RPM Quarterly Report - Q2 2019

J U N E

2 0 1 9

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

LEAD INDICATORS

DEVELOPMENT SITES

4 6

14

APARTMENTS / TOWNHOUSES

56

INTERNATIONAL

60

RESIDENTIAL INVESTMENT

Q2 MARKET OVERVIEW

FROM OUR CEO

50

FEATURE STORIES:

10

Industry Leaders Insights

COMMUNITIES

20

Legislative Updates: New duty on Development Agreements Amendments to Sale of Land Act 1962

18 48

Q2 RESIDENTIAL MARKE T RE VIE W

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FROM OUR CEO

WELCOME TO Q2 OF RPM REAL ESTATE

The median lot price fell 5.2% to $310,000 for

THIS ISSUE WE ANALYSE THE KEY TRENDS

months ago. Prices will likely ease another 5%, and,

Q2 MARKET OVERVIEW

GROUP’S RESIDENTIAL MARKET REVIEW. IN CHARACTERISING MELBOURNE AND GEELONG’S NEW HOUSING MARKET, UNDERPINNED BY OUR DATA-DRIVEN INSIGHTS.

Over the June quarter there was a positive shift in market sentiment following the announcement of

KEVIN BROWN

CHIEF EXECUTIVE OFFICER RPM REAL ESTATE GROUP

- potentially skewing the median lot size to 375sqm - will see a median lot price sub $300,000, which is

considered ‘fair value’ and better calibrated to first home buyer budgets.

In the greenfield development site space,

continuation of negative gearing and capital gains tax

a misalignment between developer and landowner

the removal of the 7.25% mortgage rate test and advantages following the Federal election.

momentum, with an uptick in monthly land sales volumes from April to June. We believe the land

market is nearing the bottom, with the pace of decline

transaction volumes remain subdued; there is still

price expectations, hence deals are taking longer to transact. However, with the baseline reset, there’s been a return of local players to the market who

are building pipelines on which to capitalise in the medium term.

in quarterly sales slowing. Lot sales for the June

In the infill market, many developers have shifted

quarter and 64% from the same quarter a year ago.

investments in the hunt for yield.

quarter fell 8.6% to 1,796 lots from the previous

R P M R E A L E S TAT E G R O U P

combined with new estates featuring smaller lot sizes

a range of stimulus including 2 interest rate cuts,

These incentives have generated a degree of sales

4

the quarter and 4.6% from the same quarter 12

focus from residential site acquisitions to secure

In the apartment and townhouse market, increased

MICHAEL STAEDLER

investors continued to impact demand both

m.staedler@rpmrealestate.com.au

stamp duty and taxes and lending curbs on

declining 17% from the March quarter and 32% from

Q2 MARKET OVERVIEW

locally and overseas, with other dwelling approvals

RESEARCH MANAGER +61 434 619 280

the June quarter last year. However, with townhouse approvals just 1.5% below the previous quarter,

medium density approvals may be approaching

The data contained within this report was prepared

apartments, however, with approvals down 27%

property experts and GIS analysts.

the bottom of the cycle. The same can’t be said for from the March quarter.

LOOKING AHEAD, WE EXPECT A GRADUAL RATHER THAN A SHARP RECOVERY IN THE LAND MARKET TOWARDS THE BACK HALF OF 2019 AND INTO 2020. THE VOLUME OF UNSOLD STOCK INCREASED OVER 2018/19 WHICH WILL LIKELY TAKE A YEAR TO ABSORB BEFORE SETTLING INTO MORE CONSISTENT LEVELS OF ACTIVITY. THE RECENT BOOST TO HOME BUYERS IN THE FORM OF INTEREST RATE CUTS AND IMPROVED BORROWING CAPACITY SHOULD HELP ABSORB THIS HIGH LEVEL OF STOCK OVERHANG.

by RPM’s research team consisting of economists,

Research underpins the core strategic decision

making capability at RPM, providing in-depth analysis on current economic and housing conditions,

sales rates and pricing, future supply and demand assessments, and buyer demographics. This rich intelligence enables clients to make informed

decisions that underscore the success of their

developments. RPM’s research is also highly valued in assisting clients to secure capital funding and

enhance their ongoing marketing and ROI strategies.

Q2 RESIDENTIAL MARKE T RE VIE W

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ECONOMIC ACTIVITY GROSS DOMESTIC PRODUCT (GDP)

2.51% 12 month change to Mar qtr. 2019

2.57%

5 year average

CONSUMER PRICE INDEX (CPI) Q 2L E M AA DR KI N ET D I OC VA ET RO VR ISE W

1.59% 2.08%

Jun-19

Source: ABS

Same month year earlier

VIC POPULATION

STATE FINAL DEMAND (SFD) - VIC

4.55% 4.14%

12 month change to Mar qtr. 2019

5 year average

RETAIL TURNOVER - VIC

4.14% 4.40% Jun-19

Same month year earlier

NATURAL INCREASE

8,984 Dec-18

9,591

Same qtr. year earlier

% change - same qtr. last year

6.3%

% change - 12 months earlier

4.3%

OVERSEAS MIGRATION

15,706 Dec-18

14,946 Same qtr. year earlier

CASH RATE

VARIABLE RATE

% change - 12 months earlier

1.3%

3,645

1.25 % 5.15% Jun-19

1.50% Mar-19

1.50% Jun-18

Source: RBA 6

R P M R E A L E S TAT E G R O U P

Jun-19

5.37% Mar-19

5.22% Jun-18

3 YEAR FIXED RATE

4.46% 3.92% Jun-19

Jun-19

4.68% 4.05% Mar-19

4.51% Jun-18

Mar-19

4.13% Jun-18

12 months to Dec-18 5.1%

Dec-18

DISCOUNTED RATE

85,965

% change - same qtr. last year

NET INTERSTATE MIGRATION

BORROWING RATES

40,256

12 months to Dec-18

4,421

Same qtr. year earlier

13,209

12 months to Dec-18

% change - same qtr. last year

17.6%

% change - 12 months earlier

19.4%

NATIONAL TOTAL CHANGE

VIC TOTAL CHANGE

404,783

139,430

1.63%

2.18%

change from Dec-17 to Dec-18 % change - same qtr. last year VIC share

34%

■ Negative change ■ Positive change

TOTAL POPULATION

AUS 25,180,234 VIC 6,526,413

VIC EMPLOYMENT EMPLOYMENT GROWTH (JOBS CREATED) Jobs (‘000s) TOTAL Mar-19 to Jun-19

FULL TIME Mar-19 to Jun-19 Last 12 months PART TIME Mar-19 to Jun-19 Last 12 months

-7.81 71.93 21.60 54.54

0.4% 15.7% 3.9% 42.7% 0.3% -31.3% 3.2% 29.2% 2.0% 34.4% 5.2% 109.6%

$1,666 $1,625 $1,607 Nov-18

2.5% Source: ABS

4.8% 4.6% 5.5% Jun-19

Source: ABS

Mar-19

Same time last year

CONSUMER SENTIMENT

100.7 Jun-19

102.1 Jun-18

Source: Westpac-Melb institute

BUSINESS SENTIMENT

1.4

Jun-19

12.9

Source: RBA/NAB

Jun-18

The Westpac-Melbourne Institute Consumer Sentiment

WAGES

May-19

UNEMPLOYMENT RATE

Q 2L M E AA D R KI E N TD IOC VA ET ROVR ISE W

Last 12 months

13.78 126.47

% Change

Vic contribution to AUS

May-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

3.6%

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.

Q 2 R E S I D E N T I A L M A R K E T R E V I E W | J U N E Q U A R T E R 2 019

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VIC FINANCE NO. OF FHBS FINANCED

8,500 9,010 Jun-19

Same qtr. year earlier

NO. OF NON-FHBS FINANCED

18,415 22,455 Q 2L E M AA DR KI N ET D I OC VA ET RO VR ISE W

Jun-19

Same qtr. year earlier

FINANCE FOR NEW DWELLINGS

7,581 Jun-19

8,126

Same qtr. year earlier

VALUE OF LOANS - OWNER OCCUPIERS

$11.09B $12.58B Jun-19

Same qtr. year earlier

6% 18% 7% 12%

AVERAGE LOAN SIZE (FHBS)

$363,100 $366,000 Jun-19

Same qtr. year earlier

AVERAGE LOAN SIZE (NON-FHBS)

$434,600 $450,100 Jun-19

Same qtr. year earlier

FINANCE FOR ESTABLISHED DWELLINGS

19,334 Jun-19

23,398

Same qtr. year earlier

VALUE OF LOANS - INVESTORS

$3.85B Jun-19

$6.50B

Same qtr. year earlier

1% SHARE OF FHB LOANS

3% 17% 41%

31.6% 28.6% Jun-19

Same qtr. year earlier

Source: ABS

MELBOURNE PROPERTY MEDIAN HOUSE PRICE

$785,000 Previous qtr.

$839,000

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

Jun-19

Jun-19

$590,000

Jun-19

$794,000

MEDIAN UNIT PRICE

1.1% 6.4%

$586,500 Previous qtr.

$596,500

Same qtr. year earlier

AUCTIONS HELD

$310,000

0.6% 1.1%

$327,000 Previous qtr.

$325,000

Same qtr. year earlier

2,382

CLEARANCE

Jun-19 5.2% 4.6%

3,118 Mar-19

3,558

Same month year earlier

67% 56% 61%

VIC BUILDING DETACHED HOUSE APPROVALS 8,738 Jun-19 10,317 Same qtr. year earlier 36,747 Last 12 months

15.3% 7.1%

HOUSE COMMENCEMENTS

32.0% 36.2%

1.3% 0.2%

6,586 Mar-19 12,128 Same qtr. year earlier 27,821 Last 12 months

45.7% 17.7%

14.3%

Jun-19

17,437 22.1%

Same qtr. year earlier

59,724 21.0%

Last 12 months

15,488 Mar-19

21,147 26.8%

Same qtr. year earlier

27,821 17.7%

Last 12 months

TOTAL COMPLETIONS

OTHER COMPLETIONS

17.1%

13,583

TOTAL COMMENCEMENTS

OTHER COMMENCEMENTS

HOUSE COMPLETIONS 8,485 Mar-19 7,243 Same qtr. year earlier 40,070 Last 12 months

4,845 Jun-19 7,120 Same qtr. year earlier 22,977 Last 12 months

Q 2L M E AA D R KI E N TD IOC VA ET ROVR ISE W

8,902 Mar-19 9,019 Same qtr. year earlier 38,228 Last 12 months

TOTAL DWELLING APPROVALS

OTHER DWELLING APPROVALS

5,098 Mar-19 4,799 Same qtr. year earlier 26,024 Last 12 months

6.2% 9.2%

13,583 Mar-19

12,042 12.8%

Same qtr. year earlier

66,094 3.7%

Last 12 months

Source: ABS

MELBOURNE PROPERTY VACANCY RATE - MELB

2.2% 1.9% Jun-19

Jun-18

AVERAGE DAYS ON MARKET - METRO MELB

42

Jun-19

36

Jun-18

MEDIAN METRO HOUSE RENT

$460 Jun-19

$450 Jun-18

MEDIAN METRO OTHER DWELLING RENT

2.2%

$430 Jun-19

$420 Jun-18

2.4%

Source: REIV Q 2 R E S I D E N T I A L M A R K E T R E V I E W | J U N E Q U A R T E R 2 019

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FEATURE STORY:

INDUSTRY LEADERS INSIGHTS RPM: How would you describe the state of

That said, one of the biggest economic challenges in

factors have played into this?

has continued to worsen post GFC. It reflects the

Q2 MARKET OVERVIEW

Victoria’s residential property market and what

DG: There are definitely signs of life emerging. The DANIEL GRADWELL

ASSOCIATE DIRECTOR PROPERTY AT ANZ

market looks better now than it has for quite some time. We’ve had falling prices for 18 months and

building approvals have followed suit. We are getting close to the turning point in the cycle, the bottom is

fact there is a lot of spare capacity in the economy,

so businesses don’t need to compete for labour. The

headline unemployment rate masks the level of under employment – people who are working but not as much as they’d like.

in sight.

