M A R C H
2 0 2 0
MARKET REVIEW
Q U A R T E R
RESIDENTIAL
RPM REAL ESTATE GROUP IS VICTORIA’S MOST SUCCESSFUL
WE ADVISE OUR CLIENTS ON ALL ASPECTS OF THE SALES
ADVISORY AGENCY. WE SPECIALISE IN SALES WITHIN
AND RISK MITIGATION THROUGH TO PRODUCT MIX, PRICING,
RESIDENTIAL DEVELOPMENT SALES, MARKETING AND
MASTER-PLANNED COMMUNITIES, MEDIUM AND HIGH-DENSITY DEVELOPMENTS, GREENFIELD AND INFILL DEVELOPMENT SITES AND INTERNATIONAL INVESTMENT SALES.
PROCESS FROM SITE DUE DILIGENCE, ACQUISITION, PLANNING LAUNCH, SALES AND SETTLEMENT. OUR RESEARCH-BACKED STRATEGIES DELIVER HIGHER REVENUES AND SALES RATES, AND BETTER RETURNS FOR OUR CLIENTS.
INSIDE
COMMUNITIES
48
APARTMENTS / TOWNHOUSES
INDUSTRY LEADER INSIGHTS
10
56
INTERNATIONAL
DEVELOPMENT SITES
12
60
RESIDENTIAL INVESTMENT
FROM OUR CEO
LEAD INDICATORS
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 0 2 0
Q1 MARKET OVERVIEW
4 6
16
3
FROM OUR CEO
WELCOME TO RPM REAL ESTATE GROUP’S Q1 2020
Gross lot sales reached an 18-month high in
TO SHARE THIS COMPREHENSIVE UPDATE
for the quarter increasing by 2.1% from the previous
Q1 MARKET OVERVIEW
RESIDENTIAL MARKET REVIEW. WE ARE PLEASED AND OUTLOOK FOR VICTORIA’S HOUSING AND INVESTMENT MARKETS.
This quarter is undoubtedly one for the history
books. We saw a seismic shift in our way of life as
CHIEF EXECUTIVE OFFICER RPM REAL ESTATE GROUP
house prices until that point 12.5% higher than a year ago, and unit prices up 9.29%.
unsurprisingly – and rapidly – reflected growing
rising sharply (the latter expected to climb towards
caution in consumer behaviour, with an immediate
drop in listings and prices from the moment the state of emergency was declared.
with the Australian market operating in seeming
isolation from the rest of the world. Lower interest rates, decreasing unemployment and strong
population growth continued to bolster the housing market; indeed, buyers at the time were able to
secure homes in growth corridors on mortgages
requiring no greater monthly outlay than average R P M R E A L E S TAT E G R O U P
before the impact of COVID-19 hit the market, with
However, from mid-March the change was abrupt.
Before that point, Q1 2020 results were favourable,
4
period. The quarter’s sales results were promising
social distancing measures were implemented in
response to COVID-19 in March. The housing market KEVIN BROWN
February, with sales across Melbourne and Geelong
middle- or inner-city rental expenses.
With under-employment and unemployment levels the 10% mark), buyers were suddenly met with
income uncertainty and enquiry levels in land sales reflected that. With migration such an integral
part of population growth and our local property story, Australia’s closed borders in response to
the COVID-19 pandemic will no doubt have broad economic impacts. Fewer migrants over the
coming months means we are likely to see a major impact on supply and demand in the housing
sector, and consequently, downward pressure on property prices.
While we cannot forecast the final toll of the current
Developers have an opportunity to respond to the
MICHAEL STAEDLER
a broad-reaching slowdown across the property
than ever. While we will undoubtedly face a tough few
m.staedler@rpmrealestate.com.au
circumstances with any certainty, we do anticipate
restrictions, employment prospects or economic
uncertainty, will adjust their behaviour. However, there will be groups for whom these market conditions,
including potentially lower prices, will be favourable. One group is those employed in sectors that will be unaffected, or in fact grow, as a result of the
pandemic. These potential purchasers, including
first home buyers, may have increased access to
the land market aided by more affordable product, developer promotions, Government stimulus and
long-term employment confidence. Another group who may benefit is englobo developers, given the nature of greenfield projects spanning multiple economic lifecycles, and being well-backed by
many years of previous lucrative growth to invest in future opportunities.
months ahead, developers who continue to tailor product to the wants, needs and price-points of
RESEARCH MANAGER
Q1 MARKET OVERVIEW
industry. Purchasers, whether impacted by travel
market, with diversity and agility more important
+61 434 619 280
potential buyers will have a competitive advantage in this market.
The reality is, we’re living through unprecedented times. We simply can’t know all the answers. But overly grim forecasts are premature as we can
The data contained within this report was prepared by RPM’s research team consisting of economists, property experts and GIS analysts.
already see innovation and opportunities burgeoning
Research underpins the core strategic decision-
great time to buy, and with Australia’s response to the
on current economic and housing conditions,
across numerous industries. We believe it’s still a
COVID-19 pandemic more swift and effective than
most other countries, we hope the impact of reduced
immigration is quickly negated as borders reopen and internationals once again turn their minds to starting a new life on our shores. Home ownership is still the
Australian dream, and Victoria will always be a great – and very desirable – place to live.
making capability at RPM, providing in-depth analysis 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 0 2 0
5
ECONOMIC ACTIVITY GROSS DOMESTIC PRODUCT (GDP)
1.85% 2.42% 12 month change to Dec qtr. 2019
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
2.19%
Mar-20
Source: ABS
1.33%
Same month year earlier
VIC POPULATION
STATE FINAL DEMAND (SFD) - VIC
2.01% 4.08%
12 month change to Dec qtr. 2019
5 year average
RETAIL TURNOVER - VIC
6.01% 4.89% Mar-20
Same month year earlier
NATURAL INCREASE
8,593 Sep-19
10,087
Same qtr. year earlier
% change - same qtr. last year
14.8%
% change - 12 months earlier
12.4%
OVERSEAS MIGRATION
23,208 Sep-19
24,339 Same qtr. year earlier
CASH RATE
VARIABLE RATE
% change - 12 months earlier
3.6%
2,030
0.25 % 4.52% Mar-20
0.75% Dec-19
1.50% Mar-19
Source: RBA 6
R P M R E A L E S TAT E G R O U P
Mar-20
4.80% Dec-19
5.37% Mar-19
3.91% Mar-20
4.15% Dec-19
3 YEAR FIXED RATE
2.54% Mar-20
3.10% Dec-19
4.68% 4.05% Mar-19
Mar-19
12 months to Sep-19 4.6%
Sep-19
DISCOUNTED RATE
82,113
% change - same qtr. last year
NET INTERSTATE MIGRATION
BORROWING RATES
35,849
12 months to Sep-19
2,599
Same qtr. year earlier
11,629
12 months to Sep-19
% change - same qtr. last year
21.9%
% change - 12 months earlier
16.8%
NATIONAL TOTAL CHANGE
VIC TOTAL CHANGE
373,733
132,369
1.49%
2.04%
change from Sep-18 to Sep-19 % change - same qtr. last year VIC share
35%
■ Negative change ■ Positive change
TOTAL POPULATION
AUS 25,464,116 VIC 6,629,870
VIC EMPLOYMENT EMPLOYMENT GROWTH (JOBS CREATED) Jobs (‘000s) TOTAL Dec-19 to Mar-20
FULL TIME Dec-19 to Mar-20 Last 12 months PART TIME Dec-19 to Mar-20 Last 12 months
12.84 19.14 -5.79 55.53
0.2% 15.9% 2.1% 30.8% 0.6% 25.2% 0.8% 20.3% 0.5% 87.5% 4.9% 37.9%
$1,707 $1,666 $1,625 May-19
2.5% Source: ABS
5.2% 4.9% 4.6% Mar-20
Source: ABS
Dec-19
Same time last year
CONSUMER SENTIMENT
91.9 Mar-20
98.8 Mar-19
Source: Westpac-Melb institute
BUSINESS SENTIMENT
-23.1 Mar-20
7.9
Source: RBA/NAB
Mar-19
The Westpac-Melbourne Institute Consumer Sentiment
WAGES
Nov-19
UNEMPLOYMENT RATE
Q 1L M E AA D R KI E N TD IOC VA ET ROVR I SE W
Last 12 months
7.06 72.67
% Change
Vic contribution to AUS
Nov-18
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
5.1%
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 0 2 0
7
VIC FINANCE NO. OF FHBS FINANCED
8,624
6,933
Mar-20
Same qtr. year earlier
NO. OF NON-FHBS FINANCED
16,658 17,640 Q 1L E M AA DR KI N ET D I OC VA ET RO VR ISE W
Mar-20
Same qtr. year earlier
FINANCE FOR NEW DWELLINGS
6,212 Mar-20
5,244
Same qtr. year earlier
VALUE OF LOANS - OWNER OCCUPIERS
$12.00B $9.63B Mar-20
Same qtr. year earlier
24% 6% 18% 25%
AVERAGE LOAN SIZE (FHBS)
$437,871 $384,105 Mar-20
Same qtr. year earlier
AVERAGE LOAN SIZE (NON-FHBS)
$493,673 $394,949 Mar-20
Same qtr. year earlier
FINANCE FOR ESTABLISHED DWELLINGS
15,184 Mar-20
15,268
Same qtr. year earlier
VALUE OF LOANS - INVESTORS
$4.44B Mar-20
$3.84B
Same qtr. year earlier
14% SHARE OF FHB LOANS
25% 1% 15%
34.1% 28.2% Mar-20
Same qtr. year earlier
Source: ABS
MELBOURNE PROPERTY MEDIAN HOUSE PRICE
$893,000 Previous qtr.
$794,000
Same qtr. year earlier Source: REIV 8
R P M R E A L E S TAT E G R O U P
MEDIAN LAND PRICE
Mar-20
Mar-20
$641,000
Mar-20
$861,500
MEDIAN UNIT PRICE
3.7% 12.5%
$637,000 Previous qtr.
$586,500
Same qtr. year earlier
AUCTIONS HELD
$311,000
0.6% 9.3%
$307,000 Previous qtr.
$325,500
Same qtr. year earlier
3,107
CLEARANCE
Mar-20 1.3% 4.5%
2,753 Dec-19
3,318
Same month year earlier
73% 74% 56%
VIC BUILDING DETACHED HOUSE APPROVALS 8,705 Mar-20 8,444 Same qtr. year earlier 35,151 Last 12 months
3.1% 8.3%
HOUSE COMMENCEMENTS
11.9% 8.0%
5.4% 7.8%
4,121 Dec-19 5,778 Same qtr. year earlier 22,077 Last 12 months
28.7% 33.8%
4.1%
Mar-20
14,610 6.8%
Same qtr. year earlier
58,609 8.2%
Last 12 months
13,316 Dec-19
15,496 14.1%
Same qtr. year earlier
57,446 19.9%
Last 12 months
TOTAL COMPLETIONS
OTHER COMPLETIONS
2.0%
15,604
TOTAL COMMENCEMENTS
OTHER COMMENCEMENTS
HOUSE COMPLETIONS 9,579 Dec-19 9,774 Same qtr. year earlier 37,328 Last 12 months
6,899 Mar-20 6,166 Same qtr. year earlier 23,458 Last 12 months
Q 1L M E AA D R KI E N TD IOC VA ET ROVR I SE W
9,195 Dec-19 9,718 Same qtr. year earlier 35,369 Last 12 months
TOTAL DWELLING APPROVALS
OTHER DWELLING APPROVALS
9,662 Dec-19 6,535 Same qtr. year earlier 28,053 Last 12 months
47.9% 9.0%
19,241 Dec-19
16,309 18.0%
Same qtr. year earlier
65,291 1.1%
Last 12 months
Source: ABS
MELBOURNE PROPERTY VACANCY RATE - MELB
2.3% 2.2% Mar-20
Mar-19
AVERAGE DAYS ON MARKET - METRO MELB
33 Mar-20
42 Mar-19
MEDIAN METRO HOUSE RENT
$470 Mar-20
$450 Mar-19
4.4%
MEDIAN METRO OTHER DWELLING RENT
$430 Mar-20
$430 Mar-19
0.0 %
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 0 2 0
9
FEATURE STORY:
INDUSTRY LEADER INSIGHTS
market was still solid in Q1, continuing to improve
significantly. This will likely put downward pressure
lower interest rates, decreased unemployment and
greater the impact on the housing sector.
upon last year’s encouraging progress, fuelled by steady population growth.
In the Melbourne housing market, prices have already
started to fall and are likely to continue declining, with new listings for all types of houses and greenfield developments dropping off sharply. So far we are seeing all segments equally affected.
