RPM Quarterly Report - Q3 2019

S E P T E M B E R

2 0 1 9

MARKET REVIEW

Q U A R T E R

RESIDENTIAL

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INSIDE

LEAD INDICATORS

DEVELOPMENT SITES

4 6

14

APARTMENTS / TOWNHOUSES

54

INTERNATIONAL

58

RESIDENTIAL INVESTMENT

Q3 MARKET OVERVIEW

FROM OUR CEO

44

FEATURE STORIES:

COMMUNITIES

16

10

Industry Leaders Insights Townhouses get the tick of approval

from buyers

50

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

3

FROM OUR CEO

WELCOME TO RPM REAL ESTATE GROUP’S Q3

Greater Melbourne’s median lot price edged only

PLEASED TO PROVIDE A COMPREHENSIVE UPDATE

due to a corresponding 1% rise in the median lot size

Q3 MARKET OVERVIEW

RESIDENTIAL MARKET REVIEW. ONCE AGAIN WE’RE AND ANALYSIS OF VICTORIA’S NEW HOUSING AND INVESTMENT MARKET.

The September quarter marked a strengthening in

buyer sentiment, with the recovery in the land market well underway. Various recent stimulus measures

have started to flow through to the numbers, with KEVIN BROWN

CHIEF EXECUTIVE OFFICER RPM REAL ESTATE GROUP

4

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

month-on-month lot sales increasing for the sixth

consecutive month. On a quarterly basis, gross lot sales climbed 48% from the previous quarter to 2,657.

slightly higher to $315,500 from the previous quarter to 395 sqm.

Buyers are highly price sensitive, with developers

re-cutting stages to feature more medium density

stock, reflected in a rising proportion of townhouse purchases, up from 4% a year ago to 19% in the September quarter.

In the development site space, the uptick in retail lot sales volumes is generating renewed transaction

activity among developers, many of whom sat out of the market for the past 12 months but are now

re-stocking their pipelines. In the infill market, smaller boutique developments ranging between $1m and $5m continue to perform well.

Volume apartment sites continue to struggle, with

MICHAEL STAEDLER

quarter falling 43% from the same time a year

m.staedler@rpmrealestate.com.au

approval activity for apartments in September

RESEARCH MANAGER

ago. Prospects for an improvement in activity is

+61 434 619 280

Q3 MARKET OVERVIEW

IF SALES VOLUMES CONTINUE TO TREND UPWARDS AT CURRENT RATES, THE LAND MARKET SHOULD RETURN TO A DESIRED SUSTAINABLE LEVEL OF APPROXIMATELY 16,000 LOTS PER ANNUM IN THE NEXT 6 TO 9 MONTHS.

far stronger for townhouses than apartments,

particularly with solid gains in housing values in

recent months which will steer buyers towards quality townhouses in the middle and outer rings.

The data contained within this report was prepared

The weak spot in building approvals is perhaps the

property experts and GIS analysts.

next few years. The industry needs to keep building

Research underpins the core strategic decision

or face a looming undersupply and subsequent

on current economic and housing conditions,

key challenge for the new housing market over the

by RPM’s research team consisting of economists,

more housing to absorb ongoing population growth

making capability at RPM, providing in-depth analysis

price pressures.

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.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

5

ECONOMIC ACTIVITY GROSS DOMESTIC PRODUCT (GDP)

1.96% 2.48% 12 month change to June qtr. 2019

5 year average

CONSUMER PRICE INDEX (CPI) Q 3L E M AA DR KI N ET D I OC VA ET RO VR ISE W

1.67%

Sep-19

Source: ABS

1.89%

Same month year earlier

VIC POPULATION

STATE FINAL DEMAND (SFD) - VIC

3.43% 4.10%

12 month change to June qtr. 2019

5 year average

RETAIL TURNOVER - VIC

3.05% 4.95% Sep-19

Same month year earlier

NATURAL INCREASE

5,107 Mar-19

10,655

Same qtr. year earlier

% change - same qtr. last year

52.1%

% change - 12 months earlier

12.0%

OVERSEAS MIGRATION

31,709 Mar-19

30,962 Same qtr. year earlier

CASH RATE

0.75 % Sep-19

1.25% Jun-19

1.50% Sep-18

Source: RBA 6

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

VARIABLE RATE

% change - 12 months earlier

0.5%

3,518

4.94% Sep-19

5.15% Jun-19

5.31% Sep-18

3 YEAR FIXED RATE

4.25% 3.36% Sep-19

Sep-19

4.46% 3.88% Jun-19

Jun-19

4.62% 4.11% Sep-18

Sep-18

12 months to Mar-19 2.4%

Mar-19

DISCOUNTED RATE

86,706

% change - same qtr. last year

NET INTERSTATE MIGRATION

BORROWING RATES

34,029

12 months to Mar-19

3,947

Same qtr. year earlier

12,780

12 months to Mar-19

% change - same qtr. last year

10.9%

% change - 12 months earlier

15.4%

NATIONAL TOTAL CHANGE

VIC TOTAL CHANGE

388,763

133,515

1.56%

2.08%

change from Mar-18 to Mar-19 % change - same qtr. last year VIC share

34%

■ Negative change ■ Positive change

TOTAL POPULATION

AUS 25,287,394 VIC 6,566,170

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

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

15.41 41.12 17.10 62.10

1.0% 37.1% 3.1% 33.1% 0.7% 34.0% 1.8% 21.5% 1.6% 40.4% 5.9% 51.8%

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

2.5% Source: ABS

4.7% 4.8% 4.6% Sep-19

Source: ABS

Jun-19

Same time last year

CONSUMER SENTIMENT

98.2 Sep-19

100.5 Sep-18

Source: Westpac-Melb institute

BUSINESS SENTIMENT

-0.4 Sep-19

11.9

Source: RBA/NAB

Sep-18

The Westpac-Melbourne Institute Consumer Sentiment

WAGES

May-19

UNEMPLOYMENT RATE

Q 3L M E AA D R KI E N TD IOC VA ET ROVR ISE W

Last 12 months

32.51 103.22

% 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 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