Because wages are weak, people are not spending

A LOT HAS CHANGED IN THE RESIDENTIAL

Some key economic and political factors have played

inflation remains weak. The Reserve Bank has a 2-3%

RPM SAT DOWN WITH DANIEL GRADWELL,

last couple of months. The federal election outcome

PROPERTY MARKET OVER THE LAST FEW MONTHS. ASSOCIATE DIRECTOR, PROPERTY, AT ANZ TO

UNPACK THE ECONOMIC AND LENDING DRIVERS UNDERPINNING THE MARKET.

into this. There’s been 2 interest rate cuts over the

has provided certainty regarding capital gains tax and negative gearing, and APRA’s reduction of the loan

serviceability calculation has really turned sentiment around quite quickly.

Victoria’s population story remains very important.

Fundamentally population growth is still incredibly

strong – well above national growth rates and pretty much every other developed economy in the world.

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Australia currently is very weak wages growth, which

R P M R E A L E S TAT E G R O U P

as much money or simply don’t have it. Hence overall target band, and the inflation rate has been below

that for a few years. They want to have a level of full

employment and inflation in that band. So with both of these measures being fairly weak, the RBA cut

interest rates to stimulate activity and encourage

investment which should absorb some of that spare wages capacity.

Banks now have the ability to see an applicant’s loan

DG: To briefly explain the changes, in 2014 APRA set

The HEM has recently been rebased in terms of how

to a bank for a loan it assumed you might one day have

vast majority of people it’s assumed their spend

have on demand?

a 7.25% serviceability buffer which means if you went

to pay 7.25% interest on that loan. It made sense at the time but now most people are paying a mortgage with an interest rate starting with a 3 (and if you’re not, go and talk to your bank).

situation at other financial institutions, for example.

much people spend on goods and services. For the will be higher therefore they’ll be able to borrow

less. For example, not many people have a landline

phone anymore but may spend more on subscription services like Netflix and Spotify.

So it doesn’t make sense to have it fixed at 7.25%.

While banks are trying to reduce their reliance on the

buffer. For most borrowers it will bring you to about

for a fair number of mortgage applications and will

Rather, it’s now set at the rate of interest plus a 2.5% 5.75% up to 6% - which is a pretty material difference from 7.25%. For most borrowers this means their

HEM and verify expenses themselves, it’s still used reduce the amount people can borrow.

maximum borrowing capacity is about 10-15% higher.

While overall credit availability will increase due to

However, it’s not all one way traffic for the borrower. As

2 measures. I think we’ve got pretty close to our

featured in your last report, the Comprehensive Credit

Reporting (CCR) regime and changes to the Household Expenditure Measure (HEM) gives banks much better visibility around potential borrowers.

APRA’s changes, some of it will be offset by these

‘new normal’. There may be some tweaks but not the

OUR MOST RECENT REPORT ON HOUSING AFFORDABILITY HIGHLIGHTED THAT FOR THE AVERAGE PERSON IN VICTORIA WITH A MORTGAGE, 40% OF THEIR INCOME GOES TOWARDS SERVICING THEIR LOAN. THAT SOUNDS LIKE A LOT, BUT IT’S IN LINE WITH AVERAGE HISTORICAL LEVELS.

Q2 MARKET OVERVIEW

RPM: How much of an effect will regulatory easing

throwback to a couple of years ago.

DANIEL GRADWELL Q2 RESIDENTIAL MARKE T RE VIE W

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Q2 MARKET OVERVIEW

ANZ’S HALF YEAR RESULTS PACK SHOWED THAT ON AVERAGE, OUR MORTGAGE BORROWERS CAN TAKE OUT 30% LESS DEBT COMPARED TO 2015. IT’S A BIG CHANGE AND SUGGESTS THAT CREDIT AVAILABILITY WON’T GO BACK TO WHERE IT WAS.

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R P M R E A L E S TAT E G R O U P

FEATURE STORY: INDUSTRY LEADERS INSIGHTS

RPM: To what extent has housing affordability improved?

lost in the discussion is housing affordability is still really stretched. Despite prices having come off

about 11% from the peak, the challenge for first home buyers is still significant. While rate cuts are positive from a cash flow perspective for existing mortgage

ANZ’s half year results pack showed that on average,

to save for the deposit they need. Our report shows

compared to 2015. It’s a big change and suggests

savings is really weak, so it’s taking longer for them that for people on an average income, it now takes about 10 years to save for a 20% deposit, which

On the construction side, it’s important to again

interest rates are not helping.

people came to Victoria and we need to be building

that deposit hurdle has really worsened and lower

RPM: What’s the outlook?

their current savings base.

DG: As mentioned earlier, I think we are at or

Our most recent report on housing affordability (with

sharp rebound or V-shaped recovery, which is a

CoreLogic) highlighted that for the average person in Victoria with a mortgage, 40% of their income goes

very close to the bottom. But there won’t be a good outcome.

towards servicing their loan. That sounds like a lot,

Over the next couple of years we’ll see some

mortgage debit is still very high, it’s offset by record

rise in line with incomes which will help affordability.

but it’s in line with average historical levels. While low interest right now.

that credit availability won’t go back to where it was.

is a material increase from the early 2000s. So

holders, it doesn’t really help people saving for a

house right now. In fact it hinders them as it impacts

our mortgage borrowers can take out 30% less debt

Q2 MARKET OVERVIEW

DG: While prices have declined, one thing that gets

On the flipside, for first home buyers the return on

highlight population growth. Last year 140,000

about 60,000 dwellings each year to house them.

While there is still a lot of dwellings under

construction, there will be a gap unless approvals start to pick up. If it does that now, there will be a

more seamless transition when they are completed.

stabilisation and moderate growth. Prices should

Stabilisation is much better than going through peaks and troughs.

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OVERVIEW

DESPITE CONTINUED SUBDUED TRANSACTION

VOLUMES IN THE DEVELOPMENT SITE MARKET,

DEVELOPMENT SITES

THERE HAS BEEN RENEWED INTEREST IN

ACTIVITY BROUGHT ABOUT BY STABILISING

EVENTS IN THE RETAIL MARKET INCLUDING THE COALITION ELECTION VICTORY, INTEREST RATE CUTS AND A REDUCTION IN THE MORTGAGE SERVICEABILITY BUFFER.

In the greenfield space, there has been a return of local players to the market who in recent

years struggled to compete against big offshore developers, who are now more established with significant stock to sell through.

Given the market has bottomed and the baseline

reset, developers can better forecast what a project looks like and are structuring deals with greater

certainty. They are recognising opportunities on which to capitalise in the medium term.

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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

Notwithstanding, there is still a misalignment

What is required is a steadier, more diverse supply

Already we are seeing some developers, including

expectations, with vendors not prepared to trade at a

stems from land supply – introducing new PSPs - and

to market. At best, the impost is a veiled swipe at

between landowner and developer price

discount, making some project feasibilities difficult.

While deals are taking longer to transact, vendors

have eased on terms and structures and there is a genuine interest from both parties to cooperate.

There is pent up demand for new housing among first home buyers that needs to be met, which gives the greenfield market greater performance longevity.

Moreover, the beauty of land lies in the ability for

product to change rapidly to meet market conditions such as smaller lot sizes and townhouses that first home buyers can afford.

and longer gestations of more moderate growth. This getting land to market quicker, with better delivery of infrastructure which will increase options for purchasers and keep pricing competitive.

The recent and unexpected State budget measure

QD2E V M EA LROK PE M T EONVT E S R IVTI EE SW

THE RECENT SERIES OF STABILISING EVENTS HAS BROUGHT A DEGREE OF CONFIDENCE BACK TO THE MARKET, WHICH WILL LIKELY SPEED UP THE HOUSING RECOVERY.

Resi Ventures*, walk away from bringing future lots taking money from a commercial venture. At worst

it will discourage development which will impact the supply of these projects coming to market – and affordability.

to bring forward and extend a stamp duty levy on

Development Agreements is a significant concern for the industry. It removes the incentive for landowners

and developers to enter into joint ventures as they are no longer economically attractive to landowners.

*Reported in Australian Financial Review, June 18, 2019 Q2 RESIDENTIAL MARKE T RE VIE W

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QD2E V M EA LROK PE M T EONVT E S R IVTI EE SW

INFILL In the infill market, many developers who got caught

The number of stalled projects due to the

The recent series of stabilising events has brought a

withdrawn from residential site acquisitions and

disincentives could well lead to an undersupply in

likely speed up the housing recovery. We should see

in the development cycle during the downturn have

switched focus to secure investments. We are seeing significant transaction activity in long term leased

investments such as boutique office buildings and retail as developers chase security and yield.

In anticipation of interest rates falling further, investors continue to flock to secure yield investments, where 2-3% will become the market norm.

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OUTLOOK

R P M R E A L E S TAT E G R O U P

challenges of selling stock and ongoing investor

the apartment sector. Given there are not enough local players to pick up the volume of supply that

comes out of apartment projects due to the lack of depth in the market and increased surcharges on

overseas buyers, projects are not being launched and developers are looking at alternate uses for their sites.

degree of confidence back to the market, which will a return to strong activity in the development site

space and continued interest in yield investments in

the first quarter of 2020 as investors seek out shelter from low interest rates.

SOLD: MIXED-USE BRUNSWICK DEVELOPMENT SITE ATTRACTS INVESTORS CHASING YIELD

remains strong following the sale of a premium development site for $5 million in the heart of

Brunswick by RPM’s Transactions & Advisory team.

Permit approved for 61 apartments over 7 storeys and designed by Rothelowman architects, the

1,170sqm site on Sydney Road currently trades as

QD2E V M EA LROK PE M T EONVT E S R IVTI EE SW

Demand for well-priced, high quality infill assets

THE SITE FEATURES AN EXISTING COMMERCIAL TENANCY BUT IS APPROVED FOR RESIDENTIAL. THIS MIXED USE ASSET APPEALED TO MULTIPLE PARTIES SEEKING A GOOD QUALITY YIELD AND FUTURE UPSIDE.

Northside Harley-Davidson, with a passing income of $270,000 +GST.

CHRISTIAN RANIERI

Head of RPM Transaction & Advisory Christian Ranieri said the campaign attracted significant interest from developers and commercial investors, generating more than 150 enquiries and 8 written offers.

Q 2 R E S I D E N T I A L M A R K E T R E V I E W | J U N E Q U A R T E R 2 019

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FEATURE STORY:

QD2E V M EA LROK PE M T EONVT E S R IVTI EE SW

LEGISLATIVE UPDATE: NEW DUTY ON DEVELOPMENT AGREEMENTS RPM: What are the new changes?

RPM: When will they be introduced/effective?

MT-S: The changes, announced in the 2019

MT-S: The new rules apply to arrangements entered

entitlement’ duty rules. They are significantly

into before this date are not subject to the new

Victorian State Budget, relate to the ‘economic MICHAEL TAYLOR-SANDS PARTNER

MADDOCKS LAW FIRM

THE VICTORIAN GOVERNMENT RECENTLY IMPOSED NEW STAMP DUTY RULES ON

DEVELOPMENT AGREEMENTS. TO EXPLAIN THE CHANGES AND IMPACT ON DEVELOPERS, WE

SOUGHT THE EXPERTISE OF MICHAEL TAYLORSANDS, PARTNER AT MADDOCKS LAW FIRM.

broader than the previous rules and effectively create a new type of duty.

The previous rules only imposed duty where the

entitlement rules in section 81 of the Duties Act 2000 (Vic).

RPM: How will the new rules operate?

in 50% or more of the proceeds of sale or profits

MT-S: Under the new rules a person who acquires

landowner (not just unit trusts and private companies)

duty and is effectively treated as having acquired

only where a person acquired a right to participate from land. The new rules can apply to any type of and there is no longer a 50% threshold for the entitlement acquired.

agreements are drafted, as they may impose a duty liability at the time the agreement is entered into

(well before the property is actually developed and eventually sold).