Q1 MARKET OVERVIEW
Banning auctions and inspections created large
headwind, but we are seeing innovative approaches DANIEL GRADWELL
ASSOCIATE DIRECTOR PROPERTY AT ANZ
WITH MAJOR SHIFTS IN CONSUMER BEHAVIOUR IN RESPONSE TO THE COVID-19 MEASURES,
RPM CONTINUES ITS INDUSTRY LEADERS Q&A
WITH DANIEL GRADWELL, ASSOCIATE DIRECTOR, PROPERTY AT ANZ TO DISCUSS THE SHORT AND LONG TERM IMPACTS OF SUCH A SIGNIFICANT
ECONOMIC EVENT ON THE HOUSING MARKET. RPM: How did we see Victoria’s residential property market impacted in Q1?
We saw an immediate impact on the property
market from the day the state of emergency and
lockdown restrictions were announced in response
to COVID-19. Before that, price growth in the housing 10
R P M R E A L E S TAT E G R O U P
in this space, like virtual tours and online auctions,
which may prove successful and stick around after the physical restrictions are removed.
RPM: How will the current climate impact supply and demand in the housing market?
I think supply and demand will likely be one of
the biggest challenges for the housing sector.
Our population growth has always been such an important part of the story, for both the housing
market and the economy. About 60% of Australia’s population growth in the past 10 years has come from overseas migration, and with our borders closed, that falls to zero immediately.
The problem is a lot of housing in Australia has
been targeted to a projected population level, and with 200,000 to 250,000 fewer migrants over the
next 12 months, the demand for housing will shift
on prices, and the longer migration is impinged, the
There may be some winners in that scenario, however, like first home buyers. Over the past 20 years the housing market has been somewhat inflated, and
there’s been a decline in younger people (under 35) entering the housing market. Lower migration and
easing housing prices may be an opportunity for this demographic to enter, but only for those who remain gainfully employed.
RPM: What are other key economic indicators telling us?
From an economic point of view, the labour market is the most important. Employment levels are an
immediate indicator, and while key economic data
often lags, the Australian Bureau of Statistics (ABS) has started releasing new data sets specific to
COVID-19 which helps firm up the bigger picture. We can already see by the start of April the total number of people employed had fallen by around 6%, with a similar drop in overall incomes too.
Rising unemployment will impact the broader
economy as well as property, and we are likely to see workers at the ends of the age spectrum being hit
disproportionately hard. Longer term we may need to look at retraining people in different industries, given the stark impacts on certain sectors to date and the possibility of longer-term shifts across spending
have the right education and training programs in
place, as well as investing in infrastructure and major projects to boost the economy.
RPM: What’s the outlook in the coming months and longer term?
We’re already seeing people’s spending patterns
change significantly. Places like supermarkets are
MONTHLY HOUSING PRICE GROWTH %
patterns. It will be important for the Government to
doing really well, with spend up 15% from a year
particular is suffering, dropping by around 50%.
State of emergency announced
3.00 2.50 2.00 1.50 1.00 0.50 0.00 -0.50 -1.00 -1.50 Apr-19
May-19
Sydney
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
Source: CoreLogic, ANZ Property
Melbourne
Q1 MARKET OVERVIEW
ago, while of course the hospitality industry in
3.50
There was an immediate impact to the housing market when the state of emergency was declared in response to COVID-19.
From a broad economic point of view, that sort of data is really interesting. We may even see preferences
patterns shift completely from what we had before.
In the housing market, it’s hard to see anything other than lower prices in the short to medium term as
demand is hit by rising unemployment and the lack of population growth. The extent of the falls will depend on the number of forced sellers who need to offload their property in a hurry, and when restrictions on migration are lifted.
We strongly expect that population growth will rebound
ANNUAL ROLLING SUM - 000’S
change as industries reopen, and we’ll see spending
500 450 400 350 300 250 200 150 100 50 0
01
02
Change in population
03
04
05
06
Net overseas migration
07
08
09
10
11
12
13
14
15
16
17
18
19
Source: ABS, ANZ Research
Natural increase
Migration is the key driver behind population growth, which in turn drives demand in the housing market.
in time. Australia is an attractive place to live and long
term that won’t change. Our handling of the COVID-19 situation has so far been respectable compared with
many parts of the world, so that in itself may clear the way for migration to improve.
EMPLOYMENT DATA IS KEY TO WATCH. IT’S A GREAT INDICATOR OF PEOPLE’S EVERYDAY LIVES, AND THE IMPLICATIONS ARE FAR-REACHING. DANIEL GRADWELL 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 0 2 0
11
OVERVIEW
OVER THE PAST FEW MONTHS COVID-19 HAS UNDENIABLY WREAKED HAVOC ON GLOBAL MARKETS. WHILE THE DATA IS CHANGING
RAPIDLY, THE IMMEDIATE IMPACT TO BUSINESSES
DEVELOPMENT SITES
AND SUBSEQUENTLY EMPLOYMENT RATES HAS BEEN STARK.
The start of 2020 saw the englobo development
market maintain its strong resurgence continuing
from December quarter 2019, with a wide range of buyers aggressively chasing opportunities,
particularly those with approved precinct plans.
This was demonstrated when, in January, a 12 hectare site in Officer was purchased for $26 million, the
highest rate ever for a medium-scale development
site in this area. The sale was executed on cash terms indicating confidence around both the market and forecast sales for the immediate period. However
by March 2020 transactions rates had stalled, with investors anticipating potential impacts on the Australian economy.Â
In that month alone we saw a dual cash rate reduction to a record low of 0.25%, significant changes to fiscal
12
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
and monetary policy, and dramatically reduced
When we consider the current situation in relation
Fast forward to December 2019, and house prices
Across the board, transaction levels drastically
we garner some insight on how the situation may
median house prices in Sydney and Melbourne rose
business activity across a large number of industries. reduced as purchasers began facing the unknown of COVID-19. Even experienced investors, who
survived previous downturns, began to take leave
from the market to focus on pressing demands on existing projects and investments, particularly those companies impacted by the drop in the Australian Stock Exchange.
WHILE THERE IS LITTLE DOUBT THE PROPERTY INDUSTRY WILL BE IMPACTED BY COVID-19, WE ANTICIPATE THERE WILL BE OPPORTUNITY FOR PROTRACTED PROSPERITY IN THE DEVELOPMENT SITE SPACE, WITH PREVIOUSLY SUCCESSFUL INVESTORS WELL-BACKED TO ACQUIRE LAND DURING THE DOWNTURN WITH A LONG-TERM DEVELOPMENT VIEW.
unfold in relation to the property and development industries. In Australia during the GFC, despite
economic growth slowing and unemployment rates rising, banks had little exposure to the flailing US
property market and our economy was supported
by a large export boom to the emerging China market. Conversely, the COVID-19 pandemic has broaderreaching flow-on effects. Without the option to
were higher than ever. According to Domain figures, to $1.14 million and $901,951 respectively. Coupled with high household debt and an impending rise in
unemployment rates, there is significant risk to the housing market broadly. However, as with the GFC,
stimulus packages and a lowered cash rate have the potential to support the market’s recovery in the medium to long term.
leverage the strength of international markets to
While the impacts of this situation will transcend the
dollar, it may result in a prolonged downturn.
insulated by the sheer nature of land development
reverse the downswing in the economy and Australian
The post-GFC property boom may be another
indicator in predicting the outcomes of the current
climate. At that time, house prices in Australia were relatively low, and following significant cuts to the official cash rate as well as a strong government
stimulus package, confidence within the business
community buoyed, employment rose, and industries such as property benefited.
QD1E V M EA LROK PE M T EONVT E S R IVTI EE SW
in terms of the immediate and medium-term impacts
to the Global Financial Crisis (GFC) in 2008-2009,
property market, the englobo space is somewhat sites. Conditioned by historically long project
lifespans that encompass multiple economic cycles, as well as benefiting from recent lucrative growth, many developers are well positioned to capitalise on future opportunities. Recognising a potential
reduction of competition in the market due to the
uncertainty caused by COVID-19, savvy investors have already increased their focus on securing projects in the short term.
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 0 2 0
13
DEVELOPMENT SITES
OUTLOOK The reality is all industries will be impacted by the
As investors seek to recall these loans, land values
groups take a more conservative approach, as
pressure on overall values – providing favourable
current conditions. We’re already seeing listed
we anticipate impact on a broad economic scale
comparative to World War II in terms of consumer
sentiment, spending, GDP and business continuity. With billions in private lending currently deployed to the development and construction sector, and
may be reduced as distressed buying puts downward
Given employment is so intrinsically linked to
conditions for developers who are well-placed to
stimulus decisions will play an important role in the
buy. This type of market cycle has previously proved lucrative for seasoned land developers who can see the medium-term recovery and longer-term uplift in the englobo land market.
property ownership, Federal and State Government endurance of this sector. Equally, industry-specific
stimulus such as a first home buyer package, coupled with low interest rates, could help pivot the trend to deliver a much needed boost to sales.
making up a huge proportion of private investment
Home ownership is the Australian dream. While
The flow-on effects of COVID-19 on the economy
market will no doubt be apprehensive. If property
balance sheets will likely trigger declines in house
effect on the property industry, signifies that we
in englobo land development, the secondary debt sales, construction and settlements slow, and
valuations reduce significantly against secured
assets, these groups may remain supportive in the short term, but there is potential for this to shift.
14
numerous factors over the coming months.
R P M R E A L E S TAT E G R O U P
dramatic changes to household and business
prices and increase mortgage stress, we anticipate
the property industry will continue to play a major role in the Australian economy. The industry’s recovery,
and stabilisation of property prices, is dependent on
as a whole, coupled with the anticipated lagging
may see impacts from this crisis for a long time yet. We simply don’t know what the ‘new normal’ is yet, but our economy, and the property industry, has rebounded before.
DEVELOPMENT SITES
SAVVY INVESTORS HAVE ALREADY INCREASED THEIR FOCUS ON SECURING PROJECTS IN THE SHORT TERM
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 0 2 0
15
OVERVIEW
MARCH 2020 WILL FOREVER BE DEFINED BY
THE RAPID CHANGES THAT OCCURRED ALMOST IMMEDIATELY AFTER THE IMPLEMENTATION OF
COMMUNITIES
RESTRICTIVE SOCIAL DISTANCING MEASURES
TO MITIGATE THE SPREAD OF COVID-19. BUT THE FIRST QUARTER OF 2020 HAD IN FACT BEEN A
PROMISING ONE FOR THE HOUSING MARKET IN THE MONTHS PRIOR TO THIS SEISMIC SHIFT.
Prior to the impact on vacant lot demand in the last
two weeks of the three month period, the rebound in
sales activity that emerged during the second half of 2019 had continued to strengthen. This was evident as gross lot sales were higher in January compared with the similarly seasonally impacted month prior, followed by gross lot sales in February reaching an
18-month high. This trend was on track to escalate
further in March, based on sales activity during the first half of the month.
16
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
Subsequently, gross sales across Melbourne and
Geelong growth areas increased by 2.1% from the
previous quarter to 3,363 lots in March quarter 2020,
Geelong growth areas, which contracted by almost
half, and in turn slowed sales activity considerably. This is supported by data from the Australian Bureau
result since September quarter 2018.
26,700 employed Victorians worked fewer hours in
through March. This was also the highest quarterly
Titled lots continued to account for a significant proportion of gross sales, estimated at 37%
throughout the March quarter 2020. This reduced the requirement for new supply to drive sales activity, as evidenced by releases for the March quarter being somewhat lower at 2,585 lots while overall sales
remained almost identical to the previous quarter. From the second half of March, purchaser sentiment weakened in response to the surge in job losses and incomes impacted by COVID-19. This manifested in
falling new enquiry levels across the Melbourne and
of Statistics (ABS) which showed approximately
March compared to February due to lack of work
or stand downs. Furthermore, there was a spike in
workers taking annual and long service leave, which cannot be attributed to holidays given the ban on international and domestic leisure travel.
Another indication of demand deteriorating was the
$311,000
MELBOURNE’S MEDIAN LOT PRICE RECORDED A MODERATE RISE OVER MARCH QUARTER 2020 TO $311,000.
400sqm
level of unsold stock on the market at the end of
PER SQUARE METRE LOT PRICE INCREASED BY
This was a reverse of the trend seen in the previous
STATIC AT 400SQM.
March, exceeding the February number by over 400.
COMMUNITIES
despite the abrupt shift in new house demand midway
1.3%. THE MEDIAN LOT SIZE REMAINED
four months where lot absorption outpaced new lot supply and excess lots on the market reduced.