7

VIC FINANCE NO. OF FHBS FINANCED

9,395

8,623

Sep-19

Same qtr. year earlier

NO. OF NON-FHBS FINANCED

19,851 21,502 Q 3L E M AA DR KI N ET D I OC VA ET RO VR ISE W

Sep-19

Same qtr. year earlier

FINANCE FOR NEW DWELLINGS

7,887 Sep-19

8,002

Same qtr. year earlier

VALUE OF LOANS - OWNER OCCUPIERS

$12.47B $12.64B Sep-19

Same qtr. year earlier

9% 8% 1% 1%

AVERAGE LOAN SIZE (FHBS)

$379,200 $360,900 Sep-19

Same qtr. year earlier

AVERAGE LOAN SIZE (NON-FHBS)

$448,600 $443,000 Sep-19

Same qtr. year earlier

FINANCE FOR ESTABLISHED DWELLINGS

21,359 Sep-19

22,123

Same qtr. year earlier

VALUE OF LOANS - INVESTORS

$4.30B Sep-19

$4.82B

Same qtr. year earlier

5% SHARE OF FHB LOANS

1% 3% 11%

32.1% 28.6% Sep-19

Same qtr. year earlier

Source: ABS

MELBOURNE PROPERTY MEDIAN HOUSE PRICE

$830,000 Previous qtr.

$829,000

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

Sep-19

Sep-19

$613,500

Sep-19

$794,000

MEDIAN UNIT PRICE

4.5% 0.1%

$590,500 Previous qtr.

$599,500

Same qtr. year earlier

AUCTIONS HELD

$315,500

3.9% 2.3%

$310,000 Previous qtr.

$321,000

Same qtr. year earlier

2,421

CLEARANCE

Sep-19 1.8% 1.7%

2,382 Jun-19

3,398

Same month year earlier

78% 67% 58%

VIC BUILDING DETACHED HOUSE APPROVALS 8,856 Sep-19 10,019 Same qtr. year earlier 35,582 Last 12 months

11.6% 10.1%

HOUSE COMMENCEMENTS

36.0% 40.1%

15.0% 5.5%

6,808 Jun-19 8,811 Same qtr. year earlier 25,310 Last 12 months

22.7% 31.1%

7.7%

Sep-19

16,325 21.0%

Same qtr. year earlier

56,784 24.3%

Last 12 months

15,371 Jun-19

18,884 18.6%

Same qtr. year earlier

25,310 31.1%

Last 12 months

TOTAL COMPLETIONS

OTHER COMPLETIONS

6.6%

12,894

TOTAL COMMENCEMENTS

OTHER COMMENCEMENTS

HOUSE COMPLETIONS 9,756 Jun-19 10,442 Same qtr. year earlier 39,384 Last 12 months

4,038 Sep-19 6,306 Same qtr. year earlier 21,202 Last 12 months

Q 3L M E AA D R KI E N TD IOC VA ET ROVR ISE W

8,563 Jun-19 10,073 Same qtr. year earlier 36,452 Last 12 months

TOTAL DWELLING APPROVALS

OTHER DWELLING APPROVALS

7,895 Jun-19 8,325 Same qtr. year earlier 25,329 Last 12 months

17,651

5.2% 12.9%

Jun-19

18,767 5.9%

Same qtr. year earlier

64,713 1.4%

Last 12 months

Source: ABS

MELBOURNE PROPERTY VACANCY RATE - MELB

2.2% 2.0% Sep-19

Sep-18

AVERAGE DAYS ON MARKET - METRO MELB

33

Sep-19

38

Sep-18

MEDIAN METRO HOUSE RENT

$460 Sep-19

$460 Sep-18

0.0%

MEDIAN METRO OTHER DWELLING RENT

$430 Sep-19

$420 Sep-18

2.4%

Source: REIV Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

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FEATURE STORY:

INDUSTRY LEADERS INSIGHTS RPM: Since the last quarter, what have been the

So prices are rising on one hand but it’s hard to get

property market?

to high density sales. Pre-sales are really hard to

Q3 MARKET OVERVIEW

key developments in Victoria’s residential

DG: I think there are 2 key developments worth DANIEL GRADWELL

ASSOCIATE DIRECTOR PROPERTY AT ANZ

WITH THE MARKET SHOWING SIGNS OF RECOVERY

highlighting, and that is the differences in supply and

come by. It reflects people’s concerns over building quality and cladding issues, especially in Sydney.

demand. On the demand side, house prices in the

We’re not building as much as we need to absorb still

up about 3% in Melbourne and Sydney. So it’s a fairly

to turn the tap on overnight. Large lead times are

established market are rising at a pretty solid rate, material turnaround.

rapid population growth. Remembering also it’s hard required to get projects off the ground.

FOLLOWING A RANGE OF STIMULUS, RPM

The latest rate cut announced in early October will

Construction – whether it’s housing or infrastructure

DANIEL GRADWELL, ASSOCIATE DIRECTOR,

further support. It shows everything being talked

terms of flow through to the rest of the economy,

CONTINUES ITS INDUSTRY LEADERS Q&A WITH PROPERTY AT ANZ TO FIND OUT WHAT EFFECT

THESE MEASURES ARE HAVING ON THE ECONOMY, THE PROPERTY MARKET AND BUYERS.

also start to flow through the market, providing about in the last 3 months about improved

borrowing power and interest rates is having the intended impact.

The opposite of that strength is weakness on the

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

or commercial property – has large multipliers in

which is part of the overall weakness we are seeing.