R P M R E A L E S TAT E G R O U P

rules but are still subject to the previous economic

landowner was a unit trust or private company, and

The changes will impact how development

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into on or after 19 June 2019. Arrangements entered

an ‘economic entitlement’ will be liable to pay an interest in the land for duty purposes. An

economic entitlement for these purposes includes an arrangement where a person is entitled to

participate in the income, proceeds from sale, rents,

profits, or capital growth of land. The land must have

unencumbered value of more than $1 million, but this provides little relief for developers.

Where the agreement provides an entity with an

RPM: How will they affect developers and

supported by the legislation. Further, where the

percentage (e.g. 20% of proceeds from sale), the duty

intended and possible unintended consequences?

fee could be dutiable under the SRO guidance.

economic entitlement by reference to a stated

acquired based on the market value of the land at the date of the agreement.

However, where the agreement does not specify the percentage, the person is deemed to have acquired

a 100% interest in the land, unless the Commissioner of State Revenue exercises his discretion to

determine that a lesser percentage is appropriate.

THIS CREATES A GREAT DEAL OF UNCERTAINTY AND IS CLEARLY NOT A SATISFACTORY PRACTICAL OUTCOME FOR DEVELOPERS. MICHAEL TAYLOR-SANDS

service provider is associated with the developer, the

MT-S: The new rules create an upfront duty cost for

RPM: What should developers do?

where the development fee is referrable to the

MT-S: Developers must be cautious if they are

will significantly impact how feasible development

there may be an upfront duty cost when entering into

developers entering into a development agreement proceeds from the sale of land and/or profit. This

agreements are for developers and landowners now that the changes are in effect.

Further, consultants engaged as part of a

development with arrangements where the

fee payable is calculated with reference to the

proceeds of sale of land will need to be careful

they are not caught by the new rules. The State

considering using development agreements now, as the agreement. Further, development agreements

will need to be drafted carefully to ensure that duty is

not chargeable as though the developer has acquired a 100% interest in the relevant land. If the new rules are triggered, the developer will need to lodge the development agreement with the State Revenue Office for assessment of duty.

Revenue Office has issued guidance on its website

If a development agreement structure is no longer

intended to be captured by the new rules, but this

alternative structures will need to be explored.

confirming that service fee arrangements are not is an administrative view which is not necessarily

QD2E V M EA LROK PE M T EONVT E S R IVTI EE SW

is calculated as if a 20% interest in the land has been

landowners who enter into these agreements – both

feasible because of the upfront duty cost, other

Q2 RESIDENTIAL MARKE T RE VIE W

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J U N E Q U A R T E R 2 019

19

OVERVIEW

IMPROVING BUYER SENTIMENT RESULTING FROM A RANGE OF STIMULUS APPLIED TO THE PROPERTY MARKET HAS GENERATED POSITIVE SALES

COMMUNITIES

MOMENTUM THROUGHOUT THE JUNE QUARTER

2019 FOR GREATER MELBOURNE AND GEELONG’S LAND MARKET.

Investor sentiment has been boosted due to the

removal of uncertainty around negative gearing and capital gains tax discounts, which, combined with 2 interest rate cuts, tax cuts and APRA’s lowering of

the 7.25% loan serviceability buffer, has improved borrowing capacity for buyers by around 10-15%.

As an example, a family with one dependent and a household income of $90,000 can effectively

borrow 14% more ($63,000) following the change

in the serviceability variable rate test from 7.25% to 5.75%. This increase is conservative considering

the serviceability assessment rate test is 5.50% at

some major banks and lower again at other housing finance providers.

20

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

RPM believes the land market is nearing the bottom,

Greater Melbourne’s median lot price fell 5.2%

The median lot size contracted to 392sqm from

slowing. For June quarter 2019, across all growth

(-$15,000) from the same quarter a year ago to

preceding quarterly periods. This is a result of many

with the pace of decline in quarterly sales volumes

sales from the previous quarter and 64% from the

same quarter in 2018. Notably, there was an uptick in

monthly sales volumes from April to June, increasing from 489 to 575 to 732 respectively, indicating a small sales upswing.

Nevertheless, the volume of stock returned to market increased to 760 lots in the June quarter, dropping net sales to just above 1,000 lots. Importantly, not

all stock put back on the market are cancellations.

With cancellations remaining at around 5% which

is the industry norm, the vast majority of stock can be attributed to developers returning lots back to

$310,000. As RPM predicted, from the peak of around $325,000 in June quarter last year, the median land price has eased by approximately 5%, which we

believe will likely fall a further 5% over the next 6 or so months.

Combined with new masterplans featuring smaller lot

sizes of around 375sqm, the median land price should fall below $300,000 which will be considered ‘fair

value’ and more in line with average first home buyer budget capacity. With smaller lots on the market, greater yield along with higher sqm rates will be achieved from a developer standpoint.

the market after initially removing them or allocating

In terms of supply, there were 43 more active estates

returned to market.

in 2018. However, new releases declined 69% to

stock to referrers/builders which are then also

in June quarter 2019 compared to the same quarter

1,445 lots compared to the same quarter 12 months ago as developers’ slow releases to avoid higher unsold lots on the market.

400sqm which was recorded in each of the 5

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

corridors gross lot sales fell 8% to 1,796 gross lot

(-$17,000) from the previous quarter and 4.6%

new estates, along with existing estates re-cutting stages and creating further product diversity by

featuring a higher percentage of medium density and smaller conventional lots (under 300sqm). This has

subsequently brought the average land size down to around 350sqm. As an example, Whittlesea, Melton

and Hume all recorded below the Melbourne median of 392sqm.

5.2%

GREATER MELBOURNE’S MEDIAN LOT PRICE FELL 5.2% FROM THE PREVIOUS QUARTER AND 4.6% FROM THE SAME QUARTER A YEAR AGO.

4.6%

Q2 RESIDENTIAL MARKE T RE VIE W

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J U N E Q U A R T E R 2 019

21

OVERVIEW

MELBOURNE GROWTH CORRIDORS

180

7,000

5,000

120 100

4,000

80

3,000

60 40

JUN 16

Active Estates

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

$325K>

1,000

$275K $300K

430 425

300,000

MEDIAN LOT PRICE �$�

420

250,000

415

200,000

410

150,000

405 400

100,000

395

50,000 0

$301K $325K

Gross Lot Sales

New Estates

350,000

390

JUN 16

Median Lot Size

22

% OF TOTAL GROSS LOT SALES

2,000

20 0

GROSS LOT SALES

6,000

140

SEP 16

DEC 16

Median Lot Price

R P M R E A L E S TAT E G R O U P

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

385

MEDIAN LOT SIZE �SQM�

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

NUMBER OF ESTATES

160

$251K $275K

<$250K

0%

10%

Jun Qtr 2019

20%

Jun Qtr 2018

30%

40%

Jun Qtr 2017

50%

60%

Source: RPM

JUN QUARTER 2018

CASEY CARDINIA HUME MITCHELL

14% 2% 10% 3%

WHITTLESEA 9%

JUN QUARTER 2019

Jun Quarter ‘19 Median Lot Price

CASEY

CARDINIA

18% 4%

% Change from Jun Quarter ‘18

HUME MITCHELL

16% 2%

MELTON

19%

GREATER GEELONG

15%

GREATER GEELONG

$299,000

$340,000

$280,000

-0.9%

-8.6%

-4.2%

8.7%

-$2,700

-$28,000

-$15,000

$22,500 452.0

% Change from Jun Quarter ‘18

-2.0%

-6.7%

-1.0%

0.9%

Jun Quarter ‘19 Gross Lot Sales

Change from Jun Quarter ‘18

-8.0 729

-1,574

-28.0

-4.0

477

-659

404

-399

% Change from Jun Quarter ‘18

-68.3%

-58.0%

Jun Quarter ‘19 sales contribution

40.6%

26.6% 22.7%

16.0%

83

45

Jun Quarter ‘19 Active Estates Change from Jun Quarter ‘18

% Change from Jun Quarter ‘18 Jun Quarter ‘19 No. of Trading Days Change from Jun Quarter ‘18

10%

$304,800

396.0

Change from Jun Quarter ‘18 WYNDHAM 20% MOORABOOL 2%

GREATER GEELONG

392.0

Jun Quarter ‘19 Lot Releases

WYNDHAM 21% MOORABOOL 3%

SOUTH EAST

392.0

Jun Quarter ‘18 sales contribution

22%

NORTHERN

Jun Quarter ‘19 Median Lot Size Change from Jun Quarter ‘18

WHITTLESEA 8%

MELTON

$ Change from Jun Quarter ‘18

WESTERN

% Change from Jun Quarter ‘18

45.9% 27

744

-1,697

186

-587

-75.9%

22.5%

10.4%

41

26

6

370

-954

4.0

-49.7%

10

15.4% 7

331

-559

191

-564

-69.5%

-72.1%

-62.8%

-74.7%

176

201

225

197

514%

348%

275%

749%

147

156

Q2 RESIDENTIAL MARKE T RE VIE W

165

|

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

% CONTRIBUTION TO TOTAL GROSS LOT SALES

174

J U N E Q U A R T E R 2 019

23

WESTERN GROWTH CORRIDOR THE WESTERN GROWTH CORRIDOR RECORDED

729 GROSS LOT SALES IN JUNE QUARTER 2019,

ACCOUNTING FOR 41% OF TOTAL SALES ACROSS ALL GROWTH CORRIDORS. WITH A GREATER

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

NUMBER OF ACTIVE ESTATES AND SUBSEQUENT HIGHER LOT SUPPLY, IT RETAINS THE HIGHEST SHARE OF SALES AMONG ALL 4 GROWTH

MOORABOOL

CORRIDORS. MELTON

However, in all 4 quarterly periods throughout

2018/19, all 3 growth areas in the Western growth

corridor recorded a decline in gross lot sales from the immediate previous quarterly period. This resulted in gross lot sales falling 68% from 2017/18.

Median lot prices remained steady through the first 9 months of 2018/19, although continued soft demand has led to an annual decline of 3.5% in Wyndham,

WYNDHAM

3.8% in Melton and 6.5% in Moorabool. Prices are now back to late 2017/early 2018 levels.

The volume of unsold stock increased to more than 2,000 lots by the end of June (almost entirely in PORT PHILLIP BAY

Melton and Wyndham), which was significantly higher than other growth corridors. This will limit and delay

an upturn in new lot releases as demand works its way through absorbing unsold lots on the market.

24

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

Wyndham added 3 new estates in June quarter 2019,

+61 411 494 499

which accounted for half of all new additions across all growth corridors throughout Melbourne and

Geelong. However, new lot supply still declined 6%

from the previous quarter to 351 lots. This equated

to under one-fifth of the peak in new releases 2 years ago which totaled almost 1,900 lots.

both declined 66% annually. This is a case of supply responding to weaker demand, rather than sales

25

10

0

unsold lots in each quarter since March quarter 2018.

Active Estates

Subdued demand has started to impact pricing, with

by only 1.2% from June quarter last year and

remained unchanged from March quarter this year,

resulting in declining per sqm lot prices which further underscores the weakness in demand.

MEDIAN LOT PRICE �$�

Moreover, the median lot size of 400sqm contracted

JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

414 412 410

250,000

408 406

200,000

404

150,000

402 400

100,000

398

50,000 0

Median Lot Size

0

Gross Lot Sales

300,000

lot prices in around 4 years. The median lot price of

3.5% below the previous quarter.

500

350,000

Wyndham recording its first annual decline in median

corresponding figure in the same quarter in 2018 and

1,000

15

5

being restricted by new supply given the increase in

$313,500 in June quarter 2019 was 4.4% below the

1,500

20

GROSS LOT SALES

and lot sales almost identical for the June quarter,

2,000

30

MEDIAN LOT SIZE �SQM�

satisfying new housing demand, with lot releases

NUMBER OF ESTATES

with 352 gross lot sales. While new lot supply is

35

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

gross sales across all growth areas for the quarter,

2,500

40

Notably, Wyndham recorded the highest number of

396 JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

394

Source: RPM

Median Lot Price

Q2 RESIDENTIAL MARKE T RE VIE W

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J U N E Q U A R T E R 2 019

25

WESTERN GROWTH CORRIDOR

MELTON Melton’s 42 active estates continue to be the highest

2015. Moreover, sales activity is at a 5 year low, with

346 gross lot sales for the June quarter. This reflects a fall of 15% from the previous quarter and 69% from the same quarter in 2018.