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 0 2 0
17
OVERVIEW
MELBOURNE GROWTH CORRIDORS
8,000
250
% OF TOTAL GROSS LOT SALES
5,000
150
4,000 100
3,000 2,000
50
1,000 0
Mar-17
Active estates
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
Gross lot sales
$301 $325
430 425
$300,000
420
$250,000
415 410
$200,000
405 $150,000
400 395
$100,000
390
$50,000 $0
$325>
$275 $300
$350,000
MEDIAN LOT PRICE ($)
GROSS LOT SALES
6,000
385 Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
380
MEDIAN LOT SIZE (SQM)
COMMUNITIES
NUMBER OF ESTATES
7,000 200
$251 $275
<$250
0% March quarter 2020
Median lot size
18
Median lot price
R P M R E A L E S TAT E G R O U P
10%
20% March quarter 2019
30%
40%
50%
March quarter 2018
Source: RPM
% CONTRIBUTION TO TOTAL GROSS LOT SALES MARCH QUARTER 2020
NORTHERN
SOUTH EAST
GREATER GEELONG
$308,000
$299,000
$331,000
$278,900
-$8,450
-$11,000
-$23,500
$2,950
% change from March quarter 2019
-2.7%
-3.5%
-6.6%
1.1%
March quarter 2020 median lot size
394.0
400.0
392.0
448.0
-6.0
5.0
-8.0
0.0
% change from March quarter 2019
-1.5%
1.3%
-2.0%
0.0%
March quarter 2020 gross lot sales
1,323
761
806
473
523
266
415
82
% change from March quarter 2019
65.4%
53.7%
106.1%
21.0%
March quarter 2020 sales contribution
39.3%
22.6%
24.0%
14.1%
March quarter 2019 sales contribution
38.5%
23.8%
18.8%
18.8%
March quarter 2020 active estates
91
54
45
37
Change from March quarter 2019
12
9
5
6
March quarter 2020 lot releases
1,028
558
635
364
Change from March quarter 2019
104
183
113
15
11.3%
48.8%
21.6%
4.3%
March quarter 2020 no. of trading days
189
180
145
166
Change from March quarter 2019
-25
-27
-137
-61
-12%
-13%
-49%
-27%
March quarter 2020 median lot price Change from March quarter 2019 Casey
20%
Hume
11%
Cardinia Whittlesea
Sunbury & Macedon MARCH QUARTER 2019
Mitchell
Wyndham Melton
Moorabool
Greater Geelong
4%
6% 3% 3%
16%
22% 1%
14%
Casey
16%
Hume
12%
Cardinia Whittlesea
Sunbury & Macedon Mitchell
Wyndham Melton
Moorabool
Greater Geelong
4%
8% 2% 3%
17% 21% 2%
16%
Change from March quarter 2019
Change from March quarter 2019
% change from March quarter 2019
% change from March quarter 2019
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 0 2 0
COMMUNITIES
WESTERN
19
WESTERN GROWTH CORRIDOR THE PROPORTION OF TOTAL LOT SALES FOR THE
WESTERN GROWTH CORRIDOR IMPROVED TO 39% IN
MARCH QUARTER 2020, ENDING THE DECLINING TREND UNFOLDING SINCE LATE 2018.
While this share is still relatively low compared to its
high of 49%, it was a 9% uplift from the previous quarter,
MOORABOOL
COMMUNITIES
with 1,323 gross lot sales in March quarter 2020. This
growth occurred exclusively in Melton, with sales activity continuing to contract in Wyndham and Moorabool.
MELTON
While the increase in new lot supply was lower by 5% with 1,028 releases, the volume of unsold stock across the Western growth corridor still increased further by the end of March to approximately 2,740 lots. This was
attributed to cancellations, which picked up notably
in the second half of March after purchaser sentiment deteriorated substantially in response to the impacts
WYNDHAM
on job and wage security following the introduction of COVID-19 social distancing measures.
A high level of overhang stock continues to restrain price growth. While the median lot prices of Wyndham and PORT PHILLIP BAY
Melton both recorded quarterly growth of 3%, much of this increase was derived from larger median lot sizes.
As a result, per square metre lot prices improved marginally in Wyndham but contracted in Melton. 20
R P M R E A L E S TAT E G R O U P
PETER GRANT
WYNDHAM
DIRECTOR, COMMUNITIES
peterg@rpmrealestate.com.au +61 411 494 499
Gross sales in Wyndham remained steady at 546
lots throughout March quarter 2020, edging down by
less than 1% from the previous quarter. However, this
reduction is coming off already low sales activity levels for Wyndham, leading to new supply experiencing a larger decline of 9.3% to 350 lot releases.
Some upward pressure was applied to lot prices as
45
demand outpaced new releases, leading to a quarterly
sold during March quarter 2020 to 400sqm.
The improvement in gross lot sales has mostly been
30
20
1,000
15 10
500
5 0
underwhelming across Wyndham, compared to
1,500
25
GROSS LOT SALES
corresponding 2% increase in the median size of lots
2,000
35
COMMUNITIES
part of this price growth has been derived from a
NUMBER OF ESTATES
3.2% rise in the median lot price to $320,000. Although
2,500
40
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
other growth areas, during the short-lived recovery cycle for vacant lot demand from the second half
Active estates
New estates
Gross lot sales
by increasingly scarce availability of lots for sale in
Landing, with their few active estates almost complete. New house demand within Point Cook/Williams
Landing originated from a relatively wider expanse of suburbs than sub-markets traditionally derive from, including suburbs outside the Wyndham corridor.
Consequently, it is more likely demand from these
buyers has shifted to other growth areas rather than to other estates within Wyndham.
MEDIAN LOT PRICE ($)
the sought-after sub-market of Point Cook/Williams
$350,000
415
$300,000
410
$250,000
405
$200,000
400
$150,000
395
$100,000
390
$50,000
385
$0
Median lot size
Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
of 2019 to early 2020. This is likely to be influenced
380
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 0 2 0
21
WESTERN GROWTH CORRIDOR
MELTON Melton recorded the highest number of gross sales with 730 lots in March quarter 2020. This equated
to significant growth in sales activity up 20% from
the previous quarter, and more notably, represented the only quarterly increase in sales activity in a
ample new supply to meet purchaser demand, as
an additional 596 new lots were released onto the
market during the three month period. Furthermore, new supply is encompassing a diversified product
1,200 40
sub-400sqm figure for a quarterly period. This
highlights small lots and medium density products
continuing to feature prominently in sales volumes. Nevertheless, the median lot size is still 5% above the previous quarter, which underpinned a 3% escalation
600 400
10
200 Mar-17
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
Gross lot sales
410
$350,000
MEDIAN LOT PRICE ($)
growth corridor and was also the fourth consecutive
800
20
Active estates
median lot size of 385sqm was the smallest for a
1,000
30
0
make them attainable to purchasers. However, its
1,400
50
offering to capture more segments of demand.
Relatively affordable conventional lot prices in Melton
1,600
400
$300,000
390
$250,000
380
$200,000
370
$150,000
360 350
$100,000
340
$50,000 $0
GROSS LOT SALES
a further two in March quarter 2020, which ensured
NUMBER OF ESTATES
COMMUNITIES
The high number of active estates in Melton rose by
60
330 Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
Melbourne growth area.
320
in Melton’s median lot price to $298,000 in March quarter 2020. 22
R P M R E A L E S TAT E G R O U P
Median lot size
Median lot price
Source: RPM
ROD ANDERSON
DIRECTOR, COMMUNITIES rod@rpmrealestate.com.au +61 417 595 859
MOORABOOL 8
in sales activity, with gross sales declining by 7.8% to 47 lots.
It seems new lot releases missed the mark in
2020 being significantly larger than the 448sqm
140
5
120
4
100 80
3
60
2
40
1 0
capturing purchaser preferences. This is highlighted by the 533sqm median lot size in March quarter
160
6
Active estates
GROSS LOT SALES
2020. However, this did not initiate an escalation
180
COMMUNITIES
the previous quarter to 82 lots in March quarter
200
7
NUMBER OF ESTATES
New supply in Moorabool almost doubled from
20 Mar-17
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
Gross lot sales
quarter accounted for under a third of sales during the period.Â
The resultant 6.7% reduction in the median lot size led to a commensurate quarterly decline of 6.3% in the median lot price to $225,250. Notably, this was the largest fall in median lot price across all
MEDIAN LOT PRICE ($)
last year. Unsurprisingly, lots released in the March
$300,000
600
$250,000
500
$200,000
400
$150,000
300
$100,000
200
$50,000
100
$0
Melbourne growth areas.
Median lot size
Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
median size of those sold during the same period
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 0 2 0
23
NORTHERN GROWTH CORRIDOR THE NORTHERN GROWTH CORRIDOR RECORDED THE GREATEST QUARTERLY DECREASE IN
SALES ACTIVITY IN MARCH QUARTER 2020,
REDUCING GROSS SALES BY 8% TO 761 LOTS.
CONSEQUENTLY, THE CORRIDOR’S PROPORTION OF TOTAL GROSS LOT SALES DECLINED TO 23%.
COMMUNITIES
in Whittlesea remains below that for Hume, in
response to weak purchaser demand. This has led
to the greatest per square metre lot price contraction of 7% in Whittlesea.
NEVERTHELESS, LOT SALES STILL OUTPACED NEW
Sunbury and Diggers Rest have been removed from
MODERATELY BY 3% TO 558 LOTS.
areas within Macedon to form the new Sunbury &
SUPPLY, AS TOTAL RELEASES INCREASED ONLY
Titled lots continued to account for a greater share
of gross sales in Hume and Mitchell compared to all other growth areas. This reduced the need for new
supply to match lot absorption and has also impacted on median lot prices, with the annual median lot price correction of 11.4% in Hume and 8.9% in Mitchell surpassing other growth areas.
24
Despite containing more active estates, new supply
R P M R E A L E S TAT E G R O U P
the Hume region and joined newly added growth
Macedon region. These peri-urban areas are distinct from the Hume growth areas, containing different price points and demand drivers. The Sunbury &
Macedon growth area was formed to better examine and understand movements within its new house
market. This will be increasingly important given the recent approval of the Precinct Structure Plans of Sunbury South and Lancefield Road as numerous estates come onto the Sunbury market.
LUKE KELLY
DIRECTOR, COMMUNITIES luke@rpmrealestate.com.au +61 400 688 520
HUME Hume’s median lot price witnessed the largest annual contraction of 11.4%, declining to $299,000 in March
quarter 2020. Significantly, this was the first quarterly
preferences shifting to smaller lots as the median lot
size remained static at 400sqm, resulting in the same rate of decline for per square metre lot prices.
The fall in the median lot price was primarily attributed
generally priced at a slight discount to new release
700
10
600
8
500
6
400 300
4
200
2 0
to Hume’s continued relative high incidence of titled lots amongst its gross sales, given titled lots are
800
Active estates
COMMUNITIES
Moreover, this fall was not in response to purchaser
900
12
NUMBER OF ESTATES
price for Hume dropped below the $300,000 mark.
14
GROSS LOT SALES
period in almost three years that the median lot
100 Mar-17
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
Gross lot sales
40% of total gross sales in March quarter 2020.
As a result, sales activity is less reliant on the timely
release of new lots. Subsequently, new supply remains markedly under lot absorption despite increasing by a sizeable 33% from the previous quarter to 222 lot
releases. Overall, Hume recorded 378 gross lot sales
MEDIAN LOT PRICE ($)
highest number of titled lot sales, which accounted for
$400,000
440
$350,000
430
$300,000
410
$200,000 400
$150,000
390
$100,000
380
$50,000 $0
in March quarter 2020, which was marginally below December quarter 2019.
420
$250,000
Median lot size
Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
stock. This was evidenced with Hume containing the
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 0 2 0
25
NORTHERN GROWTH CORRIDOR
MITCHELL
lots in March quarter 2020. The drop in purchaser
demand led to corresponding declines of 11.7% for
new releases, totalling just 68 lots, and 3.6% for the median lot price, reducing it to $265,000.
10 8
150 6 100 4
0
on lot prices, as the price of these lots are generally
Active estates
discounted compared with similar sized newly released lots.
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT PRICE ($)
0
Gross lot sales
600
$300,000
500
$250,000
400
$200,000 300 $150,000 200
$100,000
100
$50,000
Median lot size
R P M R E A L E S TAT E G R O U P
Mar-17
$350,000
$0
26
50
2
Almost half of gross sales in March quarter 2020 were titled lots, which placed further downward pressure
200
GROSS LOT SALES
COMMUNITIES
sales activity of 18.3%, with gross sales falling to 89
250
Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
Mitchell recorded the largest quarterly decrease in
NUMBER OF ESTATES
12
0
Source: RPM
PETER GRANT
DIRECTOR, COMMUNITIES
peterg@rpmrealestate.com.au +61 411 494 499
WHITTLESEA
weak recovery in sales activity during the second
half of 2020. In response, new supply continues to diminish, slipping by 5.9% to 127 lot releases for the quarter.Â
While the 6% quarterly growth in the median lot
price to $317,000 in March quarter 2020 belies the
800
25
700
20
600 500
15
400 300
10
200
5 0
Active estates
GROSS LOT SALES
over the March quarter 2020. This follows a relatively
900
COMMUNITIES
largest quarterly falls, declining by 17.6% to 187 lots
NUMBER OF ESTATES
30
Gross sales in Whittlesea experienced one of the
100 Mar-17
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
Gross lot sales
weakness in purchaser demand, it was underpinned
declined by 7%, resulting in the greatest reduction amongst all growth areas, and reflective of the current subdued demand levels.