RPM: Has the market actually bottomed/are we in recovery?

construction side. Building approvals have been

DG: I think we’ve passed the bottom now. There’s no

level since 2012, with further declines likely.

are broadening. Initially it was higher-end product,

falling for the last 3 quarters and are at the lowest

10

building approvals off the ground – especially medium

sign of prices slowing down. In fact, price increases

but price increases are starting to flow through at the lower end of the market and regional centres too.

10

10 0

Expected to decrease

commodity prices are still quite high, and with a weak

20

20

0

�10

�10

�20 �30

�20

�40 �50

plenty of international tourists visiting our shores,

Y�Y % CHANGE �TREND�

Expected to increase

30

12

13

Debt finance availability expectations (LHS)

14

15

16

17

Quarterly residential building approvals (RHS)

RPM: What are the key economic indicators telling us?

DG: Again I think it’s a couple of things.

18

19

20

�30

Source: ANZ-Property Council

job ads) it suggests the labour market is going to be

are still looking good.

RPM: How much of an effect has regulatory easing actually had?

DG: There are still issues working in a downward

direction including the HEMs and CCR measures I mentioned last quarter, but the impact of lower

interest rates and APRA changes are by far having the stronger overall effect.

The number of loans being approved has really

and wages growth anytime soon.

nationally the growth in new investment mortgage

muddling through. We won’t be seeing employment

Secondly, regarding the international outlook, global

indicators including capital expenditure plans and

at Australia’s relationship with the rest of the world

hiring intentions (based on ANZ Research’s series of

international exposures directly relevant to Australia

weak for a while. So the metrics suggest we are just

Firstly, the labour market. There’s still a lot of spare capacity. If you add in a bunch of forward-looking

Australian dollar we’re running a trade surplus. The

risks haven’t translated in Australia yet. If you look - particularly our external sector – there are still

Q3 MARKET OVERVIEW

DEBT FINANCE AVAILABILITY EXPECTATIONS IN YEAR AHEAD �NET BALANCE�

30

40

stepped up in the last few months. In August,

loans was the highest in 3 years (increasing 5.7%), coming off a pretty strong July result. So it looks

like investors are really starting to come back into the market.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

11

Q3 MARKET OVERVIEW

FEATURE STORY: INDUSTRY LEADERS INSIGHTS

OVERALL FINANCE APPROVALS IN VICTORIA WERE UP MORE THAN 10% OVER THE LAST 2 MONTHS, WITH EACH OF THE INVESTOR, OWNER OCCUPIER AND FIRST HOME BUYER SEGMENTS INCREASING. DANIEL GRADWELL

12

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

The broader improvement in the market is coming through in the types of buyers also, with first

population growth.

concessions. This broadening theme is true in

One thing to note is household debt is something to

were up more than 10% over the last 2 months, with

still rose faster than incomes. But on the flipside, we

Victoria as well. Overall finance approvals in Victoria each of the investor, owner occupiers and first home buyer segments increasing.

But if I’m looking at approval numbers, one of the

downsides is that this growth is limited to purchases of existing dwellings, not new dwellings. Finance for construction of new homes remains weak. In terms

keep an eye on. Even with the downturn, credit growth also have very high net wealth if you consider house

prices versus your debt on it. Just because we have a

lot of debt, that in itself doesn’t mean the economy or

RPM: What’s the outlook for the remainder of the year?

DG: I think prices will keep rising through the remainder of the year. The key reason is there’s fairly solid sentiment

in the market. And that’s before the October rate cut will start to flow through the system. ANZ Research’s latest

Housing Update report forecasts annual price growth in

Melbourne peaking in mid-2020 in the low double digits.

prices are going to crash, because we have a higher

A key issue is there is still a real shortage of supply. While

slowdown.

this time of year, which adds to price pressures. I do think

level of wealth backing that. But we are vulnerable to a

the number of listings is picking up, it’s still really low for we will eventually start to see new listings and turnover

of lending to developers - and ANZ is strong in this

The broad macro indicators are valuable in this

but the problem is we need pre-sales coverage.

a real concern. Debt isn’t a huge issue and the economy

On the construction side, in the next 6 months we

shows there is a real importance on regulators and

speaking, every time we’ve seen access to finance

market - there is appetite to lend, especially in Victoria,

It comes back to the end purchaser. If no-one is

buying off the plan apartments or in the greenfields

– even if developers are confident their projects will sell once built – regulatory requirements make it

difficult for banks to lend. It can be tricky to find the

equilibrium between responsible lending and making

instance. If unemployment was much higher it would be is still growing, but we could become vulnerable. It

the Reserve Bank to ensure the Australian economy continues to expand through job creation, including

new additions from migration growth, and that we start to see some improvement in wages.

Q3 MARKET OVERVIEW

home buyers taking advantage of stamp duty

sure that we build enough housing to absorb our

get back to historical normal numbers.

should start to see approvals tick up again. Historicallyimprove it filters through to a pick-up in approvals.

Given ongoing population growth, especially in Victoria, we have to keep building more housing.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

13

OVERVIEW

OVER THE SEPTEMBER QUARTER THE DEVELOPMENT SITE MARKET EXPERIENCED AN INCREASE IN

DEVELOPMENT SITES

TRANSACTION ACTIVITY ACROSS BOTH THE GREENFIELD

AND INFILL SEGMENTS ON THE BACK OF RENEWED BUYER CONFIDENCE AND A POSITIVE SHIFT IN MOMENTUM.

The market is also responding to pent up demand, with many developers who, having sat out of the market for the past 12

months, are now moving to capitalise on opportunities to set them up for the return to stabilised market conditions over the next 12 to 36 months.

A combination of macro-prudential measures and an

uptick in sales has also given developers confidence to acquire sites.

In the greenfield space, pent up demand from first home buyers is driving retail sales activity which is translating

into confidence among developers at a wholesale level. The market is also nearing the end of the valuation risk period,

with lots sold at the peak in 2017 now settling. This provides

a baseline for developers to model and build a project profile.