NUMBER OF ESTATES

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

373 lots was the lowest since September quarter

While Melton is generally an affordable area, the

relatively expensive, pushing more people to opt for

median lot prices, which fell 8.1% from the previous

quarter to $288,600. This was the biggest decline in

both absolute and percentage terms across Greater

Melbourne’s growth areas. Compared to June quarter 2018, median lot prices were down 3.8%.

26

R P M R E A L E S TAT E G R O U P

MEDIAN LOT PRICE �$�

a smaller dwelling. Consequently, the median lot size

The composition of smaller lots is also impacting

1,200

30

1,000

25

800

20

600

15

400

10

Active Estates

Deanside, where pricing for conventional lots is

period in 2018 to 375sqm.

1,400

35

0

total sales has increased. Most of these sales are

shrank 6.3% from the previous quarter and the same

1,600

40

200

5

number of small lots and medium density lots among occurring in the sub–markets of Fraser Rise and

45

JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

0

Gross Lot Sales

350,000

460

300,000

440

250,000

420

200,000

400

150,000

380

100,000

360

50,000

340

0

Median Lot Size

JUN 16

SEP 16 Median Lot Price

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

MEDIAN LOT SIZE �SQM�

quarter 2019. Nevertheless, new releases totaling

GROSS LOT SALES

among all growth areas, increasing by 2 over June

320

Source: RPM

ROD ANDERSON

DIRECTOR, COMMUNITIES rod@rpmrealestate.com.au +61 417 595 859

affordability advantage, on an annual basis new lot

releases and lot sales fell 89% and 78% respectively.

This reduced new supply to just 20 lots and gross

140

6

120

5

100

4

80

3

60

2

0

Active Estates

falls of 4% from the previous quarter and 6.5% from

40 20 JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

0

Gross Lot Sales

530

250,000

the same quarter in 2018. This is partly attributed to

510

corresponding falls in the median lot size of 0.7% and

200,000

MEDIAN LOT PRICE �$�

7.3% respectively to 445sqm.

160

1

sales of 31 lots for the June quarter.

Subdued demand translated into median lot price

180

7

GROSS LOT SALES

of $215,000 in the June quarter. However, despite its

200

8

490 470

150,000

450 430

100,000

410 390

50,000

MEDIAN LOT SIZE �SQM�

affordable growth area, recording a median lot price

9

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

Moorabool is Greater Melbourne and Geelong’s most

NUMBER OF ESTATES

MOORABOOL

370 0

Median Lot Size

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

350

Source: RPM

Median Lot Price

Q2 RESIDENTIAL MARKE T RE VIE W

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J U N E Q U A R T E R 2 019

27

NORTHERN GROWTH CORRIDOR

THE NORTHERN GROWTH CORRIDOR RECORDED

Median lot prices in both Hume and Whittlesea

DOWN 58% FROM THE SAME QUARTER LAST

highest fall across all growth areas. This is in

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

477 GROSS LOT SALES IN JUNE QUARTER 2019, YEAR. NEVERTHELESS, THE SHARE OF TOTAL

LOT SALES INCREASED FROM 23% TO 27% GIVEN THE SMALLER OVERALL DECLINE COMPARED TO

OTHER GROWTH CORRIDORS. HUME ACCOUNTED FOR 60% OF GROSS LOT SALES, WITH SALES

ACTIVITY IN WHITTLESEA AND MITCHELL AT LONG TERM LOWS.

New lot supply in the Northern growth corridor

remains flat. While active estate numbers were steady in Hume, the frequency and size of new lot releases in estates along Craigieburn Road in Wollert and

Donnybrook Road in Donnybrook fell away to enable delivery of sold lots. Consequently, new releases totaling 370 lots were identical to the previous quarterly period.

28

R P M R E A L E S TAT E G R O U P

dropped 11% annually in June quarter 2019, the response to smaller lot sizes and weaker demand, causing developers to discount lot prices to drive

sales activity. Conversely, Mitchellâ&#x20AC;&#x2122;s median lot price increased 2% over the same period to $284,000,

narrowing its once distinct affordability advantage.

LUKE KELLY

DIRECTOR, COMMUNITIES luke@rpmrealestate.com.au +61 400 688 520

HUME Gross sales in Hume continued to trend upwards in

25

year.

Active estates in Hume rose by just 1 over 2018/19 to a total of 15 estates. This relatively low number

0

June quarter 2019 reflecting a 66% decrease from

Active Estates

quarter the volume of unsold lots still increased in

5.5% from the previous quarter, falling to $310,000.

Moreover, this correction was only partly the result

of smaller lot sales, with the median lot size reducing 1.8% to 392sqm. The price fall also accounted

for almost half of the 11.4% annual decline, which equated to the biggest annual fall in percentage terms across the growth areas.

200

JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

460 450 440

300,000

430

250,000

420

200,000

410 400

150,000

390

100,000

380

50,000 0

Median Lot Size

0

Gross Lot Sales

350,000

MEDIAN LOT PRICE �$�

Consequently, Hume’s median lot price declined

400

400,000

response to a higher return of lots back onto the market.

600 10

5

has impeded new supply, with 214 lots released in

the same quarter a year ago. Nevertheless, over the

800

15

GROSS LOT SALES

sales were still down 42% from the same period last

1,000

20

NUMBER OF ESTATES

largest quarterly increase in sales activity, gross

1,200

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

from the previous quarter. While this was the second

MEDIAN LOT SIZE �SQM�

June quarter 2019, increasing by 25 lots to 296 lots

370 JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

360

Source: RPM

Median Lot Price

Q2 RESIDENTIAL MARKE T RE VIE W

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J U N E Q U A R T E R 2 019

29

NORTHERN GROWTH CORRIDOR

MITCHELL

increasing new supply or sales activity, with new lot

releases declining 92% annually to remain negligible

at 10 lots, while gross sales plunged 78% annually to

100

3 2

Active Estates

50

JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

this was 2.4% below the peak median lot price in the

550 530

MEDIAN LOT PRICE �$�

300,000

510

250,000

490 470

200,000

450

150,000

430 410

100,000

390

50,000 0

Median Lot Size

30

R P M R E A L E S TAT E G R O U P

0

Gross Lot Sales

350,000

for the quarter, rising 2.3% to $284,000. However,

higher to 451sqm, which meant per sqm lot prices fell.

4

0

Melbourne to record annual median lot price growth

previous quarter, with the median lot size also edging

150

5

1

35 lots – the lowest sales activity in 5 years.

Mitchell was the only growth area in Greater

6

GROSS LOT SALES

in 2018. However, this has not translated into

200

7

MEDIAN LOT SIZE �SQM�

represented a 100% increase from the same quarter

8

NUMBER OF ESTATES

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

Mitchell’s 8 active estates in June quarter 2019

250

9

370 JUN 16

SEP 16 Median Lot Price

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

350

Source: RPM

PETER GRANT

DIRECTOR, COMMUNITIES

peterg@rpmrealestate.com.au +61 411 494 499

WHITTLESEA

is reflected in a 5.9% fall in the median lot size to 351 sqm for the June quarter – making it the smallest

Active Estates

stimulatory effect on sales activity and new supply, reflected in substantial annual declines of 75%

and 69% for new lot releases and gross lot sales

respectively in June quarter 2019, with both dropping to 146 lots.

MEDIAN LOT PRICE �$�

than 2 years.

2018/19 to a total of 22. However, it has not had a

300 200 100

time it has dropped below the $300,000 mark in more

highlighted by a net gain of 5 active estates over

400

10

0

5.6% quarterly decline, falling to $290,000 – the first

Active estate numbers in Whittlesea ticked up,

500

5

among all growth areas.

The median lot price experienced a commensurate

600

15

GROSS LOT SALES

lot and medium density lot sales in Whittlesea. This

700

JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

0

Gross Lot Sales

350,000

410

300,000

400 390

250,000

380

200,000

370

150,000

350

100,000

340

50,000 0

Median Lot Size

MEDIAN LOT SIZE �SQM�

in Wollert has underscored a growing share of small

800 20

NUMBER OF ESTATES

Mernda/Doreen region and deteriorating affordability

900

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

Scarcity of broadhectare subdivision land in the

25

330

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

320

Source: RPM

Median Lot Price

Q2 RESIDENTIAL MARKE T RE VIE W

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J U N E Q U A R T E R 2 019

31

SOUTH EAST GROWTH CORRIDOR

THE SOUTH EAST GROWTH CORRIDOR RECORDED

With demand absorbing new lots brought to market,

THIS WAS HALF THE SALES VOLUME COMPARED

with other Greater Melbourne growth areas. This

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

404 LOT SALES IN JUNE QUARTER 2019. WHILE TO THE SAME QUARTER A YEAR AGO, THE

PROPORTION OF TOTAL GROSS LOT SALES

ACROSS ALL GROWTH CORRIDORS INCREASED

FROM 16% TO 22% â&#x20AC;&#x201D; THE HIGHEST SHARE SINCE

the rate of lot price declines has been kept in line is significant considering, in June quarter 2019,

Cardinia contained the most expensive median lot

price of $340,000, followed by Casey at $338,800.

LATE 2016.

Both Casey and Cardinia saw a modest rise in active

estate numbers over 2018/19 but it has not boosted new lot supply, with lot releases falling annually by

66% and 47% respectively in the June quarter. This resulted in gross lot sales outpacing new supply in both Casey and Cardinia in the current quarter.

PORT PHILLIP BAY

CARDINIA

CASEY

32

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

260 lots was also the highest outside of the small

market of Mitchell. This is contrary to the continuing

declining trend in sales and supply seen in most other

resultant median lot price of $338,800 is the lowest

in 2 years. With the median lot size contracting 1.9% to 393sqm, this price adjustment has, to a degree, restored ‘fair value’ of a house/land package.

JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

460 450 440

300,000

430

250,000

420 410

200,000

400

150,000

390

100,000

380

50,000 0

Median Lot Size

0

Gross Lot Sales

350,000

MEDIAN LOT PRICE �$�

median lot prices from the previous quarter. The

200

400,000

releases. The improvement in relative affordability

This improvement stems from a 5.9% decline in

400

10

Active Estates

which likely supported the small increase in new lot

recovery in sales activity.

600

15

0

the June quarter is a long term high for the area,

for a house/land package has supported an initial

800

20

5

growth areas in the June quarter.

Thirty-two active estates in Casey recorded in

25

GROSS LOT SALES

corresponding rise of 5 new lot releases totaling

1,000

MEDIAN LOT SIZE �SQM�

gross sales to 327 lots. Although marginal, a

30

NUMBER OF ESTATES

sales – 29 lots – in June quarter 2019, lifting total

1,200

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

Casey experienced the biggest increase in gross

370 JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

360

Source: RPM

Median Lot Price

Q2 RESIDENTIAL MARKE T RE VIE W

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J U N E Q U A R T E R 2 019

33

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

CASEY EXPERIENCED THE BIGGEST INCREASE IN GROSS SALES – 29 LOTS – IN JUNE QUARTER 2019, LIFTING TOTAL GROSS SALES TO 327 LOTS.

34

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

resulted in new supply falling 47% to 71 lot releases.

Gross sales fell by just 3% to 77 lots, which was

generated from 9 active estates, the same number as March quarter 2019.

The increase in unsold lots placed downward

pressure on median lot prices, which dropped 2.7%

450

16

400

14

350

12

300

10

250

8

200

6

150

4

100

2

50

0

Active Estates

to $340,000 for the quarter and 0.6% annually. This

400,000

in the median lot size to 407sqm and 15% annually.