MEDIAN LOT PRICE ($)
14%. Subsequently, per square metre lot prices
$350,000
410 400
$300,000
390
$250,000
380
$200,000
370
$150,000
360 350
$100,000
340
$50,000 $0
Median lot size
330 Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
by a higher rate of growth in the median lot size of
320
Source: RPM Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 0 2 0
27
NORTHERN GROWTH CORRIDOR
SUNBURY & MACEDON 7
Macedon region.
New supply contracted by 14% in March quarter 2020 from the previous quarter down to 141 lot releases. It
the median lot size of 392sqm in Sunbury & Macedon
100
MEDIAN LOT PRICE ($)
0.7% contraction in the median lot price to $287,000.
20 Mar-17
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
Gross lot sales
700
$350,000
600
$300,000
500
$250,000
400
$200,000 300
$150,000
200
$100,000
100
$50,000
Median lot size
R P M R E A L E S TAT E G R O U P
40
$400,000
$0
28
60
1
Active estates
corridor, with the 2.5% reduction in size leading to a
80
2
0
was the smallest amongst the Northern growth
120
3
remained higher than the 107 gross lot sales, which experienced a corresponding fall of 3.6%. Notably,
140
4
GROSS LOT SALES
areas within Macedon to form the new Sunbury &
160
5
Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
COMMUNITIES
the Hume region and joined newly added growth
180
6
NUMBER OF ESTATES
Sunbury and Diggers Rest have been removed from
200
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 0 2 0
COMMUNITIES
DESPITE THE DROP OFF FROM MID-MARCH, GROSS SALES ACROSS MELBOURNE AND GEELONG EXPERIENCED THE HIGHEST QUARTERLY RESULT SINCE 2018
29
SOUTH EAST GROWTH CORRIDOR
THE SOUTH EAST GROWTH CORRIDOR’S SHARE OF OVERALL GROSS LOT SALES IN MARCH QUARTER 2019 DECLINED TO 24%, WITH SALES FALLING BY COMMUNITIES
7% FROM THE PREVIOUS QUARTER TO 806 LOTS. Casey and Cardinia’s median lot prices ($327,000
and $345,000 respectively) are still the most expensive among all growth corridors, and in March quarter 2020 experienced the highest annual growth in gross lot sales of 113% and 81% respectively.
This growth in sales activity has been underpinned by relative affordability in March quarter 2020 being
much improved from the corresponding quarter in 2019 in Casey, highlighted by the 6% contraction in per square metre lot prices, and aided further
by increasing new lot supply. Conversely in Cardinia, relative affordability has deteriorated and new lot
supply has fallen throughout March quarter 2020, with
lot sales derived mostly from the jump in active estates.
PORT PHILLIP BAY
CARDINIA
CASEY
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
CASEY 35
by one to 32. Still, this relatively high number of active estates supported a modest improvement in new releases of 6.5% to 561 lots.
600 500
15
400 300
10
200
5
Furthermore, with titled lots constituting a
new lot supply was increasingly important in
700
20
0
diminishing share of lot sales in the March quarter,
800
25
Active estates
GROSS LOT SALES
led to the overall number of active estates reducing
900
COMMUNITIES
however, the completion or inactivity of other estates
1,000
30
NUMBER OF ESTATES
Casey added two estates in March quarter 2020,
100 Mar-17
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
Gross lot sales
stimulating sales activity. Gross sales ended at 663
Continuing improved relative affordability for a house and land package has also been key to driving sales activity. Although only declining marginally by less
than 1%, the subsequent median lot price of $327,000 was a near three year low for Casey. With the median
450 440
$300,000
430
$250,000
420
$200,000
410 400
$150,000
390
$100,000
380
$50,000 $0
lot size also remaining static at 392sqm, it is resulting in more attractive price points for lot sizes.
460
$350,000
MEDIAN LOT PRICE ($)
was still the second highest amongst all growth areas.
$400,000
Median lot size
370 Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
lots, and while this equated to a 6.5% quarterly fall, it
360
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 0 2 0
31
COMMUNITIES 32
R P M R E A L E S TAT E G R O U P
LUKE KELLY
SOUTH EAST GROWTH CORRIDOR
DIRECTOR, COMMUNITIES luke@rpmrealestate.com.au +61 400 688 520
additional active estate lifting the total to a three year high of 13.
The reduction in sales activity to 143 gross lot
300
12
maintaining Cardinia’s status at the most expensive
at $345,000, upward pressure resulted in solid per square metre lot price growth following a sizeable 6.3% decrease in the median size to 400sqm.
50
2 Mar-17
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
Gross lot sales
$400,000
600
$350,000
MEDIAN LOT PRICE ($)
While the median lot price in Cardinia was steady
100
4
Active estates
Melbourne and Geelong.
150
6
0
vacant lot market across the greenfield markets of
200
8
sales was significantly less at 9%, with the widening divergence between lot releases and lot absorption
250
10
500
$300,000 400
$250,000 $200,000
300
$150,000
200
$100,000 100
$50,000 $0
Median lot size
GROSS LOT SALES
reducing to just 74 lots. This occurred despite an
350
14
COMMUNITIES
quarterly decline of 45% in the March quarter,
16
Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
New releases in Cardinia recorded the largest
NUMBER OF ESTATES
CARDINIA
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 0 2 0
33
GREATER GEELONG GROWTH CORRIDOR
THE RECOVERY IN THE NEW HOUSE MARKET THAT STARTED DURING THE SECOND HALF OF 2019 IN
MELBOURNE EMERGED MORE NOTABLY ACROSS COMMUNITIES
GREATER GEELONG’S GROWTH AREAS IN MARCH QUARTER 2020. SUBSEQUENTLY, GROSS SALES
ESCALATED BY 22% TO AN 18 MONTH HIGH OF 473 LOTS DURING THIS PERIOD, WHICH ALSO LIFTED SHARE OF TOTAL GROSS LOT SALES TO 14%.
New supply outpaced sales activity in the previous
quarter, augmenting the build-up of unsold lots on the market through 2019. As a result, these lots absorbed some of the vacant lot demand in March quarter
2020, reducing the need to increase new supply to
align with lot sales. Consequently, releases declined by 8% over the quarter to 364 lots. GREATER GEELONG
Overhang stock also offset any upward pressure PORT PHILLIP BAY
on prices from improving demand, with Greater
Geelong’s median lot price edging down marginally
to $278,900 in March quarter 2020 and its median lot size unchanged at 448sqm.
34
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
releases and 224 gross lot sales. This was assisted by active estates rising by two to a total of 11.Â
As a result of supply closely matching demand, the
10
500
8
400
6
300
4
200
2
100
0
median lot price for Armstrong Creek remained the median lot size also static at 400sqm.
Active estates
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
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
$300,000
MEDIAN LOT PRICE ($)
unchanged at $271,900 in March quarter 2020, with
Mar-17
GROSS LOT SALES
2020 from the previous quarter, lifting to 201 lot
600
COMMUNITIES
activity escalated by around 25% in March quarter
12
380 Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
In Armstrong Creek, both new supply and sales
NUMBER OF ESTATES
ARMSTRONG CREEK
370
Source: RPM Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q U A R T E R 2 0 2 0
35
14
450
200
MEDIAN LOT PRICE ($)
150
4
100
2
50 Mar-17
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
Gross lot sales
$400,000
540
$350,000
520
$300,000
500
$250,000
480
$200,000 460
$150,000
440
$100,000
420
$50,000 $0
Median lot size
Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
400
MEDIAN LOT SIZE (SQM)
NUMBER OF ESTATES
COMMUNITIES
250
6
Active estates
R P M R E A L E S TAT E G R O U P
300
8
0
36
350
10
GROSS LOT SALES
400
12
ROD ANDERSON
DIRECTOR, COMMUNITIES rod@rpmrealestate.com.au +61 417 595 859
140
6
120
5
100
4
80
3
60
2
40
1
20
0
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
$400,000
800
$350,000
700
$300,000
600
$250,000
500
$200,000
400
$150,000
300
$100,000
200
$50,000
100
$0
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
COMMUNITIES
7
0
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 0 2 0
37
GREATER GEELONG GROWTH CORRIDOR
LARA
into 101 gross lot sales in Lara over March quarter
2020, which was also its highest total in two and a half years. The majority of lots sold were existing stock, with new supply declining by 69% to just 44 lots.
resulted in Lara maintaining its status as the most
affordable growth area in Geelong. This was below
120
5
100
4
80 3 60 2
40
1 0
A 1.9% correction in the median lot price to $257,900
140
Active estates
GROSS LOT SALES
COMMUNITIES
The 27.8% quarterly jump in sales activity translated
NUMBER OF ESTATES
6
20
Mar-17
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
0
Gross lot sales
MEDIAN LOT PRICE ($)
As a result, per square metre lot prices increased.
$300,000
600
$250,000
500
$200,000
400
$150,000
300
$100,000
200
$50,000
100
$0
Median lot size
38
R P M R E A L E S TAT E G R O U P
Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
a 7.4% reduction in the median lot size to 396sqm.
0
Source: RPM
LUKE KELLY
DIRECTOR, COMMUNITIES luke@rpmrealestate.com.au +61 400 688 520
TORQUAY
lots, with the median lot price contracting by 5% to
$415,000 and the median lot size shrinking by 7.8% to 448sqm.
100
4
80 3 60 2
40
1 0
Active estates
20
Mar-17
Jun-17
New estates
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
700
$450,000
MEDIAN LOT PRICE ($)
0
Gross lot sales
$500,000
600
$400,000
500
$350,000 $300,000
400
$250,000 300
$200,000 $150,000
200
$100,000
100
$50,000 $0
Median lot size
GROSS LOT SALES
Vacant lot demand shifted to smaller, more affordable
120
5
Mar-17
Jun-17
Median lot price
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
MEDIAN LOT SIZE (SQM)
of 16 lots, which fell by 58% from the previous quarter.
140
COMMUNITIES
March quarter 2020, outpacing the total new releases
NUMBER OF ESTATES
6
Sales activity improved to 25 lots in Torquay over
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 0 2 0
39
OUTLOOK While the projected depth of the contraction in the
more advantageous as the long settlement means
amenities, location and fit-out. There is opportunity
the contraction will be, with the Reserve Bank of
weaker rental market given the temporary
packages and remaining open to negotiation.
economy will not be unprecedented, the speed of Australia forecasting a 10% fall in national gross
domestic product (GDP) over the first half of 2020.
While predicting the full impact of the COVID-19
The current situation is creating a buyer’s market.
pandemic on the residential market is impossible
the spread of COVID-19 will be at their most restrictive,
significantly shorter settlements, potential buyers
situation on a global scale, we believe a number
be in a favourable position to enter the market in the
lot sales in March and April were 1,045 and 638
on the market for the first time in two years, as well as
point in the previous cycle (first six months of 2019),
buyers who retain employment security during this
to average this in upcoming months, it would slash
foot on the property ladder.
hinge on multiple variables including the impact of
job losses and income reductions, reintroduction of
may be put off in the short term by the uncertainty in
IT IS MORE IMPORTANT THAN EVER THAT DEVELOPERS RESPOND TO CHANGING CUSTOMER NEEDS BY PROVIDING DIVERSE AND INNOVATIVE PRODUCTS TO CATER TO HEIGHTENED PRICE SENSITIVITY, WITHOUT COMPROMISING ON QUALITY.
purchasing a new dwelling in growth areas is currently
lower price points, buyers are not willing to give up on
and subsequent impacts to the economy will be most severe. COMMUNITIES
cessation of migration and tourism.
for developers to meet the market, with affordable
Much of this decline is expected during June quarter 2020, where social distancing measures to mitigate
There was a 180-degree direction change in the new housing market during March, with strengthening
purchaser demand collapsing virtually overnight. For
the residential market, further impacts on employment and income from April will be most pertinent to the
level of purchaser demand and how that translates to sales activity going forward. We anticipate that while the $130 billion JobKeeper initiative is projected to
save six million jobs and alleviate income reductions,
this stimulus package will drive very little sales activity in the residential market.