14

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

CHRISTIAN RANIERI

DIRECTOR, TRANSACTIONS & ADVISORY christian@rpmrealestate.com.au +61 416 445 078

There is a growing preference towards more mature,

Developers with existing stock have also had time

In addition, while access to credit has improved, the

prepared to take a risk. The recent boom placed

particularly medium density, which has underscored

applicants means the entry point for apartments at

PSP-approved assets, with many developers not

in significant delays to planning approvals at both a

state and local level. That said, quality opportunities without a PSP are still attractive for certain

developers, subject to favourable terms aligned to planning outcomes.

AS SOME GROWTH CORRIDORS START TO FILL OUT, WE ARE SEEING RENEWED DEMAND FROM INDUSTRIAL PLAYERS ENTERING THE MARKET CHASING YIELDS OF AROUND 5% - 6%, WHICH IS PARTICULARLY ATTRACTIVE AS INTEREST RATES CONTINUE TO FALL.

a growing proportion of sales. This trend is expected to continue, with average lot sizes in the greenfield corridors expected to reduce to an average of 350 sqm.

banks’ still tight scrutiny on expenditure for mortgage around $450,000 is still out of reach for many buyers whose borrowing capacity has been diminished.

The infill market has seen increased activity in smaller

OUTLOOK

These developments comprising around 15-20

market, which may well experience some ‘hyper

boutique developments ranging from $1m and $5m.

apartments, townhouses or mixed use spaces, offer less risk and faster project turnarounds.

Volume apartment sites continue to struggle

given the absence of investors due to continuing

There is renewed energy in the development site activity’ in the short term from pent up demand and

lack of transactions prior to the current quarter. This will likely moderate over the medium term to normal transaction activity and stable market conditions.

disincentives and lack of depth in the market to

It is unlikely we will see a sharp rebound given the

are finding it difficult to see value due to the cost

economic indicators including static wages and

soak up large apartment supply. Many developers of construction.

QD3E V M EA LROK PE M T EONVT E S R IVTI EE SW

immense pressure on authority resources, resulting

to adjust their plans and offer a diversity of product,

continuing retreat of investors and sluggish broader employment growth.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

15

OVERVIEW

THE REBOUND IN BUYER SENTIMENT

STRENGTHENED THROUGH SEPTEMBER

QUARTER 2019, WHICH HAS TRANSLATED TO AN

COMMUNITIES

IMPROVEMENT IN THE NUMBERS WITH MONTH-

ON-MONTH GROSS SALES INCREASES, RISING TO 981 LOTS IN SEPTEMBER.

The stimulus measures including relaxed lending restrictions and 2 mid-year interest rate cuts

have given buyers confidence and more certainty around their borrowing capacity and subsequent

overall house/land budget. Improved loan approval

timeframes are also allowing potential purchasers to act more swiftly with their buying decision.

Buyers continue to take advantage of the attractive

incentives, rebates and deposit terms still available,

with discounts totaling around 10% of the retail listed lot price. The ongoing incentives aim to move a still substantial amount of unsold lots on the market,

which increased to a total of 5,800 lots at the end of the quarter.

16

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

LUKE KELLY

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

Greater Melbourne’s median lot price increased

increase in lots on the market can be attributed to

quarter but remains 1.7% (-$5,500) down from the

supply in September quarter 2019, however the

the volume of stock returning to market, rising to

963 lots. Of note is that 24% of all stock sold was

titled lots, compared to 12% last quarter. This titled stock is being put back on the market at attractive

rates, which provides an appealing option to buyers who don’t want to wait 12-18 months to start building their home.

1.8% (+$5,500) to $315,500 from the previous

same quarter a year ago. This marginal quarterly growth is due to a corresponding 1% rise in

median lot sizes to 395sqm. The median lot size

remained below 400sqm as a result of many new

and existing estates re-cutting stages to feature a higher percentage of medium density and smaller conventional lots (under 300sqm).

Our prediction in the last quarterly report that the

While strengthening, purchaser demand remains

September quarter, the growth areas of Melbourne

product (lot size) at the right price point is still the

land market has bottomed out, has eventuated. In the and Geelong recorded 2,657 gross lot sales, an

increase of 861 lot sales or 48% from the previous quarter. This halts the run of quarter-on-quarter

declines in gross lot sales over the last 12 months.

However, the recovery in sales activity is mild, with gross lot sales still 35% down annually.

highly sensitive to affordability. Supplying the right

48%

THE GROWTH AREAS OF MELBOURNE AND

GEELONG RECORDED 2,657 GROSS LOT SALES,

AN INCREASE OF 861 LOT SALES OR 48% FROM THE PREVIOUS QUARTER.

1.8%

biggest driver of sales activity. Demonstrative of this,

GREATER MELBOURNE’S MEDIAN LOT PRICE

among all LGAs in the September quarter. It came off

PREVIOUS QUARTER.

Casey recorded the highest number of gross lot sales

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

Encouragingly, gross lot sales outpaced new lot

INCREASED 1.8% (+$5,500) TO $315,500 FROM THE

the back of an 8.3% annual median price correction, which was somewhat larger than the corresponding 2% fall in the median lot size.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

