$�
170, while the median lot price rose 2%. Additionally,
200
350,000
all growth areas. However, compared to December
there was a 6% increase in gross lot sales, totaling
300
100
lot price to $307,250 was the highest fall among
and lot price has emerged. In March quarter 2019,
400
10
0
From March quarter 2018 to March quarter 2019, lot
quarter 2018, a small turnaround in both sales activity
500
5
30% quarterly and 60% annually.
sales declined by 54%, while a 7% drop in the median
600
15
GROSS LOT SALES
not translated into growth for new supply, with 154
700
MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
MEDIAN LOT SIZE �SQM�
highest among all growth areas. However, this has
NUMBER OF ESTATES
and 9 from the same quarter in 2018 - the second
800 20
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
Whittlesea increased by 2 from the previous quarter
900
350
Source: RPM
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
29
SOUTH EAST GROWTH CORRIDOR
THE SOUTH EAST GROWTH CORRIDOR RECORDED 377 LOT SALES IN MARCH QUARTER 2019, Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
WHICH WAS 56% BELOW SALES VOLUMES IN THE PREVIOUS CORRESPONDING QUARTER.
NEVERTHELESS, THE PROPORTION OF TOTAL LOT SALES ACROSS THE 4 MAJOR GROWTH
CORRIDORS INCREASED FROM 17% TO 19% IN THE CURRENT QUARTER.
THE DIFFERENCE IN NEW LOT SUPPLY AND LOT ABSORPTION IN THE SOUTH EAST GROWTH CORRIDOR IS CLOSER TO EQUILIBRIUM COMPARED TO OTHER GROWTH CORRIDORS, UNDERPINNING RELATIVELY EXPENSIVE LOT PRICES.
Both Casey and Cardinia experienced a moderate
rise in active estate numbers over the last 12 months, albeit with differing impacts on new lot supply. In
March quarter 2019, Cardinia recorded a 42% annual increase in lot releases while Casey experienced a 68% decline. New supply remains low in Cardinia,
and with the collapse in Casey, both growth areas
recorded long term lows in quarterly sales volumes.
PORT PHILLIP BAY
30
R P M R E A L E S TAT E G R O U P
ROD ANDERSON
DIRECTOR, COMMUNITIES rod@rpmrealestate.com.au +61 417 595 859
IN MARCH QUARTER 2019 Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
42%
CARDINIA RECORDED A 42% ANNUAL INCREASE IN LOT RELEASES
68%
CASEY EXPERIENCED A 68% DECLINE CARDINIA
IN LOT RELEASES
CASEY
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
31
SOUTH EAST GROWTH CORRIDOR
35 30
However, declines of 42% or 255 new lot releases and
28% or 298 gross lot sales in March quarter 2019 from the previous quarter represent long term lows. This is despite
2019 remains the most expensive across all growth
400
10
0
Active Estates
400,000
200
Maintaining a relatively expensive median lot price in the
300,000
MAR 16
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
460 450
MEDIAN LOT PRICE �$�
440 430
250,000
420 410
200,000
400
150,000
390
100,000
380
50,000 0
Median Lot Size
32
R P M R E A L E S TAT E G R O U P
0
Gross Lot Sales
350,000
and a marginal 1% increase from the same quarter in 2018.
the median lot size of 400 sqm is one of the smallest.
600
15
corridors, despite no change from the previous quarter
face of weakening demand was particularly notable given
800
20
5
a 5 year high in active estate numbers of 30.
Casey’s median lot price of $360,000 in March quarter
1,000
25
GROSS LOT SALES
quarter 2019 are in line with most other growth areas.
NUMBER OF ESTATES
Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
The substantial annual contraction in both new lot
releases (68%) and gross lot sales (61%) in Casey in March
1,200
MEDIAN LOT SIZE �SQM�
CASEY
370 MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
360
Source: RPM
LUKE KELLY
DIRECTOR, COMMUNITIES luke@rpmrealestate.com.au +61 400 688 520
and 75% for the quarter with 133 lot releases.
However, gross lot sales still decreased by 10% from
the same quarter in 2018, falling to a long term low of
sale has eased.
Significantly, this returned the median lot price to its
former peak a year earlier, despite the median lot size reducing by 10% from March quarter 2018.
300
10
250
8
200
6
150
4
100
2
50 MAR 16
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
0
Gross Lot Sales
400,000
550
350,000
MEDIAN LOT PRICE �$�
a 5.9% increase in the median lot price to $349,500.
350
12
Active Estates
The median lot size increased by 10% for the March quarter from the previous quarter, which supported
400
14
0
just 79 lot sales. With supply outpacing absorption,
upward price pressure from low availability of lots for
450
16
500
300,000 250,000
450
200,000 400
150,000 100,000
350
50,000 0
Median Lot Size
GROSS LOT SALES
underpinned a 42% annual increase in new lot supply
NUMBER OF ESTATES
doubled over the 12 months to March 2019. This has
500
18
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
The number of active estates in Cardinia almost
20
MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
MEDIAN LOT SIZE �SQM�
CARDINIA
300
Source: RPM
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
33
GREATER GEELONG GROWTH CORRIDOR
THE GREATER GEELONG GROWTH CORRIDOR
The Greater Geelong growth corridor also benefitted
MARCH QUARTER 2019, BELOW A SHARE OF
the area during the first half of 2018 which coincided
Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
CONTRIBUTED 15% OF TOTAL LOT SALES IN 17% IN THE SAME QUARTER IN 2018. THIS WAS IN RESPONSE TO GROSS LOT SALES
FALLING BY 65% TO 296 LOTS, WHICH WAS THE HIGHEST CONTRACTION IN SALES ACTIVITY IN PERCENTAGE TERMS ACROSS THE 4 MAJOR
Melbourne growth areas. However, the 55% annual decline in new lot supply also contributed to the contraction in lot sales.