300,000

JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

MEDIAN LOT PRICE �$�

0

Gross Lot Sales

550

350,000

is further highlighted by an 8% quarterly reduction

500

250,000

450

200,000 400

150,000 100,000

350

50,000 0

Median Lot Size

GROSS LOT SALES

outpaced lot absorption in the previous quarter)

NUMBER OF ESTATES

June quarter 2019 (after lot releases significantly

500

18

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

The high volume of lots on the market entering

20

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

MEDIAN LOT SIZE �SQM�

CARDINIA

300

Source: RPM

Median Lot Price

Q2 RESIDENTIAL MARKE T RE VIE W

|

J U N E Q U A R T E R 2 019

35

GREATER GEELONG GROWTH CORRIDOR

THE GREATER GEELONG GROWTH CORRIDOR

ACCOUNTED FOR JUST 10% OF TOTAL LOT SALES

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

IN JUNE QUARTER 2019, THE LOWEST SHARE IN 3 YEARS AND HALF ITS PEAK CONTRIBUTION IN

DECEMBER QUARTER 2017. THIS WAS IN RESPONSE TO GROSS LOT SALES FALLING 76% TO 186 LOTS,

WHICH WAS THE HIGHEST CONTRACTION IN SALES ACTIVITY IN PERCENTAGE TERMS ACROSS ALL GROWTH CORRIDORS.

Weak demand has led to developers’ severely

restricting new lot supply. Overall, 191 lots were

released to market in June quarter 2019, which was a quarter of new supply the same time a year ago.

Greater Geelong’s traditional affordability has

narrowed, with Melbourne lot prices contracting

GREATER GEELONG

compared to continued annual price growth in PORT PHILLIP BAY

Geelong. Consequently, lot prices in Greater

Geelong growth areas are now on par with values

in Melbourne’s western sub-markets of Wyndham and Melton.

36

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

7

by 22 lots or 19% from the previous quarter. This fall was attributed to a corresponding 40% decline in

increased 2.8% to $272,500 in June quarter 2019,

100

JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

460 450

250,000

440 430

200,000

420

150,000

410 400

100,000

390

50,000 0

Median Lot Size

0

Gross Lot Sales

300,000

MEDIAN LOT PRICE �$�

Greater Geelong.

200

2

Active Estates

size to 442sqm. Consequently, per sqm lot prices the most affordable new housing market within

3

0

underpinned by a 10.5% increase in the median lot declined. Nevertheless, Armstrong Creek is still

300

4

1

new releases to 97 lots also.

Despite subdued demand, the median lot price

400

5

GROSS LOT SALES

activity was a long term low, with gross sales down

NUMBER OF ESTATES

Geelong growth areas. However, this level of sales

500

6

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

Ninety-seven lot sales in Armstrong Creek in June quarter 2019 was the highest among all Greater

600

8

MEDIAN LOT SIZE �SQM�

ARMSTRONG CREEK

380

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

370

Source: RPM

Median Lot Price

Q2 RESIDENTIAL MARKE T RE VIE W

|

J U N E Q U A R T E R 2 019

37

GREATER GEELONG GROWTH CORRIDOR

2019, falling 24% to 17 lots and 35% to 18 lots

respectively from the previous quarter, to a total of 54 lot releases and 34 gross lot sales.

350

12

300

10

250

8

200

6

150

4

0

the highest growth of 16.5% from the previous

sizeable price growth was achieved while the median

400

100

2

Still, Bellarine Peninsula’s median lot price recorded quarter, rising to a peak of $335,000. Notably, this

450

14

Active Estates

50

JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

550 530

MEDIAN LOT PRICE �$�

350,000

510

300,000

490

250,000

470

200,000

450 430

150,000

410

100,000

390

50,000 0

Median Lot Size

38

R P M R E A L E S TAT E G R O U P

0

Gross Lot Sales

400,000

lot size contracted 2.7% to 453sqm.

GROSS LOT SALES

sales activity deteriorate further in June quarter

NUMBER OF ESTATES

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

Bellarine Peninsula saw both new lot supply and

16

MEDIAN LOT SIZE �SQM�

BELLARINE PENINSULA

370 JUN 16

SEP 16 Median Lot Price

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

350

Source: RPM

ROD ANDERSON

DIRECTOR, COMMUNITIES rod@rpmrealestate.com.au +61 417 595 859

9

correction in the median lot price of 10.1% to

4

60

3

40

2

20

0

lot size increasing 15.4% to 774sqm, which is also

JUN 16 Active Estates

MEDIAN LOT PRICE �$�

growth areas within Greater Geelong.

80

5

1

$299,000. This decline occurred despite the median significantly larger than the median lot size in other

100

6

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

0

Gross Lot Sales

400,000

800

350,000

750 700

300,000

650

250,000

600

200,000

550

150,000

500

100,000

450

50,000

400

0 JUN 16 Median Lot Size

GROSS LOT SALES

Consequently, lower demand has led to a quarterly

NUMBER OF ESTATES

sales activity fell by 36% to 27 gross lot sales.

120

7

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

New lot supply in the Geelong growth area declined 64% to 19 lot releases for the June quarter, while

140

8

MEDIAN LOT SIZE �SQM�

GEELONG

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

350

Source: RPM

Median Lot Price

Q2 RESIDENTIAL MARKE T RE VIE W

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J U N E Q U A R T E R 2 019

39

GREATER GEELONG GROWTH CORRIDOR

of 63% and a quarterly fall of 16%. New lot supply

slipped again after a brief recovery last quarter, falling 76% annually and 60% quarterly to a total of 21 lot

from the previous quarter, which was less than a 7.1%

60 2

40

1

releases.

The median lot price in Lara rose 1.7% to $274,000

80

3

0

Active Estates

20

JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

per sqm lot prices declined.

530 510

MEDIAN LOT PRICE �$�

250,000

490 470

200,000

450

150,000

430 410

100,000

390

50,000 0

Median Lot Size

40

R P M R E A L E S TAT E G R O U P

0

Gross Lot Sales

300,000

increase in the median lot size to 480sqm. As a result,

GROSS LOT SALES

quarter since 2014. This reflected an annual decline

100

4

NUMBER OF ESTATES

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

Lara recorded just 27 lot sales in June quarter 2019,

the lowest number of gross sales for a corresponding

120

5

MEDIAN LOT SIZE �SQM�

LARA

370

JUN 16

SEP 16 Median Lot Price

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

350

Source: RPM

LUKE KELLY

DIRECTOR, COMMUNITIES luke@rpmrealestate.com.au +61 400 688 520

5

price and size need to be viewed with caution given the small volume of sales.

120 100

3

80 2

60 40

1

20 0

Active Estates

JUN 16

SEP 16

New Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

Gross Lot Sales

600

500,000 450,000

500

400,000 350,000

400

300,000

300

250,000 200,000

200

150,000 100,000

100

50,000 0

Median Lot Size

0

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

MEDIAN LOT SIZE �SQM�

quarterly and annual changes to both the median lot

NUMBER OF ESTATES

tag of $395,000 for a 392sqm block. Consequently,

MEDIAN LOT PRICE �$�

sale in Torquay during the June quarter, with a price

140

4

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

Sales activity remained negligible, with just 1 lot

160

GROSS LOT SALES

TORQUAY

0

Source: RPM

Median Lot Price

Q2 RESIDENTIAL MARKE T RE VIE W

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J U N E Q U A R T E R 2 019

41

OUTLOOK

We expect a gradual rather than a sharp recovery in

The volume of unsold stock has increased over

into 2020.

supply to the market given it could apply further

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

the vacant land market from the back half of 2019 and

Over the quarter first home buyers carried the lion’s share of owner occupier sales, with a share of 71%.

This level is unsustainable and not conducive to a well balanced land market. However, we don’t expect this

downward pressure on lot prices. We don’t believe

there will be any sharp reductions in price to speed

up sales, as this will only impact settlements from the previous period.

level to remain in the next quarter given the price falls

More so, RPM anticipates lot prices will decline

attractive to this buyer cohort along with stamp duty

2019 and into 2020 as pent up demand works its way

in the established housing market, making it more savings on properties under $600,000.

While we expect first home buyers to remain

dominant in the land market, the stabilisation in

the established market should provide confidence among second home buyers to sell their current dwelling and upgrade to a larger house and land package in the growth corridors. The increased

presence of upgraders along with downsizers should assist with sales volumes over the next 12 months.

42

2018/19, resulting in developers restricting new

R P M R E A L E S TAT E G R O U P

slightly further in the range of 5% in the back half of

through absorbing the high level of unsold lots, which will have the added benefit of being more conducive

to the affordability range of first home buyer budgets.

THE POSITIVE OUTCOMES FOR BUYERS IN THE FORM OF REDUCED INTEREST RATES AND APRA CHANGES WILL AID THE MARKET IN ABSORBING THE HIGH LEVEL OF STOCK OVERHANG. NEVERTHELESS, EVEN WITH THE FINANCIAL STIMULUS NOW IN PLAY, COUPLED WITH OVERALL STRONG ECONOMIC VARIABLES (POPULATION GROWTH, EMPLOYMENT GROWTH AND GOVERNMENT SPENDING), THE OVERHANG WILL TAKE THE MAJORITY OF 2020 TO BE ABSORBED BEFORE DEVELOPERS CAN GET BACK TO A LEVEL OF NORMALITY IN TERMS OF ACTIVITY.

Beveridge $278k

Sunbury $299k

Diggers Rest $302k

Bacchus Marsh

$198k

$351k

Thornhill Park

$258k

$320k

$270k

Deanside

$317k

Tarneit Wyndham

$331k

Craigieburn $349k

Donnybrook $298k

Wollert $357k

$337k

$364k

Rockbank

Kalkallo

$320k

Burnside $407k

WHAT DOES A 400SQM LOT COST?

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

Strathtulloh

Frasers Rise

Aintree

$302k

Weir Views

$397k

Brook

$250k

$344k

Greenvale

Bonnie

Kurunjang

Mickleham

3 months to June 2019

Truganina $365k

Vale

$303k

Manor Lakes $287k

Point Cook

Mambourin $289k

Werribee $309k

$467k

Lyndhurst $412k

Clyde North Cranbourne $320k East

$316k

Geelong Armstrong Creek

$265k

$300k

Bellarine $205k

Cranbourne South

$355k

Berwick $429k

Clyde

Botanic Ridge

$355k

Officer $340k

$350k

43

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

COMMUNITIES BUYER SURVEY DATA

RECENT ANNOUNCEMENTS REGARDING INTEREST

Nevertheless, investors are still finding it challenging

buyers compared to just 56% in the same quarter last

MORTGAGE SERVICEABILITY BUFFER SHOULD

are also experiencing difficulty selling in a weak

over these 2 periods, highlighting the tight line banks are

RATE CUTS AND APRA’S REDUCTION IN THE START TO TAKE EFFECT IN THE SEPTEMBER

QUARTER, WITH IMPROVED ENQUIRY LEVELS IN THE LAND MARKET. THIS COINCIDES WITH IMPROVED SENTIMENT IN THE ESTABLISHED MARKET

THROUGH HIGHER AUCTION CLEARANCE RATES.

to obtain loans in current conditions. Upgraders

established market and/or are taking out bridging

loans which banks have been reluctant to issue since the Royal Commission.

As a result, the share of owner occupiers increased to 72% in June quarter 2019, up from 68% a year earlier.

In addition, of the owner occupier cohort, a significantly higher proportion of buyers (71%) were first home

72%

OWNER OCCUPIERS INCREASED TO 72% IN JUNE QUARTER 2019

44

R P M R E A L E S TAT E G R O U P

31%

year. Subsequently, non-first home buyers have fallen

applying to upgraders, coupled with their unwillingness to sell due to falling prices in the established market.

This increasing share of first home buyers indicate they don’t carry additional debt, and if they have a deposit

and are buying within their means, they can successfully enter the property market. Therefore they are ‘good’ customers for the banks.

47%

THERE WAS A SIGNIFICANTLY LOWER

LARGER SHARE OF FIRST HOME BUYERS

LESS THAN A THIRD - IN JUNE QUARTER 2019

OF PURCHASE

PROPORTION OF COUPLES WITH CHILDREN –

WITH MORE BUYERS RENTING AT THE TIME

The June quarter data also revealed a change in

children â&#x20AC;&#x201C; less than a third - in June quarter 2019

House and land packages were far more popular in

was a significantly lower proportion of couples with compared to 45% in the same period a year ago. Not surprisingly, buyers were also generally younger.