17

OVERVIEW

MELBOURNE GROWTH CORRIDORS

200

7,000

180

5,000

120

4,000

100 80

3,000

60 40

0

SEP 16

Active Estates

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

$325K>

$301K $325K

430

$275K $300K

425

300,000

420

MEDIAN LOT PRICE �$�

415

250,000

410

200,000

405 400

150,000

395

100,000

390 385

50,000 0

1,000

Gross Lot Sales

New Estates

350,000

$251K $275K

<$250K

380 SEP 16

Median Lot Size

18

% OF TOTAL GROSS LOT SALES

2,000

20

MEDIAN LOT SIZE �SQM�

NUMBER OF ESTATES

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

140

GROSS LOT SALES

6,000

160

DEC 16

MAR 17

Median Lot Price

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

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

375

0%

10%

Sep Qtr 2019

20%

Sep Qtr 2018

30%

Sep Qtr 2017

40%

50%

Source: RPM

SEP QUARTER 2018

CASEY

10%

CARDINIA

5%

HUME MITCHELL

9% 2%

SEP QUARTER 2019

Sep Quarter ‘19 Median Lot Price

Change from Sep Quarter ‘18 CASEY

22%

CARDINIA

5%

WHITTLESEA 10% HUME MITCHELL

14% 1%

WHITTLESEA 8% MELTON

MELTON

19%

Change from Sep Quarter ‘18

GREATER GEELONG

15%

GREATER GEELONG

11%

GREATER GEELONG

$311,200

$302,000

$330,000

$280,000

1.2%

-6.4%

-7.0%

2.8%

-$20,500

-$25,000

$7,550

398.0

400.0

392.0

448.0

Change from Sep Quarter ‘18

-0.5%

0.0%

-3.6%

0.0%

Change from Sep Quarter ‘18

-2.0

Sep Quarter ‘19 Gross Lot Sales

1,019

Change from Sep Quarter ‘18

-1,001

Change from Sep Quarter ‘18

-49.6%

Sep Quarter ‘19 sales contribution

38.4%

Sep Quarter ‘19 Active Estates

Change from Sep Quarter ‘18

Change from Sep Quarter ‘18 Change from Sep Quarter ‘18

-25.4% 24.1%

718

108

0.0

279

-323

17.7%

-53.7%

14.9%

27.0%

10.5%

86

47

41

26

855

Sep Quarter ‘19 No. of Trading Days

641

-218

-14.5

21.0%

-1,492

Change from Sep Quarter ‘18

0.0

49.4% 23

Change from Sep Quarter ‘18

WYNDHAM 19% MOORABOOL 1%

SOUTH EAST

Sep Quarter ‘19 Median Lot Size

Sep Quarter ‘19 Lot Releases WYNDHAM 23% MOORABOOL 2%

NORTHERN

$3,700

Sep Quarter ‘18 sales contribution

24%

WESTERN

8

437

-572

3

560

-258

14.7% 3

184

-552

-63.6%

-56.7%

-31.5%

-75.0%

233

232

223

220

336%

214%

117%

372%

180

158

120

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

% CONTRIBUTION TO TOTAL GROSS LOT SALES

173

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

19

WESTERN GROWTH CORRIDOR AFTER DROPPING BELOW THE 1,000-LOT MARK IN

THE PREVIOUS 2 QUARTERS, GROSS SALES IN THE

WESTERN GROWTH CORRIDOR TICKED UP TO 1,019 LOTS IN SEPTEMBER QUARTER 2019. THE WEST

REMAINS THE DOMINANT GROWTH CORRIDOR GIVEN

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

THE GREATER NUMBER OF ACTIVE ESTATES AND

SUBSEQUENT HIGHER LOT SUPPLY, ACCOUNTING FOR 38% OF TOTAL LOT SALES.

MOORABOOL

This is despite the September quarter marking the lowest

MELTON

share of total gross lot sales in 4 years, and somewhat below its peak share of 49%. Increased competition

from other growth corridors and reduced affordability,

highlighted by strong price growth in Moorabool (13.5%)

and Melton (4.0%), has seen lot sales shift to other regions.

At almost 2,500 lots, the volume of unsold stock across

the Western growth corridor remains significantly higher than other growth corridors, with the majority evenly

WYNDHAM

split between Melton and Wyndham. However this has

not impeded lot price growth. In fact, quarterly gains of 2.8% and 4.0% were recorded in Melton and Wyndham respectively over the quarter.

PORT PHILLIP BAY

From June quarter to September quarter, gross lot sales

increased by just over 40% in both municipalities, although new lot releases only recorded a commensurate increase in Wyndham, compared to remaining flat in Melton.

20

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

PETER GRANT

DIRECTOR, COMMUNITIES

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

WYNDHAM

Wyndham recorded 504 gross lot sales in September

quarter 2019, which was the second highest among all

improved demand, new releases rose 35% to 479 lots,

gross lot sales compared to new lot supply has applied some upward pressure on lot prices. The median lot value increased 2.8% from the previous quarter to

$322,250 despite the median lot size remaining static at 400sqm, resulting in greater per sqm price growth.

10

GROSS LOT SALES

1,000

15

500

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

414 412

300,000

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

350,000

MEDIAN LOT PRICE �$�

of unsold lots entering the September quarter, higher

20

Active Estates

estates in Wyndham during September quarter 2019,

Although Wyndham contained a relatively high volume

1,500

25

0

with this growth also aided by the addition of 2 new lifting to a total of 39 active estates.

30

5

growth areas. This also represented a 43% increase in

sales activity from the previous quarter. Responding to

2,000

35

MEDIAN LOT SIZE �SQM�

entering a recovery phase.

NUMBER OF ESTATES

market was then also coming out of a downturn and

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

40

Both demand (gross lot sales) and new lot supply in

Wyndham are at parallel levels to 6 years ago when the

2,500

45

396 SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

394

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

21

WESTERN GROWTH CORRIDOR

MELTON Melton’s 44 active estates continues to be the

50

Melton contains the highest level of unsold lots on

the market, which was able to absorb a 42% quarterly increase in gross sales to 492 lots without the need

$300,000 from the previous quarter, despite the

rising proportion of smaller lots among gross sales.

As a result, per sqm lot prices grew, providing another sign of improving sentiment in the new house market.

22

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

600

15

400 200

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

440

300,000

MEDIAN LOT PRICE �$�

420

250,000

400

200,000

380

150,000

360

100,000

340

50,000 0

Median Lot Size

0

Gross Lot Sales

350,000

has increased. Most of these sales are occurring in

Melton’s median lot price still increased 4% to

800

20

Active Estates

of small and medium density lots among total sales

pushing more people to opt for a smaller lot.