Affordability concerns continue to emerge in the
Notably, sales activity in March quarter 2018 was
2019, the median lot price contracted in the growth
First Home Owners Grant for new dwellings from
July 2017. The ‘pull forward’ effect of this demand is likely to have created a vacuum in current first home buyer demand. GREATER GEELONG
PORT PHILLIP BAY
R P M R E A L E S TAT E G R O U P
with lot prices peaking across many Greater
GROWTH CORRIDORS.
likely still inflated from the doubling of the Regional
34
from a significant shift in new housing demand into
Greater Geelong growth corridor. In March quarter
areas of Armstrong Creek and Geelong compared to
the previous quarter and rose only marginally in Lara. Overall, the Greater Geelong growth corridor median lot price remained static from the previous quarter.
PETER GRANT
DIRECTOR, COMMUNITIES
peterg@rpmrealestate.com.au +61 411 494 499
7
in 2018, down by 168 lots or 51%. This fall was
attributed to the larger 62% annual decline in new
quarterly correction in the median lot price of
100
MAR 16
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
460 450
250,000
440 430
200,000
420
150,000
410 400
100,000
390
50,000 0
Median Lot Size
0
Gross Lot Sales
300,000
MEDIAN LOT PRICE �$�
diminished by 2.2% from the previous quarter.
200
2
Active Estates
most affordable new housing market within the the smallest median lot size of 400sqm, which
3
0
3.2% to $265,000, making Armstrong Creek the Greater Geelong growth corridor. It also contains
300
4
1
releases to 120 lots.
Consequently, lower demand has led to a
400
5
GROSS LOT SALES
were considerably lower than the same quarter
NUMBER OF ESTATES
areas within Greater Geelong. However, sales rates
500
6
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
Sales of 160 lots in Armstrong Creek in March
quarter 2019 was the highest among all growth
600
8
MEDIAN LOT SIZE �SQM�
ARMSTRONG CREEK
380
MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
370
Source: RPM
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
35
GREATER GEELONG GROWTH CORRIDOR
quarter 2019 compared to the previous quarter.
However, both new lot releases and gross lot sales
deteriorated, falling by 25% to 71 lots and 34% to 52 lots respectively.
Geelong growth corridor, increasing by 7% from the
350
12
300
10
250
8
200
6
150
4
0
Active Estates
100 50
MAR 16
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
was underpinned by a 2.3% rise in the median lot
550 530
MEDIAN LOT PRICE �$�
300,000
510
250,000
490 470
200,000
450
150,000
430 410
100,000
390
50,000 0
Median Lot Size
36
R P M R E A L E S TAT E G R O U P
0
Gross Lot Sales
350,000
previous quarter to $287,475. Some of this growth size to 466sqm.
400
2
Still, Bellarine Peninsula’s median lot price achieved the highest quarterly growth within the Greater
450
14
GROSS LOT SALES
saw overall active estates increase by 1 in March
NUMBER OF ESTATES
Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
Bellarine Peninsula added 2 new estates and
16
MEDIAN LOT SIZE �SQM�
BELLARINE PENINSULA
370 MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
350
Source: RPM
ROD ANDERSON
DIRECTOR, COMMUNITIES rod@rpmrealestate.com.au +61 417 595 859
9
however, with gross sales down by 13% annually to 42 lots in the current quarter.
previous quarter to $332,450, which suggests lot
80
5 4
60
3
40
2
20
1 0
Median lot price growth was still a sizeable 19% from the same quarter in 2018 but fell by 1% from the
100
6
MAR 16 Active Estates
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
0
Gross Lot Sales
prices may have reached their peak. Furthermore,
400,000
750
350,000
700
increasing by 16.1% to 671sqm, which is also
300,000
650
250,000
600
200,000
550
150,000
500
100,000
450
50,000
400
significantly bigger than the median lot size in other growth areas within the Greater Geelong growth corridor.
MEDIAN LOT PRICE �$�
this decline occurred despite the median lot size
0 MAR 16 Median Lot Size
GROSS LOT SALES
a total of 53 lots. This did not boost sales activity,
NUMBER OF ESTATES
an annual increase in March quarter 2019, lifting to
120
7
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
Active estates in Geelong decreased by 1 over the
year to March 2019. However, new supply recorded
140
8
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
MEDIAN LOT SIZE �SQM�
GEELONG
350
Source: RPM
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
37
GREATER GEELONG GROWTH CORRIDOR
annual decline of 44% and a quarterly fall of 23%.
However, new lot supply has recovered, with 52 lot
releases in March quarter 2019 - more than double
0
quarter in 2018.
Active Estates
quarter, which has now overtaken the corresponding
20
MAR 16
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
0
MAR 19
Gross Lot Sales
530 510
250,000
MEDIAN LOT PRICE �$�
The median lot size of 448 sqm remained unchanged.
40
300,000
$270,000 in March quarter 2019 from the previous value for Armstrong Creek.
60 2
1
the previous quarter - and 24% above the same
The median lot price in Lara edged higher to
80
3
490 470
200,000
450
150,000
430 410
100,000
390
50,000 0
Median Lot Size
38
R P M R E A L E S TAT E G R O U P
GROSS LOT SALES
of a calendar year since 2015. This represented an
100
4
NUMBER OF ESTATES
Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
Lara recorded just 33 lot sales in March quarter 2019, the lowest number of gross sales for the first quarter
120
5
MEDIAN LOT SIZE �SQM�
LARA
370
MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
350
Source: RPM
LUKE KELLY
DIRECTOR, COMMUNITIES luke@rpmrealestate.com.au +61 400 688 520
5
price and size need to be viewed with caution given the small volume of sales.
120 100
3
80 2
60 40
1
20
Torquay’s median lot price of $431,500 was the most
0
expensive among Greater Geelong growth corridors, almost $100,000 annually.