Owner occupiers are expected to be the dominant
vacant lot buyers for the remainder of 2020, following
a strong 77% representation in the March quarter, with April indicating similar proportions. While investors
the rental market and expected rent declines in 2020,
40
they will avoid having to compete for tenants in a
R P M R E A L E S TAT E G R O U P
With the increase of titled stock available providing
given the lack of precedent for this economic
who were previously priced out of the market may
of factors will shape the outcome of 2020. Gross
short to medium term. And with more smaller stock
respectively. The result for April aligns with the lowest
the continuation of rebates and incentives, first home
and if Melbourne and Geelong growth areas were
period have an opportunity to secure an affordable
the annualised sales rate by a third. However, results
While we are seeing demand shift to smaller lots and
the JobSeeker and JobKeeper initiatives, breadth of immigration and tourism, and ultimately consumer
sentiment and resulting behaviour. We anticipate the June quarter 2020 will provide key indicators for the property market moving forward.
The new housing market will no doubt be impacted in the coming months, but with gradually rising enquiry levels occurring in April, we are optimistic. With
historically low borrowing costs setting the stage for the next two to three years, and Australia’s relatively efficient containment of COVID-19, our country’s
appeal as a place to buy and live in remains strong.
Wallan $230,000 Beveridge $239,000 Kalkallo $280,000 Sunbury $265,000 Mickleham $272,000
Donnybrook $298,000
Craigieburn $370,000 Diggers Rest $297,000
Wollert $339,450 Doreen $307,500
Greenvale $410,000
Bacchus Marsh $215,000 Kurunjang $250,000
Bonnie Brook $347,000
Fraser Rise $337,000
Rockbank $317,000 Thornhill Park $309,000 Weir Views $259,000
Strathulloh $269,000
Mount Cottrell $336,900
Taylors Lakes $438,000
Deanside $346,000
WHAT DOES A 400SQM LOT COST? March quarter 2020
Tarneit $322,950
COMMUNITIES
Mt Atkinson $333,000 Truganina $367,000
Manor Lakes $288,000 Mambourin $295,000
Wyndham Vale $294,000 Werribee $280,000
Berwick $428,000 Officer $349,000
Lara $252,900
Officer South $342,000 Cranbourne $330,000
Cranbourne East $329,500
Junction Village $368,000 Geelong $340,000
Armstrong Creek $277,000
Torquay $380,000
Pakenham $310,000
Bellarine $252,000
Cranbourne South $369,000
Clyde North $315,000 Clyde $344,500
41
COMMUNITIES BUYER SURVEY DATA
The share of owner occupiers purchasing in the
their previous rental expense. RPM’s survey data
an elevation in household income. In the March
2020 at 77%, in line with the same period in 2019, but
buyers in the land market compared with this quarter
household income above $100,000, up from 29% a
COMMUNITIES
land market remained elevated in the March quarter
above the long-term level of around 65%. This figure highlights the proliferation of first and subsequent
underlines this, showing an increase of 11% in renter last year.
home buyers in the past 12-18 months, given the
Trends showed an uplift in older demographics
Melbourne land market.
the increasing presence of subsequent buyers,
absence of overseas and local investors in the
First home buyer prevalence has fallen marginally in
the greenfield space since last year, yet interestingly, the share of subsequent home buyers increased
entering the greenfield market, so we see not only
42
R P M R E A L E S TAT E G R O U P
two quarters.
isolation to the rest of the globe.
45%
buyers in the March quarter 2020 were historically
corridor without having their new mortgage exceed
‘professional’, increasing from 23% to 45% over the
across the board, it’s unsurprising the data reveals
upgrade into the growth corridor. Favourable to
middle and inner suburbs, to purchase in a growth
the primary income earner as being employed as a
Until mid-March the market was largely unaffected by
increase. With an older population of purchasers
confidence to sell into the established market, and
first home buyers, particularly those renting in the
year earlier. Further still, these households reported
but also the age of first home buyers continues to
somewhat. This highlights that those buyers regained
low borrowing costs which in many cases allowed
quarter 2020, 51% of purchasers reported a
the ramifications of COVID-19, operating in relative
46%
45% OF BUYERS WERE PREVIOUSLY RENTING,
HOUSEHOLDS OF THREE OR MORE OCCUPIERS
QUARTER 2019.
SIZE OF BUILDS.
A SIGNIFICANT LIFT FROM 34% IN MARCH
INCREASED TO 46%, IMPACTING TYPE AND
However, the pronounced change came quickly. It
occurred alongside increasing shutdown measures
market with unknown demand levels.
widespread stand-downs and redundancies.
Nevertheless, we do not believe activity in the
In general, we anticipate a slowdown in overall
While there are many industries that have been
buyer activity for at least the next two quarters. The impact on buyers is likely to be non-discriminatory. For instance, we expect first home buyers and
investors to be more conscious of taking on debt, while upgraders and downsizers will be cautious
51%
OVER HALF OF ALL PURCHASERS REPORTED A HOUSEHOLD INCOME ABOVE $100,000.
property market will come to a complete standstill. impacted, there will be prospective buyers who are
employed in largely unaffected or growing sectors,
including healthcare, government departments and
essential services. These potential purchasers will be gainfully employed and have access to an abundant
11%
REALESTATE.COM DROPPED FROM 22%
TO 11% AS THE PRIMARY ADVERTISEMENT SOURCE FOR BUYERS.
land market – with lots both titled and untitled –
and developers likely to be open to negotiation.
In addition, first home buyers will be boosted by
COMMUNITIES
and subsequent impacts to the workforce, including
about selling their existing home in a depressed
considerable existing savings through stamp duty removal, grants and the newly established
First Home Loan Deposit Scheme. There is also
potential for further first home buyer assistance, as witnessed in previous downturns, to assist in
stimulating the property industry, and by extension, the wider economy.
THE DROP OFF IN BUYER ACTIVITY CAUSED BY COVID-19 WILL NOT BE LIMITED TO ANY PARTICULAR BUYER TYPE. 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 0 2 0
43
COMMUNITIES BUYER SURVEY DATA
MARCH QUARTER 2020
COMMUNITIES
MARCH QUARTER 2019
OWNER OCCUPIER VS. INVESTOR
Owner Occupier
3rd Home
6%
2nd Home 1st Home
Other
With parents
44
R P M R E A L E S TAT E G R O U P
Investor
5%
Group
LIVING CIRCUMSTANCE
24%
Other
4th Home
OWNER OCCUPIER TYPE
76%
Renting
Owner occupier
0% 20%
69%
2% 2%
Owner Occupier
23%
Investor
Other
2%
3rd Home
7%
4th Home
2nd Home
1st Home
Other
Group
27%
With parents
34%
Owner occupier
34%
77%
Renting
3%
24%
64%
1% 1%
22% 45% 31%
MARCH QUARTER 2019
60>
18-24
11%
18-24
25-34
Three Two
One
52%
2%
12%
One
24%
<$40k
Four
21%
45%
$80-$100k $40-$60k
Five or more
Three
13%
$60-$80k
25-34
21%
$120k>
$101-$120k
35-49
44% 11%
6%
21%
19%
37%
$120k>
29%
$80-$100k
18%
16%
35%
$60-$80k
1%
8% 32%
Two
$101-$120k
12%
4%
$40-$60k <$40k
COMMUNITIES
35-49
Four
HOUSEHOLD INCOME
60>
50-59
Five or more
HOUSEHOLD NUMBER OF PERSONS
3%
11% 22%
50-59 COMBINED AGE
MARCH QUARTER 2020
17%
22% 22% 8%
1%
Source: RPM 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 0 2 0
45
COMMUNITIES BUYER SURVEY DATA
MARCH QUARTER 2020
MARCH QUARTER 2019 Other - Student, Part time Not employed Technicians & Trades workers
COMMUNITIES
Sales Professionals Managers & Administrators
PRIMARY INCOME EARNER
Machinery operators & drivers Labourer & related workers Community & Personal service Clerical & Administrative
Other Builder Referral Family or Friend Signage
ADVERTISEMENT SOURCE
Google Realestate.com Project Website
4% 1%
Other - Student, Part time Not employed
12%
Technicians & Trades workers
23%
Professionals
6% 9%
Sales Managers & Administrators
9%
Machinery operators & drivers
7%
Community & Personal service
16% 13 % 4%
16%
Labourer & related workers Clerical & Administrative
Other Builder Referral
21%
Family or Friend
10% 22%
26%
1%
Signage Realestate.com Project Website
3%
0%
16% 7%
45% 8% 2%
2% 7%
11%
9%
15%
24%
28% 9% 11% 3%
Source: RPM
46
R P M R E A L E S TAT E G R O U P
COMMUNITIES
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 0 2 0
47
OVERVIEW
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
WITH THE PROPERTY MARKET PEAKING IN EARLY 2018 BEFORE EXPERIENCING A SUSTAINED
APARTMENTS & TOWNHOUSES
DOWNTURN OVER THE FOLLOWING 12 MONTHS, SEVERAL INTERRELATED MACROECONOMIC AND POLITICAL MEASURES PROPELLED A
TURNAROUND THROUGH THE BACK HALF OF 2019. This set the market up for a potentially robust 2020
with an anticipated focus on how to effectively tackle affordability concerns in a market that was likely to grow by 10% through the year.
While the first two months of 2020 followed this
trend, the significant drop off in market activity and severe weakening in consumer sentiment over the
final two weeks of March was a direct consequence of the lockdown and social distancing regulations
to mitigate the spread of COVID-19. Nevertheless, a
modest increase in dwelling prices over the month of
March occurred with the early signs of the true fallout not showing a material effect until April, with a fall of 0.3% (CoreLogic).
48
R P M R E A L E S TAT E G R O U P
Enclave at Riverhills, Wollert Developer: Dahua Group Builder: TownLiving by Metricon
migration levels. As a result, what we are likely to see
These include lifts, aluminum, window frames and
pronounced demand issues surfacing in April. This,
pipeline waiting for the market to turn. Unfortunately,
in the first quarter will have a flow on effect for our
resulted in volumes halving through March, with more coupled with the closure of the country to overseas buyers and a rapid rise in job losses, will ultimately have homeowners taking a pause for the coming months while they recalibrate and adjust to the current market.
In general, Melbourne relies considerably on
purchaser and consumer activity from overseas migration. As a result, the closure of borders will have a profound effect on the economy overall with a more pronounced impact on the rental
market – particularly in the inner CBD with the absence of international students.
Much of the new housing demand in the prior boom came from overseas buyers purchasing within
high-rise buildings. Subsequently, many apartment
is a bottleneck of apartment permits sitting in the
recently or soon-to-be completed apartments will be faced with buyers who bought 12 to 18 months ago when the market was stronger. They will now
tiles. The extended shutdown of Chinese factories developers with building contractors facing upwards of a month’s delay.
be attempting to settle in a falling market which will
This interruption in the development phase is
result in developers dealing with increased levels
out by up to six months across larger projects, and
create valuation issues for buyers. This may also of defaults due to buyers potentially becoming unemployed or underemployed.
COVID-19 WILL IMPACT THE HIGH-RISE APARTMENT SECTOR IN MORE WAYS THAN JUST BUYER AND RENTAL DEMAND. A LARGE PROPORTION OF MATERIALS ARE SOURCED THROUGH ASIA, WITH CHINA AS THE CENTRAL HUB.
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
The banning of open houses and public auctions
anticipated to push the completion dates of projects potentially increase material costs. This delay will
coincide with the postponement of bank settlements at a time the market is likely to be falling in value.
Ultimately this will not only impact valuations for the buyer, but it will impact on profits for the developer.
developments in the pipeline or commencing
construction will find it difficult to sell and settle
over the next 12 months with the absence of these 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 0 2 0
49
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
The apartment and townhouse market has been
driver has largely been removed. This suggests that
an expanding and ageing population. Additionally,
will further exacerbate price reductions. This will
undergoing a profound and structural shift driven by developers and buyers alike have been hampered
by numerous regulatory changes which caused the
market to stutter, particularly in the apartment sector. In previous quarterly reports we have discussed the likely shortfall of supply to the market in 2020/21 on
the back of significant falls in the number of approvals across other dwellings (apartments and townhouses). Since peaking at approximately 13,100 in December
quarter 2017, approval activity for medium and highdensity dwellings continually declined in the seven quarterly periods since through to the December
quarter 2019 where an increase took place. While
it improved to 7,471 approvals it was still well below the 2017 peak. It was this sustained reduction
in approval activity which indicated a projected
supply to market issue in 2020/21. However, with no overseas migrants entering at present, the demand
50
R P M R E A L E S TAT E G R O U P
we may be facing a short-term supply surplus which be particularly apparent in investment-grade inner
city high-rise apartments following both the drop in
overseas migration and reduced demand from local and overseas students.