25

0

Melton is generally an affordable area, the number

pricing for conventional lots is relatively expensive,

1,000

30

5

Notably, Melton’s median lot size of 357sqm was

the sub–markets of Fraser Rise and Deanside, where

1,200

35

10

to add a comparable level of new supply.

significantly smaller than all other growth areas. While

1,400

40

GROSS LOT SALES

than a 1% increase in new releases to 376 lots.

1,600

45

NUMBER OF ESTATES

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

September quarter 2019 – despite recording less

SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

MEDIAN LOT SIZE �SQM�

highest among all growth areas, increasing by 2 over

320

Source: RPM

ROD ANDERSON

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

affordability advantage, gross sales declined 26% to just 23 lots for the quarter, making it the only

Melbourne growth area where gross lot sales fell.

120

5

100

4

80

3

60

2

Active Estates

40 20 SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

with the median lot size recording corresponding

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

0

Gross Lot Sales

300,000

median lot price was due to the sale of larger lots,

growth corridors.

140

6

0

Furthermore, a 13.5% quarterly increase in the

growth of 15.1% to 512sqm – the largest among all

160

1

Subdued demand also negated any new lot releases, with no new supply added in the September quarter.

180

7

GROSS LOT SALES

$244,000 in September quarter 2019. Despite its

200

8

MEDIAN LOT SIZE �SQM�

growth corridors, recording a median lot price of

9

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

Moorabool is the most affordable area among all

NUMBER OF ESTATES

MOORABOOL

370

SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

350

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

23

NORTHERN GROWTH CORRIDOR

THE NORTHERN GROWTH CORRIDOR RECORDED

The quarterly increase in sales activity in September

2019, AN INCREASE OF 34% FROM THE PREVIOUS

adjustment for existing stock. This is highlighted

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

641 GROSS LOT SALES IN SEPTEMBER QUARTER QUARTER. HOWEVER, THIS GROWTH WAS THE LOWEST AMONG THE 4 MAJOR CORRIDORS,

RESULTING IN THE PROPORTION OF TOTAL GROSS LOT SALES FALLING TO 24% FOR THE QUARTER.

New lot supply has been less responsive to the upturn in demand in Hume, restrained by relatively low active estate numbers, leading to a slight fall in new lot

releases. Although containing more active estates,

new supply in Whittlesea remains considerably lower than in Hume, with the frequency and volume of new lot releases in estates along Craigieburn Road in

Wollert and Donnybrook Road in Donnybrook falling to enable delivery of sold lots.

24

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

quarter 2019 was generated mostly by the price by the median per sqm lot price for lots sold in

September quarter 2019 declining 9% in Whittlesea and 2% in Hume.

LUKE KELLY

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

HUME Active estates in Hume remain relatively low, edging higher by only 1 over September quarter 2019 to a total of 16 estates. Consequently, new supply

is being constrained, with the 205 lots released

25

June quarter 2019, further highlighting the shortage of active estates.

Conversely, gross sales in Hume have continued

0

September quarter, increasing by 85 lots or 29%

Active Estates

has also resulted in gross lot sales being marginally

Nevertheless, Hume’s median lot price remained

steady at $310,000 from the previous quarter, despite demand outpacing new supply and the median lot

size increasing 2% to 400sqm. Moreover, the median lot price remains 11.4% below its previous peak in

June quarter 2018, representing the largest fall from peak lot prices.

200

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 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 �$�

in gross lot sales.

400

400,000

higher on an annual basis, with Casey the only other

Melbourne growth area to record an annual increase

600 10

5

its upward trajectory through 2019 including the

from the previous quarter to a total of 381 lots. This

800

15

GROSS LOT SALES

areas to record a reduction in new lot releases from

1,000

20

NUMBER OF ESTATES

only area among the 6 major Melbourne growth

1,200

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

previous quarter. Although minor, Hume was the

MEDIAN LOT SIZE �SQM�

over the quarter reflecting a 4% decrease from the

370 SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

360

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

25

NORTHERN GROWTH CORRIDOR

MITCHELL

and Whittlesea given its affordability advantage over these 2 areas.

recorded for September quarter 2019 only 8%

50

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

550 530 510

250,000

490 470

200,000

450

150,000

430 410

100,000

390

50,000 0

Median Lot Size

26

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

0

Gross Lot Sales

300,000

MEDIAN LOT PRICE �$�

lots and 39 lots respectively.

2

350,000

advantage, with the median lot price of $285,000

and gross sales for the quarter were negligible at 26

100

3

Active Estates

prices has eroded much of Mitchell’s affordability

Consequently, despite increasing, both new supply

4

0

median lot size of 400sqm was the same as Hume

more affordable than Hume and 5% for Whittlesea.

150

5

1

However, in September quarter 2019, Mitchell’s

and Whittlesea. Moreover, the wider correction in lot

6

GROSS LOT SALES

of stock sold are generally larger compared to Hume

200

7

MEDIAN LOT SIZE �SQM�

Metropolitan Melbourne usually means that lot sizes

8

NUMBER OF ESTATES

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

Mitchell’s location on the northern outskirts of

250

9

370 SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

350

Source: RPM

PETER GRANT

DIRECTOR, COMMUNITIES

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

WHITTLESEA

in demand to larger lots has been driven by price

reductions for these lots to better reflect what the

Active Estates

respectively. This equated to new supply of 206 lots and 221 gross sales.

MEDIAN LOT PRICE �$�

3.4% to $300,000.

new lot releases and gross lot sales of 41% and 51%

300 200 100

with the median lot price increasing by a moderate

Whittlesea recorded considerable quarterly growth in

400

10

0

9.4% from the June quarter to the September quarter,

Combined with an improvement in buyer sentiment,

500

5

market is willing to pay.