Active Estates
JUN 16
New Estates
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
600
450,000
500
400,000 350,000
400
300,000
300
250,000 200,000
200
150,000 100,000
100
50,000 0
Median Lot Size
0
Gross Lot Sales
500,000
MEDIAN LOT PRICE �$�
escalating by 4.2% from the previous quarter and by
MAR 16
MAR 16
JUN 16 Median Lot Price
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
MEDIAN LOT SIZE �SQM�
quarterly and annual changes to both the median lot
NUMBER OF ESTATES
Torquay during the March quarter. Consequently,
140
4
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
Sales activity remained negligible at just 9 lots in
160
GROSS LOT SALES
TORQUAY
0
Source: RPM
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
39
OUTLOOK
The downturn in the vacant land market will likely
The key positive is the economic fundamentals
This demand – while good for developers in the
confidence improves, particularly among owner
growth, significant infrastructure spending and
and increase affordability concerns. This is why
Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
remain for at least the next 12 months until buyer occupiers impacted by tighter lending criteria. Price
falls in the established housing market have also made this type of property increasingly attractive for first home buyers who comprise more than 50% of land market purchasers.
In response, developers are acting in a responsible manner with current releases by not significantly
reducing prices which would jeopardise sales from 12
or so months ago as they come through to settlement.
employment growth – are all well above long term averages, and interest rates are at record lows.
There is also the likelihood of an interest rate cut in
either June or July following anaemic growth in the
short term – will ultimately create another upturn the Planning Minister approved an additional 12
new suburbs in February totaling 50,000 dwellings required to help meet housing demand based on
100,000+ people migrating to Victoria each year.
inflation rate in the first quarter of 2019. There have also been discussions between the RBA and APRA
about lowering the mortgage assessment rate from 7.25% to 6.75%, which would assist buyers entering
the market while still providing a comfortable buffer for regulators.
NEW SUBURBS IN FEBRUARY
hence the land market remains in a state of flux.
The current strict assessment lending rate remains a
TOTALING
Although we have already seen prices ease by up to 5%
growth, along with falling sales in both the land
This, however, means the current land price remains overvalued compared to established house values,
through incentives and rebates, we believe prices will
ease over the next 6-12 months by a further 5%. While
this does not bring the price of land back to ‘fair value’, it will allow the market to somewhat recalibrate after
record growth in both sales and price in recent years. 40
that drive the property market – strong population
R P M R E A L E S TAT E G R O U P
stumbling block haltering buyer activity. Population market and established housing market and acute vacancy rates suggest there is a growing level of underlying demand.
50,000
DWELLINGS REQUIRED TO HELP MEET HOUSING
DEMAND BASED ON 100,000+ PEOPLE MIGRATING TO VICTORIA EACH YEAR.
Beveridge $280k
Mickleham $344k
$351k
Thornhill
South
$255k
Aintree
$320k
$318k
Strathtulloh
Frasers Rise
Tarneit $320k
Wyndham
Craigieburn $378k
Donnybrook $295k
Wollert $337k
$340k
Deanside $364k
$267k
$331k
WHAT DOES A 400SQM LOT COST?
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
$266k
Park
Melton
$397k
Brook
$250k
Weir Views
Greenvale
Bonnie
Kurunjang
Kalkallo
3 months to March 2019
Truganina $365k
Vale
$328k
Mambourin $289k
Point Cook Werribee
Lara
$467k
$309k
Berwick
$258k
$430k
Geelong Armstrong Creek
$252k
Cranbourne
$240k
Bellarine $230k
South
$355k
Clyde
Botanic Ridge
$370k
$345k
Officer $340k
Pakenham $310k
Officer South
$330k
41
Q 1 MCAORMK M ET U NOI V TE I ER SV I E W
COMMUNITIES BUYER SURVEY DATA
WHILE ACCESS TO MORTGAGE LENDING HAS
they are sitting tight and subsequently not entering
Not surprisingly, given tighter credit conditions
MONTHS, OUR QUARTERLY SURVEY RESULTS
upgraders who are unable to borrow as much as they
intended to spend under $250,000 on construction
TIGHTENED SIGNIFICANTLY OVER THE PAST 12 SUGGEST IT HAS IMPACTED NON-FIRST HOME
OWNERS MORE HEAVILY THAN FIRST HOME BUYERS. In March 2019, first home buyers comprised 73% of all
initially thought they could, and downsizers, who
have in mind a higher level of equity remaining after the sale and subsequent purchase.
owner occupiers - up from 57% in the corresponding
Given the higher share of first home buyers in the
non-first home buyers has fallen over these 2 periods.
age profile than the same quarter 12 months ago.
quarter a year earlier. Subsequently, the number of This highlights the tighter line banks are currently
taking with upgraders; restricting the level of exposure home owners are allowed to take.
market, the March quarter recorded a slightly younger These purchasers aged between 18 and 34 accounted for 66% of all buyers in the March quarter 2019
compared to 56% from the March quarter 2018.
Access to bridging loans has also been reduced,
Interestingly, there is not a large variation in household
current dwelling before providing finance for the
increasing household income of first home buyers – a
meaning lenders often require the sale of a
next purchase. It’s worth noting the state of the
established market and the unwillingness among
homeowners to accept current offers. As a result,
42
the greenfield market. This is the case for both
R P M R E A L E S TAT E G R O U P
income between the 2 periods which highlights the
result of this cohort buying later in life and at a more advanced stage of their career.
a slightly higher percentage of buyers (50%)
compared to 47% for the corresponding period a year earlier.
THIS LOWER CONSTRUCTION SPEND ALIGNS WITH BUYERS LOOKING AT BUILDING A SMALLER HOME, WITH 75% OF BUYERS INTENDING ON BUILDING UNDER 25SQS COMPARED TO 61% FROM THE SAME QUARTER LAST YEAR.