WHILE COVID-19 IS LIKELY TO HAVE A DETRIMENTAL IMPACT ON APARTMENTS, THE SAME CANNOT BE SAID FOR TOWNHOUSES; AT LEAST NOT TO THE SAME DEGREE. WHILE ALL DWELLING TYPES WILL BE IMPACTED BY THE PANDEMIC, TOWNHOUSES ARE LARGELY OWNER OCCUPIED AND TEND TO BE PURCHASED BY FIRST HOME BUYERS OR BUDGETCONSCIOUS BUYERS IN THE OUTER-MIDDLE TO OUTER RING
OF MELBOURNE. SIMILARLY, TOWNHOUSES IN THE BLUECHIP SUBURBS OF MELBOURNE TEND TO BE PROFESSIONAL COUPLES. TOWNHOUSE SALES ARE ALSO LESS EXPOSED TO THE OVERSEAS MARKET. Further still, townhouse development is far less
complex in terms of generating finance, pre-sales
and build timeframes. This is demonstrated by the
increased activity in the sector over the past decade, increasing from an average of 7,350 approvals in the first five years to 11,500 approvals in the latter. The
most pressing concern for townhouse developments is sourcing suitable sites in amenity-rich and well-
connected suburbs of Melbourne, which is becoming increasingly difficult to do. Additionally, many
potential sites in attractive locations are simply not feasible from a development perspective (dwelling prices won’t cover high land costs).
Image: Enclave at Riverhills, Wollert, Developer: Dahua Group, Builder: TownLiving by Metricon
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 0 2 0
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
WITH NO OVERSEAS MIGRANTS ENTERING THE COUNTRY AT PRESENT, A KEY DEMAND DRIVER HAS LARGELY BEEN REMOVED, WHICH MAY RESULT IN A SHORT-TERM SUPPLY SURPLUS.
51
OTHER DWELLING APPROVALS Victoria recorded 6,899 other dwelling approvals
in March quarter 2020, representing a fall of 7.7%
in approval activity from the previous quarter, but
an improvement of 11.9% from the same quarter in
2019. This highlights the majority of the quarter was
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
unaffected by COVID-19 and demonstrated a market
that was showing a robust gain from 12 months earlier. While down from December quarter 2019, it was still a strong result, considering December was the highest level since the March quarter 2018.
Townhouse approvals recorded a modest gain over the quarter (1.4%) with a more pronounced gain of
16.7% comparative to the same period a year earlier. In addition, while approvals over the 12 months to
March 2020 fell 15.5% from the corresponding period
a year earlier, it was coming off a record level from
2019 was the lowest outcome since 2009, but the
result of 10,237 townhouse approvals is compared
quarter 2018.
is significantly higher (up 27%). This robust level of
Notwithstanding this volatility, the result in the March
townhouse developments in greenfield areas, and is
corresponding period and down only a modest 1.1%
2018/19. It is worth noting when the recent annual to the yearly average across the past 15 years, it approvals highlights the increasing popularity of
offsetting the easing number of approvals taking place in the built-up middle ring of Melbourne.
occurs with approvals. It often takes only one or two
large-scale developments to have a material effect on the overall number. For instance, September quarter
11,000
10,000 9,000
8,000 7,000
6,000 5,000
4,000
-
52
19 13%% Year to Mar-16
R P M R E A L E S TAT E G R O U P
69%%
Year to Mar-17
25 20%% Year to Mar-18
6%% 10
Year to Mar-19
24 16% % Year to Mar-20
APARTMENT APPROVALS
TOWNHOUSE APPROVALS
12,000
1,000
glimmer of hope that developers were slowly coming
This, however, has been stopped in its tracks. The
possibility of a high rise or student accommodation
development in the CBD or Docklands, or a mid-rise development in Footscray coming to market in the foreseeable future, looks highly unlikely.
24,000
14,000
2,000
from the previous year. This outcome provided a
and demand fundamentals moved back into alignment.
challenging to analyse due to the movement that
13,000
3,000
quarter 2020 was up a substantial 8.9% from the
back into the high-rise apartment market as supply
Apartment activity on a quarterly basis is more
15,000
following quarter recorded a high not seen since March
22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 -
3%
Year to Mar-16
4%
Year to Mar-17
2%
Year to Mar-18
37%
Year to Mar-19
1%
Year to Mar-20
Source: ABS
KEY MEDIUM DENSITY BUILDING DATA
APPROVALS
TOTAL APARTMENTS
TOTAL
March quarter 2020
2,766
4,133
6,899
Change from previous quarter
1.4%
-12.8%
-7.7%
Change from previous year
16.7%
8.9%
11.9%
12 months to March quarter 2020
10,237
13,221
23,458
% change 12 months earlier
-15.5%
-1.1%
-8.0%
COMMENCEMENTS December quarter 2019
OTHER DWELLINGS 4,121
COMPLETIONS
OTHER DWELLINGS
December quarter 2019
9,662
Change from previous quarter
-18.8%
Change from previous quarter
49.6%
Change from previous year
-28.7%
Change from previous year
47.9%
12 months to December quarter 2019
22,077
12 months to December quarter 2019
28,053
% change 12 months earlier
-33.8%
% change 12 months earlier
TOTAL APARTMENT & UNIT PRICES
MEDIAN PRICE
March quarter 2020
$641,000
December quarter 2019
$637,000
March quarter 2019
$586,500
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
TOTAL TOWNHOUSES
9.0%
CHANGE FROM PREV. QTR.
0.6%
CHANGE FROM PREV. YR.
9.3%
NOTE: Approvals are to the current quarter (March 2020), while commencements and completions are delayed by a quarter (December 2019).
Image: Enclave at Riverhills, Wollert, Developer: Dahua Group, Builder: TownLiving by Metricon
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 0 2 0
53
OUTLOOK
price growth reaching double digits underpinned by
FORTUNATELY, LENDERS HAVE PROVIDED LENIENCY TO DISTRESSED BORROWERS, WHICH MEANS FORCED SALES WILL BE LIMITED AND ULTIMATELY REDUCES THE LEVEL OF SUPPLY THAT WOULD OTHERWISE BE ON THE MARKET. AS A RESULT, WITH LIMITED SUPPLY ON THE MARKET WE MIGHT ACTUALLY SEE SOME RESILIENCE IN VALUES OVER THE COMING MONTHS AS THERE WILL BE BUYERS, PARTICULARLY FIRST HOME BUYERS, WHO ARE SECURE IN THEIR EMPLOYMENT AND WILL LOOK AT THIS PERIOD AS PRIME TIME TO BUY.
potential affordability concerns and the inability of
However, if the pandemic continues beyond six
Conversely, the more positive outlook indicates a fall
was likely to be the next mini housing-price boom
must be reinstated, consumer sentiment will be
buffered by support put in place by the Government
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
Over the course of a single quarter the outlook
for other dwellings, particularly apartments, has pivoted 180 degrees. As part of the December
quarter outlook, the discussion was around strong buyer fundamentals at play, including historically
low interest rates, improved borrowing capacity and strong employment growth. The consensus was for
buyer urgency and fear of missing out. The focus was first home buyers to enter the market through what through 2020.
Unsurprisingly, this outlook rapidly changed. While affordability concerns are on the horizon, it is not
limited to first home buyers. It is now all mortgage holders who are looking at a state unemployment rate reaching 11% by the end of the year and remaining elevated through most of 2021.
54
R P M R E A L E S TAT E G R O U P
months, or a second wave occurs and restrictions rocked once more, and activity will plummet. At this
point in time the protection that is currently in place,
in values of between 5% and 10% by the end of 2020, and financial institutions.
including JobKeeper and bank payment holidays,
Melbourne will likely see a more prolonged downturn
sales resulting in a sharp fall in values. This outcome
vast majority being rentals, and a significant number
may cease and we could see an increase in forced
is in line with commentators who anticipate prices to fall between 20% and 30%.
in the apartment and unit market simply due to the
located within the middle and inner rings, occupied
by overseas students or migrants on short-term visas, who have largely all returned home.
LUKE KELLY
DIRECTOR, PROJECT MARKETING luke@rpmrealestate.com.au +61 400 688 520
instant positive surge to both business and
COVID-19 long after the broader market goes back
reduces significantly in 2021, result in the nation
this specific market sector will feel the fallout of to a level of normality.
Most of the driving demand fundamentals for
property in Melbourne remain uncertain in the near
consumer confidence. This could, if unemployment
This is in addition to other factors including quality
property prices.
institutions all acting as magnets to overseas
expect, and this will have a positive influence on
In addition, once travel restrictions are removed it
robust migration, and will in fact have a sharp spike
Victoria, will be held in high regard following our
in unemployment and not see any meaningful migration until the middle of 2021 at best.
On a positive note, once the Government begins
to lift social distancing restrictions, there will be an
rules and regulations.
returning to economic activity sooner than many
term. While the borrowing environment is at a record low, we will not have strong employment growth or
transparent market with scale, along with clarity of
of life, weather, clean air, and world class education migrants.
is widely considered that Australia, and particularly
While there will be a price correction in 2020 which
response to COVID-19. Prior to the pandemic,
home buyers and other budget-conscious buyer
Victoria was a highly desirable investment option
for buyers from Asia. This may be enhanced after
COVID-19, given the market offers a deep, liquid and
A P AQR1T M E AN R TK SE T/ O TO VW E RN VH IOE UWS E S
With the country closed through to the start of 2021,
will make detached housing more affordable to first groups, a continued shift in demand to less expensive townhouses in the middle and outer ring will also be highly sought after.
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 0 2 0
55
OVERVIEW
OVERSEAS DEMAND FOR RESIDENTIAL PROPERTY IN VICTORIA REMAINED RELATIVELY LOW IN MARCH QUARTER 2020. FOREIGN BUYERS
INTERNATIONAL
ACCOUNTED FOR 12% OF NEW DWELLINGS
PURCHASED AND JUST 2.3% OF ESTABLISHED DWELLINGS PURCHASED; A LONG-TIME LOW.
DEMAND FROM CHINA, THE LARGEST SOURCE
FOR OVERSEAS BUYERS IN VICTORIA, IS LIKELY
TO HAVE WEAKENED DURING MARCH QUARTER
2020 AS THE COUNTRY DEALT WITH THE HARSH
ECONOMIC REALITIES OF COVID–19 THROUGHOUT MUCH OF THE PERIOD.
However, this continues the downward trending
proportion of overseas buyers for much of the last three years. A myriad of factors can be ascribed,
including; a tightening of domestic credit to foreign purchasers; increased restrictions on capital
transfers in home countries; the introduction and subsequent increase to 8% of Victoria’s foreign
resident additional stamp duty rate; and other state taxes such as vacancy fees.
56
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
Consequently, the number of residential real estate
approvals by Foreign Investment Review Board (FIRB)
The expected downturn in property markets over the remainder of 2020 will make purchasing a dwelling in Victoria relatively more affordable and attractive for
overseas purchasers. This could lead to a reverse in the persistent low share of overseas buyers, driven by rebounding interest from buyers from China in
particular, as their economy recovers more quickly comparative to most countries.
EARLY SIGNS ARE POSITIVE, WITH REAL ESTATE PLATFORMS REPORTING A SIGNIFICANT INCREASE IN OVERSEAS BUYER ENQUIRIES FOR VICTORIAN DWELLINGS IN APRIL.
% OF FOREIGN PURCHASERS BY DWELLING TYPE
approvals in 2015/16.
Q 1 IMNAT RE KR ENTA TO IVOENRAVLI E W
22%
in Victoria over 2018/19 was 82% below peak in
20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
New
14%
21%
14%
14%
12%
12%
13%
8%
5%
12%
7%
12%
12%
Established
7%
9%
8%
9%
8%
6%
6%
4%
5%
4%
4%
6%
2%
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 0 2 0
57
AUSTRALIAN ECONOMIC OUTLOOK
The rapid deterioration in Australia’s economic
the Australian Tax Office show that between March
in effort to kick-start the economy from hibernation
distancing measures implemented in late March
7.5% and total employee wages decreased by 8.2%.
back of these measures will be gradual, with some
outlook, directly attributed to restrictive social
to mitigate the spread of COVID-19, is particularly Q 1 IMNAT RE KR ENTA TO IVOENRAVLI E W
evident in the rapid changes of economic forecasts. It is estimated that gross domestic product (GDP) will contract by an historic 7-8% in June quarter
Weakening employment conditions were further highlighted by the additional 81,500 people who
worked fewer hours in March compared to February.