This is highlighted in the per sqm lot price declining

600

15

GROSS LOT SALES

capacity has improved in recent months, the shift

700

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 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�

previous quarter. While purchasers’ borrowing

800 20

NUMBER OF ESTATES

to 400sqm in September quarter 2019 from the

900

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

The median lot size in Whittlesea increased 14%

25

330

SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

320

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

27

SOUTH EAST GROWTH CORRIDOR

THE SOUTH EAST GROWTH CORRIDOR RECORDED

This has also enabled new lot releases to increase,

SIGNIFICANTLY, IT WAS THE ONLY GROWTH

South East growth corridor is leading the recovery in

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

718 LOT SALES IN SEPTEMBER QUARTER 2019.

CORRIDOR TO ACHIEVE ANNUAL GROWTH IN

SALES ACTIVITY, LEADING TO A 27% SHARE OF

and with price points becoming more attractive, the demand through escalating lot sales.

TOTAL GROSS LOT SALES, WHICH WAS ABOVE

THE NORTHERN GROWTH CORRIDORâ&#x20AC;&#x2122;S OVERALL PROPORTION OF SALES.

While median lot prices in Casey and Cardinia are

still the most expensive at $330,000 and $340,000 respectively, the higher number of active estates has led to increased competition and falling per sqm lot prices.

PORT PHILLIP BAY

CARDINIA

CASEY

28

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

for all growth corridors – the first time in 4 and a half years.

As such, new supply could not keep up with the

or $30,000 over the last 6 months, decreasing to

$330,000 in September quarter 2019 – the lowest in over 2 years. Comparatively, the median lot size has fallen by a smaller rate of 2% to 392sqm, indicating more attractive price points for lot sizes.

200

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 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 �$�

in gross lot sales. Median lot prices have fallen 8.3%

400

10

400,000

growing demand.

package in Casey, further supporting the increase

600

15

Active Estates

with 31 active estates enabling Casey to respond to

improvement in relative affordability for a house/land

800

20

0

by a considerable 72% to 441 lots. Nevertheless,

Increased competition has also led to an

25

5

spike in demand, despite releases also increasing this was also the highest volume of new lot releases,

1,000

GROSS LOT SALES

sales, Casey topped the highest number of sales

30

NUMBER OF ESTATES

from the same quarter in 2018. With 595 gross lot

1,200

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

gross lot sales from the previous quarter and 42%

MEDIAN LOT SIZE �SQM�

Casey experienced a substantial 82% increase in

370 SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

360

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

29

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

CASEY EXPERIENCED A SUBSTANTIAL 82% INCREASE IN GROSS LOT SALES FROM THE PREVIOUS QUARTER AND 42% FROM THE SAME QUARTER IN 2018.

30

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

growth area. However, median lot sizes rose 2.9% to 419sqm, resulting in improved relative affordability.

With 10 active estates – the highest in over 2 years

250

10

200

8

150

6 4

100

2

50

Active Estates

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

0

Gross Lot Sales

400,000

550

350,000

MEDIAN LOT PRICE �$�

increased 60% to 119 lots and 123 lots respectively.

300

12

0

– new releases also grew 68% and gross sales

350

14

500

300,000 250,000

450

200,000 400

150,000 100,000

350

50,000 0

Median Lot Size

GROSS LOT SALES

greater Melbourne and Geelong’s most expensive

400

16

NUMBER OF ESTATES

$340,000 from the previous quarter, Cardinia is still

450

18

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

Although the median lot price remained static at

20

SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

MEDIAN LOT SIZE �SQM�

CARDINIA

300

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

31

GREATER GEELONG GROWTH CORRIDOR

THE GREATER GEELONG GROWTH CORRIDOR ACCOUNTED FOR A RELATIVELY LOW 11% OF

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

TOTAL LOT SALES IN SEPTEMBER QUARTER 2019, NOTABLY DOWN ON 2017 AND 2018 LEVELS. THIS

WAS IN RESPONSE TO GROSS LOT SALES FALLING 54% ON AN ANNUAL BASIS TO 279 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. While the 3 other major

growth corridors recorded an increase in new supply from the previous quarter, in Greater Geelong new releases declined 4% to 184 lots.

Greater Geelong’s traditional affordability advantage

GREATER GEELONG

has narrowed, with Melbourne lot prices contracting PORT PHILLIP BAY

compared to continued annual price growth in

Geelong in recent years. Consequently, lot prices in Greater Geelong growth areas are now on par

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

32

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

remain weak overall, evidenced by a 78% drop in lot sales from the same quarter in 2018.

to just 82 lots. Weak demand has also led to a

housing market within Greater Geelong with a median lot price of $272,500.

100

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 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 �$�

Armstrong Creek is the most affordable new

200

2

Active Estates

quarterly increase in the median lot price well median lot sizes.

3

0

contraction in per sqm lot prices, with the 2.8% below the corresponding 10.5% increase in

300

4

1

Soft demand has impacted new supply, with

releases declining 15% from the previous quarter

400

5

GROSS LOT SALES

in the previous quarter. As such, gross lot sales

NUMBER OF ESTATES

growth came off a long term low in sales activity

500

6

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

Gross sales in Armstrong Creek increased 56% to 151 lots in September quarter 2019. However, this

600

8

MEDIAN LOT SIZE �SQM�

ARMSTRONG CREEK

380

SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

370

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

33

GREATER GEELONG GROWTH CORRIDOR

14

55 gross lot sales.

250

6

200 150

4

0

highest growth (16.5%) among all growth corridors, price growth was achieved while the median lot size

300

8

100

2

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

350

10

Active Estates

50

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 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

34

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

0

Gross Lot Sales

400,000

contracted 2.7% to 453 sqm.