March Quarter 2018 Other
1% 9%
1st Home
57%
2nd Home
60>
1st Home
73%
2nd Home
60>
20%
1%
9% 25%
18-24
8%
18-24
14%
48%
$120k>
14%
$80-$100k
25%
$60-$80k
$40-$60k
<$40k
3%
14%
21-25sq
<15sq
20%
$60-$80k
30sq>
16-20sq
$80-$100k
24%
$150-$200k <$150k
26-30sq
19%
23%
11%
26% 36% 22% 3%
52%
$120k>
$101-$120k
2% 1% 9% 13% 28% 34% 12% 1%
$250-$300k $200-$250k
25-34
$40-$60k
<$40k
20% 24% 15% 2%
$150-$200k <$150k
2% 4% 13% 7% 25% 32% 18% 0%
30sq>
12%
$450k>
$400-$450k $350-$400k
$300-$350k $250-$300k $200-$250k
26-30sq 21-25sq
16-20sq <15sq
Q 1 MCAORMK M ET U NOI V T EI ER SV I E W
25-34
$300-$350k
Source: RPM
0% 4%
35-49
$450k>
SIZE OF HOME PLANNING TO BUILD
3rd Home
35-49
$400-$450k $350-$400k
BUDGET FOR NEW HOME CONSTRUCTION
2%
3%
50-59
$101-$120k
HOUSEHOLD INCOME
32%
Other
4th Home
7% 34%
50-59
COMBINED AGE
2%
3rd Home
4th Home
OWNER OCCUPIER TYPE
March Quarter 2019
14% 38% 35% 2%
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
43
OVERVIEW
THE COMBINATION OF THE FINANCIAL SERVICES ROYAL COMMISSION, APRA MEASURES TO
APARTMENTS &TOWNHOUSES
RAISE STAMP DUTY AND TAXES FOR OFFSHORE PURCHASERS, STRICTER CHINESE CAPITAL
CONTROLS, AND THE REMOVAL OF CONCESSIONS FOR LOCAL INVESTORS HAVE HALTERED BUYER
ACTIVITY, WITH SENTIMENT AT LONG TERM LOWS. This slowdown in demand has heavily impacted
the speed of pre-sales, which has subsequently caused developments to either be pushed back in delivery or put on hold. This has exacerbated
weaker confidence and uncertainty in the market among potential purchasers.
In addition, the apartment market has been working through a considerable level of supply and in some suburbs an oversupply. New stock coming to
market also - which is all taking longer to move - has consequently impacted on the pipeline of activity.
44
R P M R E A L E S TAT E G R O U P
LUKE KELLY
DIRECTOR, PROJECT MARKETING luke@rpmrealestate.com.au +61 400 688 520
OTHER DWELLING APPROVALS After holding up well through the first 9 months of
volume of apartment dwellings have seen remaining
months have revealed the extent of the downturn in
in the middle ring that have a higher than average
stock sit on the market for an extended period. This has resulted in some developers offering higher
calendar 2018, approval numbers over the last 6 the current lending environment.
commissions to agents – in some cases more than
Other dwelling approvals (apartments and
rental deals for buyers are also on offer such as a 5%
11.8% to 5,246 approvals from the previous quarter –
10% according to recent reports. In addition, lucrative rental guarantee over 5 years.
Further still, developers are also holding back
stock and releasing it to the rental market where
vacancy rates remain acute. This is largely the case with sub 50sq apartments as buyers struggle to
townhouses) over the March quarter 2019 were down the lowest recorded level since March quarter 2014.
More pronounced is the comparison to March quarter 2018 which shows a 41% fall in approvals. Across the previous 12 months the market has fallen 28.9% to record 24,655 other dwellings.
MORE SIGNIFICANT IS THE RESULT WHEN COMPARED TO THE SAME QUARTER A YEAR EARLIER WHICH SHOWS APARTMENT APPROVALS FALLING BY 51%. IN ADDITION, OVER THE PAST 12 MONTHS 12,620 APPROVALS WERE RECORDED WHICH REFLECTS A 40.5% REDUCTION FROM THE SAME 12 MONTH PERIOD A YEAR EARLIER.
obtain finance, and any significant reduction in the
The apartment market in particular has suffered
This reduction is all part of the cycle. However,
jeopardise apartments in the development that have
a reduction in local buyer appetite over an extended
lack of demand initially given population growth
retail price on these dwellings by the developer will already been sold.
Nevertheless, the fundamentals that drive the
property sector – strong population growth, record
spending on infrastructure and robust employment growth – are all well above trend.
severely from the exodus of overseas investors and period. Nevertheless, over the March quarter 2,917
apartment approvals were recorded. This is positive as it reflects an increase of 4.5% from December quarter 2018 which was the lowest quarter since
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
The overly represented inner ring and some suburbs
the market downturn has not been driven by a
is at record numbers, but tighter lending criteria coupled with cautious purchasers who suspect prices will fall further.
June 2017.
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
45
OTHER DWELLING APPROVALS
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
While apartment approvals have struggled over
increased year-on-year since 2012 peaking in the year to March 2018 with 13,455 approvals. This
extended upturn reflects an increase of 131% and highlights the increasing popularity of townhouse
developments. While approvals fell by 11% to 12,035 over the year to March quarter 2019, it is still in line
with the average that was recorded over the boom 2
TOWNHOUSE APPROVALS
the past couple of years, townhouse activity has
year period of 2017 and 2018 (12,365 approvals).
Until now townhouse activity has held up well and
hampered by difficulties obtaining finance – for both buyers and small to medium sized developers – as a result of tighter lending standards. This can also
be seen in the change from the same quarter a year earlier, with approvals falling by 21%.
12 mths to Mar-15
12 mths to Mar-17
19%
12 mths to Mar-18
11%
12 mths to Mar-19
18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000
50%
12 mths to Mar-15
Source: ABS R P M R E A L E S TAT E G R O U P
12 mths to Mar-16
9%
20,000
0
46
13%
22,000
APARTMENT APPROVALS
quarter reflects a market that is void of confidence,
16%
24,000
is coming off a record high. A 26% drop in activity in March quarter 2019 compared to the previous
15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
3%
12 mths to Mar-16
7%
12 mths to Mar-17
6%
12 mths to Mar-18
41%
12 mths to Mar-19
KEY MEDIUM DENSITY BUILDING DATA
March qtr. 2019
% change from previous qtr.
TOTAL TOWNHOUSES
TOTAL APARTMENTS
2,329
2,917
-26.2%
4.5%
TOTAL 5,246
-11.8%
% change from previous yr
-20.8%
-51.0%
-41.0%
% change 12 months earlier
-10.6%
-40.5%
-28.9%
12 months to March qtr. 2019
COMMENCEMENTS Dec qtr. 2018
% change from previous qtr.