2020 alone, eliminating all gains to economic
This has led to the unemployment projection more
in the Australian economy declining by a forecast
2020, which would have been worse without the
activity in the previous three quarters, and resulting 0.3% over financial year 2020. It should be noted that these forecasts take into consideration the
combined massive $320 billion stimulus measures
than doubling in just one month to 11.7% by June
JobKeeper initiative which has kept an estimated five million people in employment.
from the Federal Government and Reserve Bank
Australia’s handling of the COVID–19 pandemic has
16.4% of GDP.
when considering number of cases and deaths.
of Australia, which equates to approximately
Early employment indicators released from the
Australian Bureau of Statistics in conjunction with
58
14 and April 18, total employee jobs declined by
R P M R E A L E S TAT E G R O U P
been more effective compared to most countries
This has allowed the country to begin winding back some of the social distancing measures from May,
and get people back into work. However, the roll
sectors of the economy, such as the tourism industry, to experience little recovery through 2020. This will continue to act as a drag on family finances,
with almost one third of households reporting their
financial position has deteriorated from COVID–19. Furthermore, people’s confidence to return to
normal activities will take time to recover as we learn to live with the threat of COVID–19 before a vaccine is released. Consequently, the initial opening
period for retail, cafes, restaurants, fitness and
entertainment is expected to lead to only a minor upturn in economic activity.
An important driver of economic growth over the past two decades has been population growth,
with overseas migration into Australia the largest
from overseas migration in financial year 2021 will
While growth in quarterly GDP is projected to return
to Australia will reduce this inflow from tens of
years prior. A substantial decline in dwelling demand
and industries gradually returning to normal activity,
segment. However, the ban on overseas migration thousands per quarter to zero in June quarter 2020, Federal Government projects Australia’s net inflow
will follow, impacting the entire residential property
industry, particularly the new house sector which has the largest multiplier benefits on the economy.
AUSTRALIAN ECONOMY ECONOMIC INDICATORS (% CHANGE)
in the second half of 2020, in line with fewer restrictions annual GDP at June 2021 is still forecast to be 2.5% lower than June 2020.
MARCH 2020 FORECAST
Q 1 IMNAT RE KR ENTA TO IVOENRAVLI E W
and remain extremely low through 2020–21. The
decrease by 85% from the corresponding figure two
APRIL 2020 FORECAST
2019-20 F
2020-21 F
2019-20 F
2020-21 F
GDP
1.60
1.90
-0.30
-2.50
Employment
2.00
0.20
-0.10
-7.00
Unemployment Rate
5.20
5.60
11.70
8.90
Average Earnings
2.90
2.60
2.70
1.20
Inflation
2.10
2.20
2.00
1.30
RBA Cash Rate
0.68
0.71
0.25
0.25
$A/US cents
0.59
0.60
0.57
0.67
Source: NAB. The Forward View. 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 0 2 0
59
OVERVIEW
THE TAIL-END OF 2019 AND THE START OF THE
NEW DECADE MARKED WHAT MANY HAD HOPED
RESIDENTIAL INVESTMENT
FOR; A STEADY UPWARDS RETURN TO THE
PREVIOUS 2017/18 PEAK. THIS WAS FUELLED BY
THE IMPACT OF APRA’S RELAXATION OF LENDING
SERVICEABILITY TESTS, AND MULTIPLE CASH RATE REDUCTIONS RESULTING IN THE LOWEST RATE IN RECORDED HISTORY.
However, the widespread health, productivity and economic impacts of COVID-19 saw hope of a
continued recovery dashed by the end of March quarter 2020. As such, the quarter is a unique
statistical period. It marked the start of an upwards
recovery in both housing price and market sentiment, but the final weeks of the quarter were characterised by significant social and economic changes as a
result of stringent (but as we have now seen, effective) lockdown measures.
Overall, house prices in Metropolitan Melbourne still
rose by a healthy 3.7% during the March quarter 2020,
60
R P M R E A L E S TAT E G R O U P
Enclave at Riverhills, Wollert Developer: Dahua Group Builder: TownLiving by Metricon
LYNN NIE
DIVISION MANAGER, PROPERTY MANAGEMENT lynn@rpmrealestate.com.au +61 488 210 951
The slight increase in vacancy rates can be directly
comparing house and unit prices to the same period
sectors most heavily hit by COVID-19 impacts,
compared to the previous quarter. Nevertheless, a year ago (during the middle of the ‘slump’), the
evidence of recovery at the outset of 2020 is clearly
apparent. House prices are 12.5% higher than a year ago, with unit prices up 9.29%.
attributed to job losses or underemployment in
such as retail and hospitality industries, along with overseas students, leaving many unable to live
independently and consequently leaving their rental
WHILE THE OCCASIONAL DWELLING TYPE HAS SEEN RENT INCREASING IN THE MARCH QUARTER, MANY HAVE SEEN NO MOVEMENT OR EVEN A DROP.
property.
Rental increases in smaller dwellings, such as inner
The market rebound was supported by overall good
While we expect the vacancy rate to increase above
and one bedroom units, have seen their growth
saw a robust demand for rental accommodation.
quarter, Government initiatives at both Federal and
sentiment through much of the March quarter and
This was as a result of sustained underlying factors
including low unemployment and strong population
growth. However, this all changed in mid-March. The immediate response pushed up Melbourne’s overall vacancy rate to 2.3%, compared with 2.2% in the
previous quarter. This rate is now also slightly higher than the two year average of 2.1%.
the 3% equilibrium industry benchmark in the June State levels are aimed at limiting this rise.
OVERALL VACANCY RATES HAVE REMAINED TIGHT IN THE MARCH QUARTER 2020, ALTHOUGH THERE HAS BEEN VOLATILE MOVEMENT IN RENT PRICING FOR HOUSES, AND UNITS AND APARTMENTS.
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EW ENT
although unit prices increased by a mere 0.63%
and middle ring two and three bedroom houses from December quarter 2019 largely wiped off.
For two bedroom houses in all areas, stagnant or
negative growth has occurred. This indicates that renters (particularly those living alone or with a
single housemate) have dropped off during the
quarter, again reflecting the hardest hit industries,
and overseas students who have returned home to
complete the year’s curriculum online. We anticipate this downturn to be even more pronounced in subsequent quarters.
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 0 2 0
61
OVERVIEW
Conversely, larger houses of three and four
Inner-ring Melbourne one and two bedroom units
bedroom houses) have seen the highest upwards
gains, with rents increasing 6% and 3% respectively
recorded no growth from a year ago.
by $65 and $125 (10% and 16%) respectively. These
bedrooms in the inner ring recorded the healthiest
dropped by 1% from the previous quarter, and have
relative to the previous quarter. The only other
houses that recorded notable rent increases above
While inner-ring three bedroom units and apartments
ring. On an annual basis, these homes have seen
this time last year, all other dwellings in all areas have
3% were two and three bedroom houses in the outer
saw 10% growth from both the previous quarter and
notable growth at 6% and 3% respectively. However, R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EE WN T
inner ring four bedroom houses have seen the
despite a modest 3% growth quarter on quarter.
fluctuate to a lesser degree.
bedroom units and apartments have fallen by 7%, two
strong performance the previous quarter. From 2017
$10, and three bedroom dwellings falling by $5 or 1%.
than houses across all product types in all areas.
find consistently that upmarket dwellings generally
From a regional perspective, Geelong has seen very
bedroom dwellings have only increased slightly by
Units and apartments have generally fared worse
larger dwellings tend to be premium offerings, and we
seen growth beneath 3%, or even negative change. This is most notable in outer Melbourne, where one
greatest growth year-on-year at an impressive 16%,
increase year on year, with the dwelling types increasing
Interestingly, the largest dwelling types in the inner
ring (three bedroom units and apartments, and four
weak performance in the March quarter 2020 after
Geelong has seen strong growth across all bedroom
and dwelling types due to the Government relocating offices to the area, creating significant demand for rental accommodations.
MEDIAN RENTS HOUSE: BEDROOMS
MAR-19
Inner
2
$560
Middle
2
4
$800
3
$440
Outer
Geelong
3
4
2
MAR-20
$580
$560
-$20
$925
$25
$680
$900
$400
$400
$580
$630
$341
$460 $350
$380
$380
2
$320
$325
4
3
R P M R E A L E S TAT E G R O U P
$720
$380
3
4
62
$743
$430 $360 $423
CHANGE FROM PREVIOUS QUARTER
DEC-19
$430
$380
$440
$40
-3% 6%
$10
3%
$330
$5
$385
$440
$0 $5
$0
1%
3.1%
5%
$390
$430
4.0%
$20
-7%
$10
5%
0%
-$45
3%
0% 2% 1%
0%
$20 $5
$20
6%
$0
0%
$25
7%
$10
$10 $18
0.9%
5.0%
16%
$585
$360
0%
2 YEAR AVERAGE ANNUAL GAIN
-3%
$125
0%
$0
-$23
3%
$0
$460
$0
CHANGE FROM PREVIOUS YEAR
3%
3% 4%
1.7%
3.4% 1.3%
1.3%
0.0% 4.9%
4.9%
3.6%
LYNN NIE
DIVISION MANAGER, PROPERTY MANAGEMENT lynn@rpmrealestate.com.au
While this underlying factor is still present, during
+61 488 210 951
this quarter Geelong recorded very little or no growth across all dwelling types and sizes.
The largest growth in Geelong can be seen in two
bedroom houses where rent increased by $5 relative to the last quarter; a mere 2% increase. Units and
change, with one bedroom unit rents increasing by
just $3 relative to the previous quarter, while two and three bedroom units recorded no change at all. This
indicates Geelong may have reached a growth plateau,
10%
with renters who moved into Geelong for employment
MELBOURNE’S VACANCY RATE INCREASED
INNER RING THREE BEDROOM HOUSES AND UNITS
permanently or move into their newly built home.
IMPACTS ARE LIKELY TO DRIVE THIS RISE HIGHER.
FROM LAST QUARTER, UP 6% AND
potentially now having decided whether to stay
MARGINALLY, BUT ANTICIPATED COVID-19
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EW ENT
2.3%
apartments have seen even more diminutive levels of
RECORDED THE HIGHEST RENTAL INCREASES 10% RESPECTIVELY.
UNITS & APARTMENTS:
Inner
Middle
Outer
Geelong
BEDROOMS
MAR-19
1
$380
2
3
1
DEC-19
MAR-20
$385
$380
$495
$500
$320
$350
$350
$540
$535
$350
$360
$228
$230
$670
$670
2
$403
$400
1
$300
$290
3
$400
3
2 1
2 3
$503 $350 $220 $310
$398
$420
$330
$400
$495
CHANGE FROM PREVIOUS QUARTER
-$5
-$5
-1%
-1%
$0
$0
9%
3.0%
6%
3.4%
$413
$13
$270
-$20
-7%
-$30
-10%
$415
-$5
-1%
$15
4%
$0
0%
$330
$400
$10 $3
$0
0%
$30
-1%
$33
3%
3% 1%
0%
$11
$10
$10
$20 $3
1.3%
0.5%
$65
-$5
$65
0%
2 YEAR AVERAGE ANNUAL GAIN
0%
$735
$0
10%
CHANGE FROM PREVIOUS YEAR
10% 3%
3% 5%
6% 1%
2.5%
2.3%
2.9%
2.9% 2.5%
2.2%
4.9%
4.0%
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 0 2 0
63
OVERVIEW
VACANCY RATES & YIELDS Vacancy rates in the March quarter reflect a minimal
However, vacancy rates in the coming quarters
quarter overall. Across the board, all areas remained
COVID-19.
middle ring (up marginally to 3.5%) and outer ring
Rental yields have been, and continue to be, below
These consistently low vacancy rates reinforced
seen in both detached houses and other dwellings
and likewise current dwelling approval rates have
market a rental yield above 2.5% is far more appealing
will be interesting to witness following fallout from
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EE WN T
uplift, although trends still follow the previous
below the accepted norm of 3%, excepting the
including Mornington Peninsula (remaining at 3.4%).
long-term levels due to the significant capital gains
the consensus that the market is not oversupplied,
over the past five years. Nevertheless, in the current
remained low compared to 2017/18 boom levels.
than other types of investment due to the incredibly
Inner total
Inner (0-4km)
Inner (4-10km)
MAR-19
DEC-19
MAR-20
2 YEAR AVERAGE
1.4
1.7
2.0
1.6
2.0 2.1
1.9 2.1
2.0
poor for those investing in detached housing in the outer and regional areas, land value appreciation
tends to be the driving force in the earlier stages.
2.2 1.6
64
R P M R E A L E S TAT E G R O U P
MAR-20
2.51%
2.32%
2.33%
2.82%
2.66%
2.34%
4.22%
UNITS
MAR-19
DEC-19
MAR-20
Middle
3.26%
2.93%
2.96%
3.4
2.2
2.3
2.2
2.2
1.6
2.6 2.1
1.8
Metro
Inner
Outer
Metro
Source: REIV, RPM
4.44%
2.92%
2.52%
4.20%
3.1
Regional Source: REIV
DEC-19
2.83%
4.21%
1.8
3.4
Middle
MAR-19
Regional
1.8
2.3
Inner
1.7
1.5
1.9
HOUSES
1.8
Outer (20+km exc. Mornington Peninsula)
1.6
1.9
3.08%
3.5
Geelong
While a rental yield of sub 2.5% would be considered
Outer
3.3
Melbourne total
within the market offering far more attractive yields.