With a larger share of first home buyers, more buyers were either renting (47%) or living with parents (18%)

the type of housing product that people purchased. the current quarter (29%) compared to just 15% in the June quarter last year. In addition, the prominence of townhouses continues to grow, comprising 10% of sales compared to 2% a year earlier.

at the time of purchase compared to the same period last year with shares of 37% and 14% respectively.

29%

48%

HOUSE AND LAND PACKAGES WERE MORE

AN INCREASED SHARE OF BUYERS PURCHASING

THE JUNE QUARTER LAST YEAR

$500,000 INCREASED TO 48% THIS QUARTER.

POPULAR IN JUNE QUARTER 2019 COMPARED TO

HOUSE AND LAND OR A TOWNHOUSE FOR UNDER

THE LARGER PRESENCE OF FIRST HOME BUYERS ALONG WITH TIGHTER LENDING STANDARDS HAS RESULTED IN AN INCREASED SHARE OF BUYERS PURCHASING HOUSE AND LAND OR A TOWNHOUSE FOR UNDER $500,000, UP FROM 32% IN JUNE QUARTER 2018 TO 48% THIS QUARTER. Q2 RESIDENTIAL MARKE T RE VIE W

|

J U N E Q U A R T E R 2 019

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

With a higher number of first home buyers, there

45

Q2 2019 COMMUNITIES BUYER SURVEY DATA

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

June Quarter 2018

Investor OWNER OCCUPIER VS INVESTOR

Other

46

R P M R E A L E S TAT E G R O U P

2%

Investor

Other

28%

72%

Owner Occupier

0%

With Parents

0% 18%

Owner Occupier

45%

Owner Occupier

35%

Renting

37%

Other

3%

3rd Home

6%

2nd Home 1st Home

1%

34%

56%

Group

Renting

47%

Other

2%

3rd Home

7%

4th Home

2nd Home 1st Home

3% 17% 71%

Empty Nesters

2%

Empty Nesters

6%

Couple no Kids

28%

Couple no Kids

30%

21%

Single no Kids

Couple w/ Kids

HOUSEHOLD MAKEUP

Owner Occupier

With Parents

4th Home

OWNER OCCUPIER TYPE

68%

1% 14%

Group

LIVING CIRCUMSTANCES AT THE TIME OF PURCHASE

32%

June Quarter 2019

Single w/ Kids

Single no Kids

45% 3%

Couple w/ Kids Single w/ Kids

31% 7%

25%

June Quarter 2018 60>

18-24

8%

18-24

House & Land Land Only

2%

15% 83%

$600k>

27%

$500-$550k

21%

$550-$600k $450-$500k

BUDGET FOR HOME AND LAND PACKAGE

54%

$400-$450k

$350-$400k

$300-$350k <$300k

11%

10%

Townhouse

29% 61%

House & Land Land Only

$600k>

18%

$500-$550k

19%

$550-$600k

14%

$450-$500k

10%

$400-$450k

1%

$300-$350k

1%

53%

25-34

20%

6%

9% 23%

35-49

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

35-49

25-34

4%

60>

50-59

Townhouse

PURCHASE TYPE

2%

5% 31%

50-59

COMBINED AGE

June Quarter 2019

14%

22%

20% 5%

$350-$400k

1%

0%

<$300k

Source: RPM

Q2 RESIDENTIAL MARKE T RE VIE W

|

J U N E Q U A R T E R 2 019

47

FEATURE STORY:

Q 2 MCAORMK M EU T NOI V TE I ER SV I E W

LEGISLATIVE UPDATE: AMENDMENTS TO SALE OF LAND ACT 1962 THE VICTORIAN GOVERNMENT RECENTLY PASSED

Residential off-the-plan contracts that were validly

ONLY BE ABLE TO EXERCISE A SUNSET CLAUSE TO

23 August 2018 are not covered by the reforms.

NEW LAWS THAT SPECIFY DEVELOPERS WILL

RESCIND RESIDENTIAL OFF-THE-PLAN PROPERTY

rescinded by vendors under sunset clauses prior to

CONTRACTS BY OBTAINING WRITTEN CONSENT

Sunset clause provisions are commonly found in off-

SUPREME COURT OF VICTORIA.

the contract where the plan of subdivision has not

FROM THE BUYER, OR PERMISSION OF THE

The new laws on sunset clauses apply retrospectively from 23 August 2018 so that any existing and future off-the-plan contracts are protected.

As of 4 June 2019, a vendor may also seek an order from the Supreme Court of Victoria to allow them

to exercise a sunset clause. A rescission effectively

unwinds the contract as if it never existed and returns the parties to their original positions.

the-plan contracts to allow developers to terminate been registered by a specified date.

Consumer Affairs Victoria says the reforms “protect buyers … from developers deliberately postponing the completion of construction work in order to

terminate signed contracts under the sunset clause, and then sell the property at a higher price.”

While the new laws on sunset clauses apply from

23 August 2018, all other reforms in the Act will be implemented by no later than 1 March 2020.

Source: Consumer Affairs Victoria

48

R P M R E A L E S TAT E G R O U P

Q 2 MCAORMK M ET U NOI V TE I ER SV I E W

Q2 RESIDENTIAL MARKE T RE VIE W

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J U N E Q U A R T E R 2 019

49

OVERVIEW

SINCE PEAKING AT APPROXIMATELY 13,100

OTHER DWELLINGS IN DECEMBER QUARTER 2017,

APARTMENTS & TOWNHOUSES

APPROVAL ACTIVITY FOR MEDIUM DENSITY AND HIGH DENSITY DWELLINGS HAS CONTINUALLY DECLINED IN THE 6 QUARTERLY PERIODS

SINCE, WITH OTHER DWELLING APPROVALS IN JUNE QUARTER 2019 63% BELOW THE PEAK.

BOTH TOWNHOUSES AND APARTMENTS HAVE EXPERIENCED SIGNIFICANT DECLINES IN

APPROVALS DURING THIS 18 MONTH PERIOD. The peak in established house prices in late 2017/ early 2018 would have normally driven a greater shift in demand to relatively more affordable

dwellings. However, weak purchaser sentiment has led to demand for townhouses and apartments to

soften, exacerbated by other factors including the

removal of off–the–plan stamp duty concession for local investors.

Artist impression of Kingston townhomes at Carter Place in Armstrong Creek.

Builder: Porter Davis. Developer: APD Projects.

50

R P M R E A L E S TAT E G R O U P

LUKE KELLY

DIRECTOR, PROJECT MARKETING luke@rpmrealestate.com.au +61 400 688 520

The combination of increased stamp duty and taxes

townhouses and apartments) broadening from just

and severe lending curbs to overseas purchasers by

off–the–plan dwelling (which encompasses most new the land component price to the total contract price, including build. Hence it removed one of the main

advantages of purchasing a new dwelling compared to established housing.

LOCAL INVESTORS ALSO FACED TOUGHER BORROWING CONDITIONS FROM LENDERS FOCUSED ON REDUCING RISK ON THEIR RESIDENTIAL MORTGAGE BOOKS. THIS INVOLVED HIGHER STANDARD VARIABLE INTEREST RATES FOR RESIDENTIAL INVESTMENT LOANS AND INTEREST ONLY LOANS, WHICH ARE FAVOURED BY INVESTORS.

for offshore buyers, stricter Chinese capital controls local lenders has restricted demand from overseas

OTHER DWELLING APPROVALS

investors. This has mostly impacted approvals for

Victoria recorded 4,845 other dwelling approvals in

slowing of pre–sales leading to commencement

approval activity from the previous quarter and 32%

inner city apartment projects, with the subsequent of high rise developments either being delayed or abandoned altogether due to developers taking

longer or being unable to meet pre–commitment levels to secure construction finance.

In addition, the apartment market has been working through a considerable level of supply, raising the

prospect of an oversupply emerging in some pockets.

This is applying further downward pressure on prices in an already weaker property market, with recent

June quarter 2019, representing a 17% decline in

from the same quarter in 2018. Notably, this is the

lowest volume for approvals in any year during the same 3 month period since 2013.

Approval activity for both the medium density and

high density dwelling sectors experienced significant annual falls in the June quarter. Compared to the

same quarter in 2018, approvals were down 33% to 2,317 townhouses and 31% to 2,528 apartments.

reports suggesting some settlement issues arising.

However, the weakening trend differed for

have changed use to commercial projects given

2019, townhouse approvals were just 1.5% below

Consequently, many inner-city development sites current office market vacancy rates are low.

A P AQR2T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

This change resulted in stamp duty payable for an

townhouses and apartments. In June quarter

the corresponding figure in the previous quarter,

Q2 RESIDENTIAL MARKE T RE VIE W

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J U N E Q U A R T E R 2 019

51

OTHER DWELLING APPROVALS

A P AQR2T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

indicating that medium density approvals may be

sizeable reduction in apartment approvals continued in the current quarter, with approvals 27% below the March quarter.

Additionally, from a longer term perspective,

approvals of 10,916 townhouses over 2018/19 was

still the third highest on record. The corresponding

TOWNHOUSE APPROVALS

approaching the bottom of the cycle. Conversely, the

figure for apartments - 12,061 approvals - was the

15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

lowest financial year total since 2010.

attributed to the growing prominence of townhouse

development in greenfield areas, which is helping to maintain relatively high approval activity.

Year to June 2018

21%

Year to June 2019

20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 0

49%

Year to June 2015

Source: ABS R P M R E A L E S TAT E G R O U P

Year to June 2017

19%

22,000

2,000

52

Year to June 2016

10%

24,000

APARTMENT APPROVALS

market downturn over the last 18 months. This is

Year to June 2015

11%

26,000

This highlights that demand for townhouses has

held up better compared to apartments through the

18%

15%

Year to June 2016

15%

Year to June 2017

26%

Year to June 2018

46%

Year to June 2019

KEY MEDIUM DENSITY BUILDING DATA

June qtr. 2019

% change from previous qtr.

TOWNHOUSES

APARTMENTS

2,317

2,528

-1.5%

-27.4%

TOTAL 4,845

-16.9%

% change from previous yr

-33.2%

-30.7%

-32.0%

% change 12 months earlier

-21.0%

-45.7%

-36.2%

12 months to June qtr. 2019

COMMENCEMENTS Mar qtr. 2019

% change from previous qtr.

10,916

OTHER DWELLINGS 6,586

14.0%

% change from previous yr

-45.7%

% change 12 months earlier

-17.7%

12 months to Mar qtr. 2019

TOTAL APARTMENT & UNIT PRICES

27,821

MEDIAN PRICE

Jun qtr. 2019

$590,000

Jun qtr. 2018

$596,500

Mar qtr. 2019

12,061

COMPLETIONS

22,977

OTHER DWELLINGS

Mar qtr. 2019

5,098

% change from previous qtr.

-22.0%

12 months to Mar qtr. 2019

26,024

% change from previous yr

% change 12 months earlier CHANGE FROM QTR.

$586,500

NOTE: Approvals are to the current quarter (June 2019). While commencements and completions are delayed by a quarter (March 2019).

A P AQR2T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

APPROVALS

0.6%

6.2%

-9.2%

CHANGE FROM PREV. YR

1.1% Source: ABS, REIV Q 2 R E S I D E N T I A L M A R K E T R E V I E W | J U N E Q U A R T E R 2 019

53

A P AQR2T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

OUTLOOK

Property market sentiment has received a much-

unaffordable, in particular in the inner and middle

rate of 3%, vacancy rates have stabilised - particularly

purchasers has increased markedly following the

in demand to less expensive townhouses in these

- with this trend likely to continue in the short term.

needed boost recently. Borrowing capacity for

25 basis point cut to interest rates in June and July and the change in the serviceability test applied by

lending institutions from a flat 7.25% interest rate to

an interest rate of 2.5% above the prevailing variable

rate. Investors have been buoyed by the continuation of negative gearing and capital gains tax advantages

areas, which will drive medium density development.