12,035
OTHER DWELLINGS 5,189
-21.9%
% change from previous yr
-28.0%
% change 12 months earlier
11.1%
12 months to Dec qtr. 2018
TOTAL APARTMENT & UNIT PRICES
33,313
MEDIAN PRICE
March qtr. 2019
$586,500
March qtr. 2018
$601,000
Dec qtr. 2018
$589,500
NOTE: Approvals will be the current quarter (March). Commencements and completions are delayed by a quarter (Dec).
12,620
COMPLETIONS
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
APPROVALS
24,655
OTHER DWELLINGS
Dec qtr. 2018
% change from previous qtr.
6,407 5.6%
% change from previous yr
-16.9%
% change 12 months earlier
-18.3%
12 months to Dec qtr. 2018
CHANGE FROM QTR.
0.5%
25,597
CHANGE FROM PREV. YR
2.4% Source: ABS, REIV Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
47
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
THE PROSPECTIVE GOOD NEWS FOR HOMEOWNERS IS A POSSIBLE LOWERING OF THE MORTGAGE ASSESSMENT RATE WHICH WOULD INCREASE BORROWING CAPACITY.
48
R P M R E A L E S TAT E G R O U P
OUTLOOK
LUKE KELLY
DIRECTOR, PROJECT MARKETING luke@rpmrealestate.com.au +61 400 688 520
This is unlikely as the major concern for the market
The reality is a constant flow of people at historically
postponed pipeline projects move through to enter
provides). Rather, the main hurdle is obtaining the
who require housing. This can either be through home
for the remainder of the year before some of the
the market and underlying demand converts to real
demand as lending conditions ease. This could come
in the form of action being taken by the RBA regarding a cut in the cash rate or APRA lowering serviceability requirements, or both.
A change in the cash rate is now increasingly likely
to occur mid-year rather than the end of 2019 given
inflation remains low. However, a cut to the cash rate
this time around might not be the panacea it has been previously.
After the 2008 GFC and slump in prices in 2011/12, it
took 4 to 5 months after the initial rate cut to kickstart sales. If a rate cut was applied in June, we would
expect a recovery by at least the end of this year.
is not obtaining cheaper finance (which a rate cut
necessary level of loan to be able to buy. This can only be resolved by APRA decreasing the loan buffer of
7.25% and, to a lesser extent, the rigid approach major banks are taking when assessing household income. The prospective good news for homeowners is the
high levels have moved to Victoria in recent years
ownership or renting; either way, construction needs to take place. This activity, however, won’t start until developers are confident there are loan-approved
buyers ready to purchase, hence the growing level of underlying demand.
discourse between the RBA and APRA regarding
With the Coalition government retaining power, we
assessment threshold being lowered to 6.75%. This
recovery from recent downturns. This may be assisted
the best course of action, which could result in the would allow buyers to borrow more and stimulate activity to begin the next cycle of development.
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
Subdued market conditions are likely to continue
would expect the market to take a similar path to
by the recently announced First Home Loan Deposit
scheme, which will see eligible first-home buyers with at least a 5% deposit for a home, qualify for a loan.
They’ll also save around $10,000 by not having to pay mortgage insurance to lenders. The scheme will be capped at 10,000 loans per year.
As with all new policies, however, the intended (and
unintended) effects may not be known for some time.
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
49
50 R P M R E A L E S TAT E G R O U P
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
LUKE KELLY
DIRECTOR, PROJECT MARKETING luke@rpmrealestate.com.au +61 400 688 520
PROJECT IN FOCUS The boutique development is situated in a premium
A RANGE OF ARCHITECTURAL TOWNHOMES
station, 5-minute drive to Tarneit medical centre,
A BOUTIQUE COMMUNITY, ORCHARD ROW, WITHIN THE NEW MASTER PLANNED
DEVELOPMENT OF ORCHARD ESTATE, TARNEIT, LOCATED 27KM FROM MELBOURNE’S CBD.
location; only a 7-minute drive from Tarneit train
13-minute drive from Werribee Pacific shopping centre and easy access to Princes Freeway via Doherty’s or Leakes Road.
Developed by established developers Dahua in
Future amenities in Orchard estate include the
community comprises 2-, 3- and 4-bedroom
walking distance, as well as Tarneit West train station,
conjunction with builder SOHO Living, the new
townhomes, which maximise style, convenience and comfort.
Stage 1 features 3-bedroom, 2.5 bathroom, single or double garage homes priced from
$374,950 to $449,950. Each home comes with
high-end inclusions as standard and as complete turnkey packages.
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
RPM RECENTLY LAUNCHED STAGE ONE OF
1-hectare Orchard Park and a shopping centre within located less than 1km from Orchard Row. The estate is also located within walking distance to a future
non-government school and public primary school
and is currently within 1km of P-9 Tarneit College, a Catholic primary school and daycare centre.
Increasing investment and development in Tarneit underscores growing interest in townhome
properties throughout Melbourne’s outer ring.
Orchard Row, a range of architectural townhomes within the new master planned development of Orchard Estate, Tarneit
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
51
OVERVIEW
IN VICTORIA, FOREIGN BUYERS ACCOUNTED
FOR 4.8% OF PURCHASES FOR BOTH NEW AND
ESTABLISHED DWELLINGS IN MARCH QUARTER
INTERNATIONAL
2019. THIS PROPORTION OF NEW DWELLINGS
REPRESENTS A LONG TERM LOW, AND WAS ALSO
RELATIVELY LOW FOR ESTABLISHED DWELLINGS, WITH ONLY A SLIGHT IMPROVEMENT ON THE PREVIOUS QUARTER.
Policy changes in China restricting foreign investment outflows, onerous Australian foreign buyer taxes
and tighter lending conditions in Australia combined to result in a gradual retreat of foreign buyers from Victoria’s residential market since the second half
of 2017. This exodus has been exacerbated over the
quarter by the decline in property prices and growing sentiment that the market will take longer to recover and be more gradual.