2.0
3.6
Outer (Mornington Peninsula)
Over the March quarter 2020, there were segments
2.0
Middle (10-20km) Outer total
uncertainty of the world’s stock markets.
YIELDS:
VACANCY RATE: MELBOURNE
low interest rate environment and significant
4.10%
2.92% 2.61%
4.05%
3.66%
3.35%
3.40%
4.67%
4.66%
5.07%
3.99%
3.67%
3.61%
LYNN NIE
DIVISION MANAGER, PROPERTY MANAGEMENT lynn@rpmrealestate.com.au +61 488 210 951
OUTLOOK In the coming months we expect there will be
seems to be a movement from the middle to the outer
and rental market due to the impacts of COVID-19
likely to change in subsequent quarters), and what
ring for renters, yields are at the higher end for these outlier areas.
Houses and units in regional areas recorded an
average yield of 4.2% and 5.1% respectively during
this period. These strong returns are generally due to two factors; a lowering house price in regional areas, and rental prices staying almost completely level.
Similarly, units in the inner ring recorded an attractive average yield of 4.05% in the March quarter which,
although is slightly down from 4.10% in the previous quarter, suggests continued robust demand for
significant deterioration in the residential investment
not to go home over the end-of-year break period have remained.
and its containment measures. To date, the rental
Following the closure of Australia’s borders, tourism-
within the broader property sector, with companies
hope of recovery from the bushfires dashed as
market has seen the most immediate disturbance
closing their doors in the final weeks of March and unemployment figures skyrocketing in mere days. Casual workers and those in industries such as
retail, hospitality and tourism were immediately
impacted. Landlords and agents suddenly found their tenants were unemployed through unprecedented circumstances. These circumstances further
compounded the consequences of the December 2019 bushfires on the regional tourism industry.
dependent regional communities have seen any international tourism numbers plunged to zero.
Furthermore, Stage three domestic restrictions
reduced travel to essential users only, ending all
domestic tourism demand. In turn, swathes of Airbnb properties have now moved back into the rental
market. This increases the supply when there is little to no demand, as well as increasing competition for landlords already facing rent reductions in order to lease their property.
one and two bedroom units in the CBD and fringe
Over the balance of 2020, Victoria’s reliance on
However, State and Federal Governments have
the 2-year average. However, while the inner ring and
February, all flights from China to Australia were
evicted. Further still, the Federal Government
suburbs. Vacancy rates have now moved just above
regional areas are still attractive in the March quarter
2020, vacancy rates are anticipated to move upwards in the coming months which will bring down yields as the full fallout of COVID-19 can be quantified.
overseas students will come to the fore. From
banned, and in late March, all non-Australian Citizens were prohibited from entering. This significantly decreases overall demand of inner-city rental
properties, as many international students are
unable to enter Australia; only those who chose
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EW ENT
However, with vacancy rates at acute levels (although
introduced measures to protect tenants from being introduced the most comprehensive support
package ever offered to Australians in the form of JobKeeper. This package was designed to keep
employers and employees in work and in business as we navigate the current climate.
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 0 2 0
65
OUTLOOK
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EE WN T
TO DATE, IN BENEVOLENT FASHION, LANDLORDS WHO HAD TENANTS IN CHANGED CIRCUMSTANCES HAVE BEEN OVERWHELMINGLY SUPPORTIVE AND EMPATHETIC. WE COMMEND THE MANY LANDLORDS WHO HAVE BEEN GRACIOUS IN DEALING WITH TENANTS IN DISTRESS DURING COVID-19. It is worth noting that many landlords are also facing distressing circumstances of their own. However, protections at the national and state levels have been predominantly weighted towards tenants,
with comparatively few concessions for landlords, including in many states rent moratoriums and
restrictions on rent increases for the next six months. In Victoria, the state government has announced a $500 million rent rescue package. A further $420 million has been earmarked for land tax relief for
landlords. While this is something, for the average
residential investor it does not provide the assistance
they require. Land tax concessions are not accessible until the end of the financial year and will therefore
not provide immediate support if tenants can’t pay.
In addition, land tax only applies on valuations above $250,000. Consequently, apartments, townhouses
and even some smaller lots will not meet the criteria. This package, in essence, is targeted to commercial
landlords where their sites are larger, and by extension, more expensive. Additionally, the tax relief is in the
form of a 25% reduction if landlords can demonstrate they have offered rent relief to their tenant. If the land valuation is $300,000, the owner will be billed $375 in
tax, so the 25% relief results in just $93.75 of savings. Supported by RPM’s survey results, we know the
majority of landlords are average wage earners. As such, they rely on rental payments alongside job
income to manage their mortgage as well as running expenses of the investment, including council and
water rates, strata levies and repairs. While landlords
can apply for a mortgage repayment reprieve from the
banks, there are potentially considerable costs further down the track, with major banks confirming that any pause in payments will be capitalised into the rest of the loan term.
WHILE THERE IS CONSIDERABLE UNCERTAINTY AT PRESENT AND SIGNIFICANT HEADWINDS ON THE HORIZON, FOR POTENTIAL INVESTORS WHO ARE SECURE IN THEIR EMPLOYMENT, IT IS A FAVOURABLE TIME TO BUY. LENDING RATES ARE AT HISTORICAL LOWS, AND INVESTORS IN THE GREENFIELD MARKET WON’T BE REQUIRING A TENANT FOR AROUND A YEAR AS THEY SETTLE THE LAND AND UNDERTAKE CONSTRUCTION. THIS UNDOUBTEDLY DIFFERS FOR AN INVESTOR PURCHASING AN EXISTING DWELLING. Through these tumultuous times, it is important to remember that looking historically, property has
been a significantly safer form of investment than more volatile options such as the share market.
Additionally, Australia’s response to COVID-19 has been swift and broad, and has seen the country
fare significantly better than most other countries affected. Subsequently, in a year’s time, with
COVID-19 behind us, we expect the market to recover and Victoria to remain an appealing destination.
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R P M R E A L E S TAT E G R O U P
RESIDENTIAL INVESTMENT BUYER SURVEY DATA
building quality and demand levels of more centrally
Interestingly, no buyers indicated their intent to
Although there was growing uncertainty in the market
March quarter 2020 with the onset of the COVID-19
household incomes above $100,000 increased. This
of 2019, investors represented just 23% of sales in the pandemic, down from 37% in December quarter 2019. While this share was in line with the corresponding
quarter in 2019 which was impacted by the tail-end of a slowdown, it is likely to remain around this level for
towards the end of the quarter, purchasers with
highlights the growing prevalence of investor-buyers, from the more volatile share market and uncertainty in located apartments.
spend above $400,000 on the build, compared
The March quarter data revealed a considerable
quarter 2019. This is likely the result of investors
home. While at first this appears to indicate a smaller
forcing investors to re-evaluate the composition
share of house builds larger than 21sq. This may
price indicating more diversity in investor type.
of these buyers. This trend continued through to
of potential tenant diversity, and not wanting to
The landscape has changed for investors over
purchasers this quarter up from just 8% last year.
double-storey residences.
same. One of these is the source of advertising the
DESPITE THE GROWING TREND TOWARDS LARGER SINGLE-STOREY BUILDS, THE ANTICIPATED OVERALL BUILD SPEND IS LESS.
line with previous surveys, over half of all investors
at least another six months. We anticipate potential
investors will weigh up their personal circumstances
and employment security against it being a favourable time to buy.
While the 2018/19 market downturn reduced the
proliferation of Indian and Chinese born investors,
the strong December quarter 2019 showed a re-entry 2020, with Indian investors accounting for 31% of all To a lesser degree, Chinese investors have held
ground, but will more than likely remain subdued in the coming months due to the continued capital controls
the Chinese Government has in place on its residents.
with 19% falling into this price bracket in March
upswing of investors intending to build a single-storey
spending slightly more in the land component,
dwelling, RPM survey findings showed an increasing
of their budgets, and a slightly lower total package
demonstrate investors becoming more considerate
exclude older households who may discount
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EW ENT
with traditional mum and dad investors moving away
DURING THE MARCH QUARTER 2020, 72% OF INVESTORS INTENDED TO SPEND LESS THAN $250,000 ON CONSTRUCTION, UP FROM 46% A YEAR EARLIER.
Following increasing buyer appetite throughout much
the past 12 months, but some things remain the
investor first noticed; during the March quarter, in
indicated word of mouth (friend, family, builder) as the primary advertising source.
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 0 2 0
67
RESIDENTIAL INVESTMENT BUYER SURVEY DATA
MARCH QUARTER 2020
MARCH QUARTER 2019
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EE WN T
OWNER OCCUPIER VS. INVESTOR
Investor
Investor
$120k>
39%
$80-$100k
14%
China
India
$101-$120k
$60-$80k $40-$60k <$40k
$351-$400k
0%
$301-$350k $251-$300k
$201-$250k $151-$200k
<$150k
38%
$80-$100k
15%
$60-$80k
8%
$40-$60k <$40k
3% 2%
$351-$400k
2%
3%
$301-$350k
38%
$201-$250k
0%
17%
0%
$401-$450k
8%
25%
>$450k
11%
32%
Owner Occupier
$120k>
India
19% 0%
77%
Australia
China
$101-$120k
11%
23%
2% 3% 4% 31% 54%
Malaysia
Philippines
17%
>$450k
$401-$450k
NEW HOME CONSTRUCTION BUDGET
Owner Occupier
Australia
Bangladesh
HOUSEHOLD INCOME
76%
3% 3% 4% 8% 74%
New Zealand
COUNTRY OF PERSON 1&2 TOP 5
24%
$251-$300k $151-$200k
<$150k
0% 3%
23% 54% 18% 0%
Source: RPM
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R P M R E A L E S TAT E G R O U P
MARCH QUARTER 2020
MARCH QUARTER 2019
Undecided
Double storey
NUMBER OF STOREYS CONSIDERED
Single storey
INTENDED SIZE OF HOME INCLUDING GARAGE
21-25sqs
16-20sqs <15sqs
Other Builder Referral
3%
Single storey
>30sqs
3%
26-30sqs
67%
16-20sqs
11%
Other
19% 8%
26%
21-25sqs
<15sqs
Builder Referral
Family or Friend
Realestate.com
13% 18%
>$600k
15%
Signage Google
Project Website
$551-$600k
$501-$550k
$451-$500k
HOME & LAND BUDGET
53%
18%
Family or Friend
ADVERTISEMENT SOURCE
45%
Undecided
Double storey
$401-$450k $351-$400k
$301-$350k <$300k
11%
3%
3% 5%
18%
Signage
82%
0% 5%
32% 54% 9%
18%
28% 23% 18% 5% 5%
>$600k
2%
Project Website
$551-$600k
$501-$550k
$451-$500k
$401-$450k
0%
$301-$350k
0%
11%
Realestate.com
33% 26%
7%
R E QS 1I DME AN RT KI A E LT IONVVEERSVTI M EW ENT
>30sqs
26-30sqs
3%
3%
11% 11%
30% 37%
$351-$400k
5%
<$300k
3%
2%
RPM surveys every buyer on its clients’ estates in the greenfield market. In March quarter 2020, 23% of all buyers indicated they were investors. The data illustrates demographic and purchase intent changes amongst this cohort based on surveys from the March quarter 2020 compared to the same quarter in 2019. 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 0 2 0
69
ERIC DICK
KEVIN BROWN
eric@rpmrealestate.com.au
kevin@rpmrealestate.com.au
EXECUTIVE CHAIRMAN +61 418 349 267
+61 418 397 577
LUKE KELLY
PETER GRANT
luke@rpmrealestate.com.au
peterg@rpmrealestate.com.au
DIRECTOR
+61 400 688 520
DIRECTOR, COMMUNITIES +61 411 494 499
ROD ANDERSON
JINYIN ZHANG
rod@rpmrealestate.com.au
jinyin@rpmrealestate.com.au
DIRECTOR, COMMUNITIES +61 417 595 859
DIRECTOR, RPM INTERNATIONAL +61 451 898 886
CHRISTIAN RANIERI
MICHAEL STAEDLER
christian@rpmrealestate.com.au
m.staedler@rpmrealestate.com.au
DIRECTOR, TRANSACTIONS & ADVISORY +61 416 445 078
LYNN NIE
DIVISION MANAGER, PROPERTY MANAGEMENT lynn@rpmrealestate.com.au +61 488 210 951
70
CHIEF EXECUTIVE OFFICER
R P M R E A L E S TAT E G R O U P
RESEARCH MANAGER +61 434 619 280
+61 3 9862 9555
Level 5, 52 York Street
South Melbourne VIC 3205 rpmrealestate.com.au