Moreover, with townhouse prices also falling during

the downturn and recent improved borrowing power among buyers, townhouses in inner and middle ring suburbs have become more attainable.

following the Federal election.

In the outer/greenfield areas, townhouses will

Additional demand fundamentals for property,

buyers. Developers are increasingly offering more

on top of historically low borrowing costs, remain

strong, with high population growth and relatively

low unemployment. This should underpin both owner occupier and investor demand. Overall prospects for an improvement in activity for the remainder of 2019

and into 2020 are stronger for townhouses compared

to apartments, although any rebound for both sectors will be gradual.

Despite the price correction throughout 2018

and 2019, established houses remain relatively 54

ring suburbs. This should continue to support a shift

R P M R E A L E S TAT E G R O U P

continue to be a more realistic option for first home townhouse product in their estates to capture this demand after strong lot price growth and tough lending conditions in recent years priced out

many first home buyers in the traditional detached housing market.

In comparison, the outlook for the apartment market remains more subdued. High commencements

during the 4 years to 2018 is now translating into a

substantial amount of apartment stock being added to the market. Although below the balanced market

in the middle ring which has seen an improvement

The subsequent downward pressure on prices and

rents could discourage investors who have a short term view, with pre-sales continuing to struggle for momentum.

As a result, the pipeline of apartment projects is falling rapidly to allow for demand to absorb the current

high level of supply. This will lead to lower apartment

completions in coming years, and as pentâ&#x20AC;&#x201C;up demand builds, will set the scene for the next upswing in apartment activity.

This new project activity going through the pipeline

is vital given once supply is absorbed there will need to be ready-to-be-sold dwellings to meet demand.

Otherwise, a significant shortage will occur which will impact further on vacancy rates, rents and act as the catalyst for the next price upswing.

Image: Artist impression of Berkley townhomes by Soho Living.

LUKE KELLY

DIRECTOR, PROJECT MARKETING luke@rpmrealestate.com.au +61 400 688 520

A P AQR2T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

Q2 RESIDENTIAL MARKE T RE VIE W

|

J U N E Q U A R T E R 2 019

55

OVERVIEW

IN VICTORIA, FOREIGN DEMAND FOR NEW

DWELLINGS IMPROVED IN JUNE QUARTER 2019,

ACCOUNTING FOR AN INCREASED SHARE OF 12%

INTERNATIONAL

OF ALL NEW DWELLING PURCHASES.

The correction in housing prices from early 2018 and weakening Australian dollar has made residential property relatively more affordable for foreign

buyers. Moreover, with signs the downturn in the

property market is bottoming out, offshore buyers

may increasingly feel it is the right time to purchase in Melbourne.

Nevertheless, with the Victorian Government

increasing the additional duty rate of the contract

price from 7% to 8% from July 2019, some foreign purchasers will have likely brought forward their

purchase decision into June quarter 2018. Coupled

with increased scrutiny from the Foreign Investment Review Board, these disincentives could lead to the

share of dwellings purchased by foreigners to decline

again in the short term. Also, the proportion of foreign buyers purchasing established dwellings remained 56

R P M R E A L E S TAT E G R O U P

low at 4% in the June quarter.

JINYIN ZHANG

DIRECTOR, RPM INTERNATIONAL jinyin@rpmrealestate.com.au +61 451 898 886

This conclusion is supported by recent reports from

leading Chinese property selling platforms including

26%

property. Buyers are now looking at markets that

don’t have such hurdles including Vanuatu, Portugal,

Ireland, Malta and Spain, which arguably offer greater value for money.

There is also interest in countries that offer a ‘golden visa’ such as Greece and the US. A golden visa is

a permanent residency visa granted to individuals

who invest a certain sum of money, often through a property purchase.

While Chinese activity is low, Chinese interest in

24%

% OF FOREIGN PURCHASES BY DWELLING TYPE

continued fall in Chinese appetite for Australian

Q 2 IMNAT RE KR ENTA TOIVOENRAVLI E W

investorist, Juwai and ACProperty highlighting the

Australian property won’t disappear altogether

22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2%

because of China’s continued interest in other

0%

Australian exports including tourism and education.

■ New

■ Established

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

22%

15%

19%

14%

21%

14%

14%

12%

12%

13%

8%

10%

9%

11%

7%

9%

8%

9%

8%

6%

6%

4%

MAR 19

JUN 19

5%

12%

5%

4%

Source: NAB Quarterly Residential Property Survey

Q2 RESIDENTIAL MARKE T RE VIE W

|

J U N E Q U A R T E R 2 019

57

AUSTRALIAN ECONOMIC OUTLOOK

The Australian economy has weakened through

However, despite recent positive stimulus, any

The adverse impacts on the residential property

Product (GDP) growth slowing from 2.8% over

investment is still anticipated to be a drag on

projected to slow employment growth during 2019/20

Q 2 IMNAT RE KR ENTA TOIVOENRAVLI E W

the first half of 2019, evident by Gross Domestic calendar 2018 to a projected 2.1% over fiscal 2019.

Private consumption is expected to slow as high household debt and declining property prices

impact personal wealth and consumer confidence.

recovery is expected to be gradual. Dwelling

economic activity, as turnover activity of established dwellings and purchases of new dwellings remain

industry (a major employer across Australia) is

and keep economic growth steady at around 2.0%.

relatively weak.

Moreover, wages growth remains stubbornly low, which is also keeping the Consumer Price Index

(CPI) below the lower end of the Reserve Bank of Australia’s (RBA) inflation target of 2–3%.

Economic indicators (% change)

2018-19 f

2019-20 f

GDP

2.10

2.00

In response the RBA cut the cash rate by a total

Employment

2.40

1.40

Unemployment Rate

5.20

5.30

lower the cash rate to a historical low of just 0.75%.

Average Earnings

1.60

2.40

interest rates, increased borrowing capacity

Inflation

1.70

1.70

RBA Cash Rate

1.25

0.75

$A/US cents

0.70

0.75

of 50 basis points in mid-2019, with another 25

basis cut forecast by the end of the year. This will It is hoped subsequent falls to standard variable

following APRA’s removal of the 7.25% mortgage rate test and the first tranche of income tax cuts will lift consumer confidence.

58

AUSTRALIAN ECONOMY

R P M R E A L E S TAT E G R O U P

Source: NAB. The Forward View. f = forecast.

Q 2 R E S I D E N T I A L M A R K E T R E V I E W | J U N E Q U A R T E R 2 019

Q 2 IMNAT RE KR ENTA TOIVOENRAVLI E W

WITH THE FALLING AUSTRALIAN DOLLAR AND PRICES LIKELY TO HAVE BOTTOMED, OVERSEAS BUYERS MAY SEE THIS AS A PRIME TIME TO ENTER THE MARKET.

59

OVERVIEW

WHILE DWELLING PRICES HAVE EASED OVER THE LAST 12 MONTHS, THE HIGH NUMBER OF PEOPLE

RESIDENTIAL INVESTMENT

MOVING TO MELBOURNE FROM INTERSTATE AND OVERSEAS HAS UNDERSCORED CONTINUED

STRONG DEMAND FOR RENTAL ACCOMMODATION, WITH TOTAL MELBOURNE SITTING AT 2.2% -

THE SAME AS THE PREVIOUS QUARTER – AND

REMAINING BELOW THE ACCEPTABLE 3% TARGET. With ongoing low vacancy rates, modest annual

gains in rents across most defined areas for both

established houses, apartments and units, remained.

In general, rental increases were most prominent in

the inner ring for houses, and the outer ring for units and apartments. This suggests there is a desire to

reside closer to Melbourne’s CBD and an increased demand for other dwellings (units and apartments)

in the outer areas – particularly near public transport options. In comparison to the previous quarter, the middle ring had the biggest rental increases for

houses and the outer ring remained the same for units and apartments.

60

R P M R E A L E S TAT E G R O U P

MEDIAN RENTS Houses

INNER

MIDDLE It should be noted that the volume of houses for rent

OUTER

ring are fairly low, creating excessive fluctuation.

One-bedroom units and apartments in the outer

ring recorded the largest annual rental gain, with an

GEELONG

increase of 16.7%, followed closely by 4-bedroom

the past 12 months of $40 and $100 respectively.

Additionally, there has been robust rental increases in Melbourneâ&#x20AC;&#x2122;s outer ring and Geelong. This is not

Interestingly, there has been a slight decline in rents

INNER

MIDDLE

for both 4-bedroom houses and 3-bedroom units

and apartments in the outer ring. This suggests there is a desire for renters to reside in smaller and more affordable dwellings.

Jun-19

2

$565

$560

$570

4

$800

$800

3

$423

$440

3

2

4

2

$675

$378 $570

$340

$743

$700

$0

2.7%

3.2% 2.3%

$20

2.9%

$420

-$10

0.0%

$370

$20

4.3%

Change from previous year

$380

2

$310

$320

$320

$350

$360 $423

$430

Bedrooms

Jun-18

Mar-19

Jun-19

1

$380

$380

$390

3

$675

$670

$700

$420

4.0%

3.7%

$360

$380

3

$23 $28

$570

$430

3.8%

$450

$580

$380 $430

$25

$5

$100

$400

3 4

2 Year Average Annual Gain

$900

$380

$341

Change from previous year

$0

1.3%

$10

5.0%

$10

3.7%

Units & Apartments

surprising for Geelong given the level of development in recent years, contributing to demand in the area.

Mar-19

4

houses in the inner ring, with gains of 12.5%. This

increase is on the back of weekly rental growth over

Jun-18

R E QS 2I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

in the inner ring along with apartments in the outer

Bedrooms

OUTER

GEELONG

2

1

2

$500 $330

$495 $320

$495

$330

2 Year Average Annual Gain

$10

2.7%

-$5

1.6%

$25

0.4%

$0

2.8%

$20

3.3%

$400

$403

$405

$240

$300

$280

$40

8.0%

3

$400

$400

$393

-$8

0.3%

2

$300

3

1 2 1

3

$510

$333 $220

$380

$503 $350 $220 $310

$398

$530

$345 $220

$320

$400

$5

1.3%

$13

2.2%

$0

2.4%

$20

5.5%

$20

2.6%

Source: REIV Q2 RESIDENTIAL MARKE T RE VIE W

|

J U N E Q U A R T E R 2 019

61

OVERVIEW

Melbourneâ&#x20AC;&#x2122;s outer ring has seen a significant

In Geelong, 2 bedroom units and apartments had

VACANCY RATES & YIELDS

1-bedroom units and apartments, reflecting a weekly

which represents a $20 increase in weekly rent

While vacancy rates have only modestly changed

second largest average annual increase, with rental

the board, most areas remain below the acceptable

R E QS 2I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

16.7% increase in average annual rental gains for rental increase of $40 over the past 12 months.

However, it did fall by $40 from the previous quarter, highlighting the volatility of the dwelling type.

3.2%

over the past year. Three bedroom houses had the gains of 5.7%, also reflecting a weekly increase

of $20 over the past 12 months. Over the past 2

years, Geelong has averaged rental gains across

all dwelling types of between 2.4% and 5.5%, while the outer ring of Melbourne has averaged gains of between 0% and 8%.

MELBOURNEâ&#x20AC;&#x2122;S INNER RING HAS SEEN A 3.2%

Overall, across all regions, other dwellings performed

FOR 4 BEDROOM HOUSES

recorded in detached houses on a rolling 2-year

INCREASE OF 2 YEAR ANNUAL RENTAL GAINS

3.3%

IN THE MID-RING, 3 BEDROOM UNITS AND

APARTMENTS HAD A 2 YEAR AVERAGE ANNUAL RENTAL GAIN OF 3.3% 62

the largest average annual rental gain of 6.7%,

R P M R E A L E S TAT E G R O U P

slightly better when compared to the growth

average. Interestingly, 4-bedroom houses in the

inner ring had an annual average increase of 12.5% in comparison to the previous quarter which saw a significant reduction of 10.6%. This excessive

fluctuation once again highlights the low levels of rental properties available.

with either slight increases or decreases across

level of 3%. The exception is the middle ring, with

a vacancy rate of 3.4%, which is down from 3.6% in

the previous quarter. Consistently low vacancy rates

reinforce our view that there is no oversupply of stock in the market.