52
R P M R E A L E S TAT E G R O U P
JINYIN ZHANG
DIRECTOR, RPM INTERNATIONAL jinyin@rpmrealestate.com.au +61 451 898 886
26%
Q 1 IMNAT RE KR ENTA TO IVOENRAVLI E W
% OF FOREIGN PURCHASES BY DWELLING TYPE
24% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
■ New
■ Established
MAR 16
JUN 16
SEP 16
DEC 16
MAR 17
JUN 17
SEP 17
DEC 17
MAR 18
JUN 18
SEP 18
DEC 18
MAR 19
11%
22%
15%
19%
14%
21%
14%
14%
12%
12%
13%
8%
5%
7%
10%
9%
11%
7%
9%
8%
9%
8%
6%
6%
4%
5%
Source: NAB Quarterly Residential Property Survey
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
53
AUSTRALIAN ECONOMIC OUTLOOK
The Australian economy performed solidly
The contraction has led to a growing belief that the
Product (GDP) increasing by 2.8%. However,
rate in either June or July, rather than later in the year.
Q 1 IMNAT RE KR ENTA TO IVOENRAVLI E W
over calendar year 2018, with Gross Domestic economic conditions are projected to weaken through 2019, partly attributed to the current property market downturn.
This is particularly the case given the Consumer Price Index (CPI) is sitting at the lower end of the RBA’s inflation target of 2-3%.
Private consumption is expected to slow, as high
However, another key determinant of any cash
impact personal wealth and consumer confidence.
wage growth. While unemployment is forecast
household debt and declining property prices In addition, dwelling investment is anticipated
to contract due to weakened sentiment towards
residential property, diminishing turnover activity in
established dwellings and discouraging purchasers of new dwellings.
54
Reserve Bank of Australia (RBA) will reduce the cash
R P M R E A L E S TAT E G R O U P
rate reduction will be the unemployment rate and to edge higher over 2019, it will still be relatively
low, exemplifying tight labour market conditions. Subsequently, average earnings growth is
projected to escalate, although it has remained benign to start 2019.
AUSTRALIAN ECONOMY Economic indicators (% change)
2018 a 2019 f
GDP
2.80
2.10
Employment
2.70
1.80
Unemployment Rate
5.00
5.10
Average Earnings
1.60
2.20
Inflation
1.80
2.30
RBA Cash Rate
1.50
1.00
$A/US cents
0.71
0.75
a = actual f = forecast
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
Q 1 IMNAT RE KR ENTA TO IVOENRAVLI E W
POLICY CHANGES IN CHINA RESTRICTING FOREIGN INVESTMENT OUTFLOWS, ONEROUS AUSTRALIAN FOREIGN BUYER TAXES AND TIGHTER LENDING CONDITIONS IN AUSTRALIA COMBINED TO RESULT IN A GRADUAL RETREAT OF FOREIGN BUYERS FROM VICTORIA’S RESIDENTIAL MARKET SINCE THE SECOND HALF OF 2017
55
OVERVIEW
WHILE DWELLING PRICES HAVE SLIGHTLY DECLINED, DEMAND FOR RENTAL
RESIDENTIAL INVESTMENT
ACCOMMODATION HAS NOT EASED, WITH TOTAL MELBOURNE VACANCY RATE SITTING AT 2.2% -
THE SAME AS THE PREVIOUS QUARTER - BUT STILL BELOW THE ACCEPTABLE 3% TARGET.
Relatively low vacancy rates have resulted in modest annual gains in rents across most of
the defined areas in both established houses,
apartments and units over the past 2 years. Fourbedroom houses in the middle ring recorded the largest average annual rental gain with a 7.7%
increase, followed closely by 3-bedroom houses
in the inner ring with gains of 7.6%. This increase is on the back of weekly rent growth over the past 12 months of $30 and $90 respectively.
56
R P M R E A L E S TAT E G R O U P
MEDIAN RENTS House Bedrooms INNER
and apartments. This suggests the desire to reside
in more affordable areas is becoming more prevalent in comparison to the previous quarter, where the
Additionally, there has been robust rental increases in the outer ring of Melbourne and Geelong. This is not
demand in the area.
Melbourne’s outer ring has seen a significant 14.2% increase in average annual rent gains over the past
past 12 months.
4
$895
$895
$800
3
$430
$420
$440
$653 $370
$720
$378
$550
$560
3
$380
$385
2
$300
4
$410
2 4
GEELONG
3
$351
$430
$350 $428
$320
$743
$380 $580
Change from previous year
2 Year Average Annual Gain
$90
7.6%
$10
-$95
0.2%
$10
4.7%
$10
$30
1.3% 7.7%
$341
-$11
2.4%
$430
$0
1.0%
$380
$0
1.4%
$320
$20
$423
$13
2.8%
Change from previous year
2 Year Average Annual Gain
$5
2.6%
-$10
1.6%
$350
$360
$360
Bedrooms
Mar-18
Dec-18
Mar-19
1
$370
$380
$380
$680
$670
-$30
$400
$403
$8
$268
$300
$395
$400
$400
$300
$300
$420
2.8%
$10
5.5%
2.9%
Units & Apartments
INNER
MIDDLE
OUTER
two years for 1-bedroom units and apartments,
reflecting a weekly rental increase of $45 over the
$560
4
OUTER
surprising for Geelong given the significant increase in development in recent years, contributing to
$550
2
be noted that houses in the inner ring are sparse and resulting in excessive fluctuation.
$550
3
inner ring had the biggest rental increases. It should as such constitute low levels of rental properties,
Mar-19
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EW ENT
the middle ring for houses, and the outer ring for units
Dec-18
2
MIDDLE In general, rental increases were most prominent in
Mar-18
GEELONG
2
$490
1
$330
3
$500
2
$340
1
$220
3 2 1 3 2 3
$700
$395 $255
$370
$480 $320 $510
$340 $220
$393
$495 $320
$503 $350 $220 $310
$398
$10
$3
$45 $10 $5
$0
$10
$28
1.3%
3.5% 1.6%
0.2%
14.2% 4.6% 1.9%
4.9%
4.3% 2.6%
Source: REIV Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
57
OVERVIEW
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EE WN T
14.2%
MELBOURNE’S OUTER RING HAS SEEN A
SIGNIFICANT 14.2% INCREASE IN AVERAGE ANNUAL RENTAL GAINS FOR 1 BEDROOM UNITS AND APARTMENTS.
4.29%
UNITS IN THE INNER RING ALSO CONTINUE TO ACHIEVE HIGH YIELDS WITH AN AVERAGE OF 4.29% OVER THE PAST 12 MONTHS.
In Geelong, 2-bedroom houses had the largest
VACANCY RATES & YIELDS:
a $20 increase in weekly rent over the past year.
While vacancy rates have only modestly changed
average annual increase, with rental gains of 4.9%,
most areas in the region, they all remain below the
average annual rental gain of 5.5%, which represents Three-bedroom houses had the second largest
reflecting a weekly increase of $10 over the past 12 months. Over the past 2 years, Geelong has
averaged rental gains across all dwelling types of between 2.6% and 5.5%, while the outer ring of
Melbourne has averaged gains of between 1.0%
ring, with a vacancy rate of 3.6%. Consistently low
vacancy rates reinforce the consensus that there is no oversupply of stock in the market.
This being the case, rental growth has remained,
Overall, across all regions, other dwellings (units
investing in detached housing in the outer and
and apartments) performed slightly better when compared to the growth recorded in detached
houses on a rolling 2-month average. Interestingly, there was a significant reduction in 4-bedroom
houses in the inner ring. This could reflect renters instead opting for a newer, bigger and cheaper rental properties in the outer ring.
R P M R E A L E S TAT E G R O U P
acceptable level of 3%. The exception is the middle
and 14.2%.
deciding they were not willing to pay more and
58
with either slight increases or decreases across
providing appealing yields for investors. For those regional areas, land value appreciation tends to be
the driving force in the earlier stages. However, with vacancy rates at acute levels, and what seems to
be a movement from the middle to the outer ring for
renters, rental yields for detached houses, units and apartments in outer and regional areas top the list.
DAVID YANG
MANAGER, PROPERTY MANAGEMENT d.yang@rpmrealestate.com.au +61 402 446 058
Due to significant capital gains seen in both detached
picked up over the past 2 quarters with more modest
Regional areas of Victoria continue to achieve the
rental yields have been below long-term levels.
months, rental yields for all dwelling types across
with robust rental prices given regional areas are
overall gains in the March quarter. Over the past 12
Rental growth cannot compare to the increases in
all regions have continued to increase, resulting in
capital gains. Nevertheless, with prices moderating
robust returns.
– particularly in other dwellings – rental yields have
Inner Total
Inner (0-4km)
Inner (4-10k m)
Mar-18 1.8 2.1
Source: REIV
1.5
1.4
1.7
1.5
2.2
2.2
1.6
Geelong
Mar-19
2.1
2.3
Outer (20+km exc. Mornington Peninsula) Melbourne Total
Dec-18
1.8
3.0
Outer (Mornington Peninsula)
in the inner ring also continue to achieve high yields
YIELDS
Middle (10-20km) Outer Total
traditionally tightly held. It’s important to note, units with an average of 4.29% over the past 12 months.
VACANCY RATE Melbourne
highest yields due to lower purchase prices, coupled
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EW ENT
houses and other dwellings over the past 5 years,
2.1
1.4
2.0 2.1
2 Year Average
Houses
1.8
Middle
2.0 2.0
3.1
3.6
2.9
1.4
1.5
1.6
2.2 1.9
1.6
2.3 2.2 1.6
1.7
2.3 2.1
1.9
Inner
Mar-18 2.17%
2.02%
Dec-18 2.42%
2.45%
Mar-19 2.88% 2.51%
Outer
2.84%
3.03%
3.09%
Regional
3.87%
3.96%
4.17%
Units
Mar-18
Dec-18
Mar-19
Middle
3.03%
3.19%
3.28%
Metro
3.68%
3.80%
3.99%
Metro
Inner
Outer
Regional
2.46%
4.10%
3.23% 4.43%
2.71%
4.32% 3.42% 4.17%
2.82%
4.45%
3.63% 4.54%
Source: REIV, RPM
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
59
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EE WN T
OUTLOOK
Tighter lending criteria for first home buyers -
With supply generally sitting well below demand
In addition, renters will be in a more favourable
difficult to secure finance during 2019, forcing
increase. These positives provide key incentives
regulations coming into play, which heavily restrict
and buyers in general - has made it increasingly them to continue to rent. Coupled with continuing high population growth, vacancy rates have
remained at low levels – particularly in suburbs with strong infrastructure and amenities.
60
R P M R E A L E S TAT E G R O U P
levels, weekly rental prices and yields continue to for investors to enter the market, albeit in the face of lending headwinds.
position come the 1st of July 2020 with new rental landlords. As a result, once implemented, these
changes could discourage some investors from entering the market.
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EW ENT
THE FEDERAL ELECTION RESULT WILL LIFT UNCERTAINTY ABOUT NEGATIVE GEARING AND CAPITAL GAINS TAX, PROVIDING A MORE POSITIVE OUTCOME FOR INVESTORS.