This being the case, rental growth has remained,

providing appealing yields for investors. For those

investing in detached housing in outer and regional areas, land value appreciation tends to be the

driving force in the earlier stages. However, with

vacancy rates at acute levels, and what seems to

be a movement from the middle to the outer ring for

renters, rental yields for detached houses, units and apartments in outer and regional areas top the list.

DAVID YANG

MANAGER, PROPERTY MANAGEMENT d.yang@rpmrealestate.com.au +61 402 446 058

Due to significant capital gains seen in both

the past 12 months, rental yields for all dwelling

quarter saw houses in regional areas reflect a yield

past 5 years, rental yields have been below long-

resulting in solid returns.

It’s important to note, units in the inner ring also

types across all regions have continued to increase,

term levels. Rental growth cannot compare to the

increases in capital gains. Nevertheless, with prices

Regional areas of Victoria continue to achieve

yields have picked up over the past 2 quarters with

coupled with robust rental prices given regional

moderating – particularly in other dwellings – rental

the highest yields due to lower purchase prices,

more modest overall gains in the June quarter. Over

Inner Total

Inner (0-4km)

Inner (4-10km)

Jun-18

Mar-19

Jun-19

2 Year Average

1.7

1.4

1.6

1.8

1.8 1.8

2.0 2.1

1.9

2.0

1.9

Geelong

Source: REIV

1.8

2.2 1.6

2.2 1.7

2.75%

2.85%

2.79%

Units

Jun-18

Mar-19

Jun-19

Middle

3.14%

3.24%

3.24%

1.6

1.9

2.62%

2.58%

4.08%

1.7

Melbourne Total

2.41%

2.32%

3.72%

1.5

2.5

2.28%

Regional

1.5

2.3

Middle

Inner

1.7

Outer (20+km exc. Mornington Peninsula)

3.3

Jun-19

3.08%

3.0

1.8

Mar-19

2.83%

3.4

1.6

Jun-18

Outer

3.6

1.6

Houses

2.0

2.4

Outer (Mornington Peninsula)

4.29% over the past 12 months.

YIELDS

Middle (10-20km)

Outer Total

continue to achieve high yields with an average of

areas are traditionally tightly held. The June

VACANCY RATE Melbourne

of 4.37%, with units and apartments at 4.97%.

R E QS 2I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

detached houses and other dwellings over the

2.4 2.1

1.8

Metro

Inner

2.56%

4.15%

Outer

3.29%

Regional

4.09%

Metro

Source: REIV, RPM

3.71%

4.49%

3.18%

4.37%

4.37%

3.48%

3.62%

4.85%

4.97%

3.90%

Q2 RESIDENTIAL MARKE T RE VIE W

|

3.97%

J U N E Q U A R T E R 2 019

63

R E QS 2I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

OUTLOOK Tighter lending conditions over the past 12 months

With supply generally sitting below demand levels,

Moreover, with pockets of apartments through

obtain finance. First home buyers have been

These positives provide key incentives for investors

completion, savvy investors with a medium to long

have made it increasingly difficult for buyers to

particularly affected in terms of reduced borrowing capacity coupled with a mandatory 10% deposit requirement. This has forced many ‘want-to-be’

homeowners to continue renting. Combined with strong population growth, vacancy rates have

remained at low levels – especially in suburbs with strong infrastructure and amenities.

64

R P M R E A L E S TAT E G R O U P

weekly rental prices and yields continue to increase. to enter the market, along with the removal of any changes to property taxes following the Federal election and recent interest rate cuts.

the middle ring looking to be discounted upon

term outlook can potentially pick up undervalued apartments in well-established and amenity-rich suburbs that offers solid returns.

R E QS 2I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

A CAUTIONARY NOTE IS THAT FROM THE FEDERAL THE MIDDLE OFELECTION 2020, NEW RESULT RENTAL WILL LIFT UNCERTAINTY ABOUT NEGATIVE REGULATIONS WILL COME INTO PLAY WHICH HEAVILY RESTRICTGAINS LANDLORDS. GEARING AND CAPITAL AS A RESULT, ONCE THESE TAX, PROVIDING A IMPLEMENTED, MORE POSITIVE CHANGES COULD DISCOURAGE SOME OUTCOME FOR INVESTORS. INVESTORS FROM ENTERING THE MARKET.

Q 2 R E S I D E N T I A L M A R K E T R E V I E W | J U N E Q U A R T E R 2 019

65

RESIDENTIAL INVESTMENT BUYER SURVEY DATA

THE PROPORTION OF INVESTORS IN THE

The restrictive lending landscape is further reflected

DECLINE, FALLING FROM 32% IN JUNE QUARTER

Over the June quarter this year, 49% of lots were

R E QS 2I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

GREENFIELD MARKET HAS CONTINUED TO

2018 TO 28% IN JUNE QUARTER 2019. ONGOING TIGHT CREDIT CONDITIONS HAS RESULTED IN INVESTORS MOVING AWAY FROM LAND-ONLY PURCHASES DUE TO GREATER UNCERTAINTY

AROUND BORROWING CAPACITY AT THE TIME OF SETTLEMENT. HENCE THIS TYPE OF PURCHASE HAS FALLEN FROM 82% TO 57% OVER THE 2 PERIODS. CONVERSELY, HOUSE AND LAND

in the size of land purchased between the 2 periods.

300sqm or under compared to 24% for the same period a year earlier. This indicates investors still

see property as a solid investment. However, their

mindset has changed in terms of moving away from

buying a traditional block and 3 to 4 bedroom house to a smaller lot or more so a townhouse due to financial constraints.

PURCHASES HAVE INCREASED, ALONG WITH

This uncertainty is reflected in the time period

SETTLEMENT TIMEFRAMES AND LOWER OVERALL

In June quarter 2018, 40% of investors wanted at

TOWNHOUSES WHICH COME WITH SHORTER PURCHASE PRICE.

regarding desire to settle (i.e. when to start to build). least 3 months before settlement to organise their

finances compared to just 13% in June quarter 2019.

This means 87% wanted to start building within 3

months to limit uncertainty around their borrowing capacity. In fact, 71% wanted to start immediately.

WHILE THE LANDSCAPE FOR INVESTORS HAS CHANGED OVER THE PAST 12 MONTHS, SOME THINGS REMAIN THE SAME, INCLUDING THE NUMBER OF VISITS TO THE ESTATE PRIOR TO PURCHASE, WITH THE MAJORITY VISITING ONLY ONCE OR TWICE. IN ADDITION, THE KEY DECIDING FACTORS TO BUY IN A PARTICULAR ESTATE BY AN INVESTOR INCLUDES LOCATION, PRICE, AFFORDABILITY AND PROXIMITY TO AMENITY AND INFRASTRUCTURE. ALSO, THE MAIN SOURCE OF MARKETING IS STILL LARGELY THROUGH WORD OF MOUTH (BUILDER/FAMILY/FRIEND REFERRAL).

RPM surveys every buyer on its clientsâ&#x20AC;&#x2122; estates in the greenfield market. 28% of all buyers indicated they were investors. The following illustrates demographic and purchase intent changes amongst this cohort based on surveys from the June quarter 2019 compared to the same quarter in 2018.

66

R P M R E A L E S TAT E G R O U P

June Quarter 2018

June Quarter 2019 5%

Other

14%

Builder Referral

35%

Family or Friend Herald Sun Home Mag Newspaper: Local

0% 0%

16% 10%

Google Realestate.com

7%

Project Website

2% Over 12 months 6-12 Months

3-6 Months

TIME TO START BUILDING AFTER SETTLEMENT

Within 3 Months Immediately

4> 3

NUMBER OF ESTATES VISITED

2 1

House and Land

16%

Land Only

15% 17% 23% 37% 7%

10% 36% 47%

0% 0% 0%

TV

0%

Direct Mail

6%

Signage

3%

Radio

3%

Website: Other

0%

Mypackage.com

9% 17%

Google Realestate.com

0%

Project Website

11% 8%

0%

Newspaper: Metro

Townhouse

82%

17%

R E QS 2I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

0%

Radio Website: Other Mypackage.com

PURCHASE TYPE

Newspaper: Local

13%

Signage

Townhouse

0% 0%

Direct Mail

ADVERTISEMENT SOURCE

0%

0%

TV

46%

Family or Friend Herald Sun Home Mag

0%

Newspaper: Metro

0%

Other Builder Referral

House and Land

Land Only

32%

57% 0%

Over 12 months

10% 3% 16%

6-12 Months 3-6 Months

Within 3 Months

71%

Immediately

0%

4>

6% 29% 65%

3 2 1

Q2 RESIDENTIAL MARKE T RE VIE W

|

J U N E Q U A R T E R 2 019

67

RESIDENTIAL INVESTMENT BUYER SURVEY DATA

June Quarter 2018 701SQM>

0%

651-675SQM

0%

0%

576-600SQM

1%

526-550SQM

4%

476-500SQM

13%

426-450SQM

27%

376-400SQM

14%

326-350SQM

276-300SQM

7%

276-300SQM

<250SQM

8%

<250SQM

551-575SQM

526-550SQM

501-525SQM

476-500SQM

R E QS 2I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

0%

626-650SQM

576-600SQM

451-475SQM

426-450SQM

401-425SQM

376-400SQM

351-375SQM

326-350SQM

301-325SQM

251-275SQM

0% 1%

4% 1%

5% 4% 1%

9%

Facilities

3%

Investment

5%

Community Design

Schools Shops

Lot Size

Presentation Parks/Water Proximity

Affordability

Location/Area

R P M R E A L E S TAT E G R O U P

651-675SQM

0%

601-625SQM

68

0%

0%

626-650SQM

TOP 3 BEST FEATURES OF ESTATE

701SQM>

676-700SQM

676-700SQM

LOT SIZE

June Quarter 2019

601-625SQM

0%

451-475SQM

401-425SQM

351-375SQM

301-325SQM

251-275SQM

0% 9%

0% 2%

0%

22% 12%

7%

9%

33%

Investment

6%

Schools

6%

Lot Size

29 %

0%

0%

3%

21%

2%

Facilities

Design

11%

2%

501-525SQM

2%

7%

3%

0%

Community

3%

0%

551-575SQM

7%

6%

0%

Shops

Presentation Parks/Water Proximity

Affordability

Location/Area

1%

4%

5% 4%

5%

2% 4%

14%

23%

30%

OUR TEAM ERIC DICK

JINYIN ZHANG

eric@rpmrealestate.com.au

jinyin@rpmrealestate.com.au

EXECUTIVE CHAIRMAN +61 418 349 267

DIRECTOR, RPM INTERNATIONAL +61 451 898 886

KEVIN BROWN

CHRISTIAN RANIERI

kevin@rpmrealestate.com.au

christian@rpmrealestate.com.au

CHIEF EXECUTIVE OFFICER +61 418 397 577

DIRECTOR, TRANSACTIONS & ADVISORY +61 416 445 078

LUKE KELLY

MICHAEL STAEDLER

luke@rpmrealestate.com.au

m.staedler@rpmrealestate.com.au

DIRECTOR

+61 400 688 520

RESEARCH MANAGER +61 434 619 280

PETER GRANT

DAVID YANG

peterg@rpmrealestate.com.au

d.yang@rpmrealestate.com.au

DIRECTOR, COMMUNITIES +61 411 494 499

MANAGER, PROPERTY MANAGEMENT +61 402 446 058

ROD ANDERSON

DIRECTOR, COMMUNITIES rod@rpmrealestate.com.au +61 417 595 859

DISCLAIMER Although all reasonable care has been taken in the preparation of this document, RPM Real Estate Group Pty Ltd takes no responsibility for the accuracy of the information contained herein. It is recommended that all the information be verified if it is to be used for commercial purposes.

70

R P M R E A L E S TAT E G R O U P

T +61 3 9862 9555

Level 5, 52 York Street

South Melbourne VIC 3205 rpmrealestate.com.au