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
61
RESIDENTIAL INVESTMENT BUYER SURVEY DATA
CREDIT TIGHTENING BY BANKS TO INVESTORS -
Furthermore, while access to lending has been
The March quarter data also revealed an increasing
RECENTLY TO LOCAL INVESTORS - HAS RESULTED
investment come from a vast range of household
intending on building a single storey home compared
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EE WN T
FIRSTLY TOWARDS OVERSEAS BUYERS AND MORE IN THE SHARE OF INVESTORS IN THE GREENFIELD MARKET FALLING FROM 29% IN THE MARCH
QUARTER 2018 TO 23% IN THE CURRENT QUARTER. This is no more evident than the drop in Chinese investors (largely foreign investors) and recently
migrated domestic investors. In the March quarter 2018, investors from China, India, and Sri Lanka
income levels. In the current quarter, 37% of
households indicated a household income above
$100,000 compared to 60% from the March quarter a year earlier. This suggests that if a buyer has
the required deposit and the ability to finance the
repayments (with no other outstanding debts), then they can obtain the necessary finance.
accounted for 64% of all investors. These same three
It also potentially highlights first home buyers may
only 12% (with no Indian buyers).
an owner occupier. In addition, households with a
nationalities in the March quarter 2019 accounted for
Conversely, Australian born investors increased from 24% in the March quarter 2018 to 78% in the March quarter this year. The drop in Indian and Sri Lankan
investors could be due to the fact that the property
cycle is bottoming out and they may be sitting it out and waiting for the market to improve.
62
curtailed, those that can obtain finance for
R P M R E A L E S TAT E G R O U P
be buying an investment property before buying as
share of investors (82%) indicated they were
to 68% in the same quarter 12 months ago. Moreover, 90% indicated they planned to build a home on a
smaller footprint (25 sqs or less) compared to 70% in the March quarter last year.
This corresponds with a desire (driven by the banks) to have a more manageable overall house and land
budget. In the March quarter 2019, 77% of investors
indicated an overall package price of under $500,000 compared to 44% in the March quarter 2018.
higher net income might have multiple investment
Also worth noting is ‘investment’ still ranks highly
environment, are finding it increasingly difficult to
affordability also increasingly important.
properties already and, in the current lending
secure additional finance as they may be considered too highly leveraged.
amongst purchasers as a key estate feature, with
March 2018
Investor
OWNER OCCUPIER VS INVESTOR
41%
$80-$100k
17%
Croatia
Vietnam
Sri Lanka China
Australia
$101-$120k
$60-$80k $40-$60k
<$40k
Undecided Single
30sq>
6%
26-30sq 21-25sq
SIZE OF HOME PLANNING TO BUILD
16-20sq <15sq
16%
$80-$100k
16%
-
Pakistan
Italy
Sri Lanka
New Zealand China
$60-$80k
18%
25% 43% 25% 2%
Owner Occupier
$120k>
-
17% 1%
77%
Australia
-
$101-$120k
5%
23%
0% 0% 0% 0% 2% 2% 5% 5% 7% 78%
-
19%
13% 68%
Double
Investor
$40-$60k
<$40k
Undecided
21%
32% 16% 0%
5%
Single
14% 82%
30sq>
5%
Double
21-25sq
5% 32%
<15sq
11%
26-30sq
16-20sq
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EW ENT
$120k>
Bangladesh
Afghanistan
NUMBER OF STOREYS
Owner Occupier
India
Italy
HOUSEHOLD INCOME
71%
2% 2% 2% 2% 2% 3% 11% 19% 24% 34%
Malaysia
COUNTRY OF PERSON 1&2 TOP 10
29%
March 2019
47%
Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 019
63
RESIDENTIAL INVESTMENT BUYER SURVEY DATA
March 2018 $600k>
14%
$500-$550k
20%
$550-$600k $450-$500k
BUDGET FOR HOME AND LAND PACKAGE
$400-$450k
$350-$400k
$300-$350k
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EE WN T
<$300k
Shops
Presentation Parks/Water Proximity
Affordability
Location/Area
9%
$450-$500k
14%
$400-$450k
1%
$300-$350k
9% 1%
7%
Lot Size
$500-$550k
19%
Investment Schools
9%
$550-$600k
4%
Design
$600k>
22%
Facilities
Community
TOP 3 BEST FEATURES OF ESTATE
March 2019
$350-$400k <$300k
Facilities
2%
Community
1%
Design
Investment
3%
Schools
3%
Lot Size
4%
3%
8%
10% 19%
33%
Shops
Presentation Parks/Water Proximity
Affordability
Location/Area
5%
27%
36% 14% 0% 0% 2% 2%
11% 0% 2%
0% 0% 7% 5%
11%
27%
32%
RPM surveys every buyer on its clients’ estates in the greenfield market. 23% of all buyers indicated they were investors. The above illustrates demographic and purchase intent changes amongst this cohort based on surveys from the March quarter 2019 compared to the same quarter in 2018.
64
R P M R E A L E S TAT E G R O U P
OUR TEAM ERIC DICK
JINYIN ZHANG
eric@rpmrealestate.com.au
jinyin@rpmrealestate.com.au
EXECUTIVE CHAIRMAN
DIRECTOR, RPM INTERNATIONAL
+61 418 349 267
+61 451 898 886
CHRISTIAN RANIERI
KEVIN BROWN
CHIEF EXECUTIVE OFFICER
DIRECTOR, TRANSACTIONS & ADVISORY
+61 418 397 577
+61 416 445 078
christian@rpmrealestate.com.au
kevin@rpmrealestate.com.au
LUKE KELLY
MICHAEL STAEDLER
luke@rpmrealestate.com.au
m.staedler@rpmrealestate.com.au
DIRECTOR
RESEARCH MANAGER
+61 400 688 520
+61 434 619 280
PETER GRANT
DAVID YANG
peterg@rpmrealestate.com.au
d.yang@rpmrealestate.com.au
MANAGER, PROPERTY MANAGEMENT
DIRECTOR, COMMUNITIES
+61 402 446 058
+61 411 494 499
ROD ANDERSON
DIRECTOR, COMMUNITIES rod@rpmrealestate.com.au +61 417 595 859
DELENA BAJADA-GARDNER
ASSOCIATE DIRECTOR, COMMUNITIES delena@rpmrealestate.com.au +61 487 888 556
66
R P M R E A L E S TAT E G R O U P
DISCLAIMER Although all reasonable care has been taken in the preparation of this document, RPM Real Estate Group Pty Ltd takes no responsibility for the accuracy of the information
contained herein. It is recommended that all the information be verified if it is to be used for commercial purposes.
T +61 3 9862 9555
Level 5, 52 York Street
South Melbourne VIC 3205 rpmrealestate.com.au