GROSS LOT SALES

previous quarter to a total of 72 lot releases and

NUMBER OF ESTATES

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

2019, rising 33% and 62% respectively from the

400

12

Bellarine Peninsula saw both new lot supply and sales activity rebound in September quarter

450

MEDIAN LOT SIZE �SQM�

BELLARINE PENINSULA

370 SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

350

Source: RPM

ROD ANDERSON

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

lot sales.

Nevertheless, the median lot price recorded

80

4

60

3

40

2

0

This decline occurred despite the median lot

significantly larger than the median lot size in other

100

5

20

1

a quarterly correction of 10.1% to $299,000.

size increasing 15.4% to 774sqm, which is also

120

6

Active Estates

MEDIAN LOT PRICE �$�

growth areas within Greater Geelong.

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 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 SEP 16 Median Lot Size

GROSS LOT SALES

although sales activity improved by 19% to 32 gross

NUMBER OF ESTATES

21% to 15 lot releases for September quarter 2019,

140

7

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

New lot supply in the Geelong growth area declined

8

MEDIAN LOT SIZE �SQM�

GEELONG

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

350

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

35

GREATER GEELONG GROWTH CORRIDOR

an annual decline of 75% and a quarterly fall of 22%.

Moreover, new lot supply fell a substantial 52% for the quarter to a total of 10 lot releases, and 90% on an

from the previous quarter, which was less than the

60 2

40

1

annual basis.

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

80

3

0

Active Estates

20

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

result, 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

36

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

0

Gross Lot Sales

300,000

7.1% increase in median lot size to 480sqm. As a

GROSS LOT SALES

a corresponding quarter since 2014. This reflected

100

4

NUMBER OF ESTATES

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

Lara recorded just 21 lot sales in September

quarter 2019, the lowest number of gross sales for

120

5

MEDIAN LOT SIZE �SQM�

LARA

370

SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

350

Source: RPM

LUKE KELLY

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

5

$430,000.

120 100

3

80 2

60 40

1

20 0

Active Estates

SEP 16

DEC 16

New Estates

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 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

SEP 16

DEC 16 Median Lot Price

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

MEDIAN LOT SIZE �SQM�

drove a 9% increase in the median lot price to

NUMBER OF ESTATES

The larger median lot size for these sales of 448sqm

MEDIAN LOT PRICE �$�

lot sales recorded during September quarter 2019.

140

4

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

Sales activity increased in Torquay, with 20 gross

160

GROSS LOT SALES

TORQUAY

0

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

37

OUTLOOK

Boosted by a further interest rate reduction in

Notwithstanding, the recovery is still in an early

the foreseeable future, buyer sentiment and resulting

trajectory, it will take approximately 6 to 9 months

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

October and likely ongoing low borrowing costs in

sales activity is expected to continue to strengthen through 2019/20 (albeit seasonal factors will come into play over the next 2 quarters).

The rebound in established house prices during September quarter 2019 provides another

confidence boost to the new housing market. This price growth may well encourage second home

buyers to sell their existing property and upgrade to a larger home in the growth corridors, and also spur

empty nesters to trade down to ever more prominent townhomes. Combined, this diverse mix of buyers should also help drive higher sales activity.

38

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

phase. If monthly sales volumes continue its upward for the market to return to a sustainable equilibrium of approximately 16,000 lots per annum. Long term historical averages indicate this is the desired

threshold to be able to meet demand while delivering lots in a reasonable timeframe.

FROM A PRICE PERSPECTIVE, SOLID GAINS IN LOT SUPPLY IN SOME GROWTH AREAS PLUS A STILL HIGH VOLUME OF UNSOLD LOTS SHOULD CURB ANY SHARP PRICE INCREASE. AN INCREASING NUMBER OF SMALLER LOTS FEATURED IN MASTERPLANS SHOULD SEE THE MEDIAN PRICE FALL BELOW $300,000, WHICH IS GOOD NEWS FOR FIRST HOME BUYER BUDGETS.

Wallan $230k Beveridge $270k Diggers Rest $302k Bacchus Marsh $209k

Kurunjang $250k

Thornhill Park $242k

Aintree $307k

Strathtulloh Rockbank $260k $317k Mt Atkinson $343k

Tarneit $315k

Kalkallo $310k

Mickleham $295k Craigieburn $355k Greenvale $351k

Donnybrook $288k Wollert $376k

Fraser Rise $337k

Deanside $346k

Burnside $407k

WHAT DOES A 400SQM LOT COST?

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

Weir Views Melton South $250k $200k

Bonnie Brook $348k

Sunbury $292k

3 months to September 2019

Truganina $365k

Manor Lakes $285k Wyndham Vale $289k

Mambourin $289k

Werribee $300k Point Cook $460k

Lyndhurst $412k

Lara $258k

Armstrong Creek $280k

Berwick Clyde North $428k $316k Cranbourne East Junction Clyde $362k Village $335k $355k Cranbourne Botanic Ridge South $345k $355k

Officer $340k Officer South $335k 39

COMMUNITIES BUYER SURVEY DATA

THE 2 INTEREST RATE REDUCTIONS IN JUNE

Nevertheless, consumer sentiment improved over

With a high proportion of first home buyers, there is

SERVICEABILITY TEST HAS TRANSLATED

through higher auction clearance rates on the back

a relationship as opposed to couples with children.

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

AND JULY, ALONG WITH APRA’S REDUCED INTO IMPROVED ENQUIRY LEVELS IN THE

SEPTEMBER QUARTER IN MELBOURNE AND GEELONG’S LAND MARKET.

This slight uptick in sales numbers - as opposed to a sharp increase - is likely due to still rigorous

the quarter, particularly in the established market of stabilising prices and in the increasing number

of pockets seeing price growth. As a result, owner

occupiers have largely maintained a fairly dominant

share of 65%, down slightly from 67% from the same quarter a year ago.

assessment banks are applying to potential

In addition, of this buyer cohort, a significant

more so with first home buyers than other purchasers

of purchasers compared to 63% in the September

customers’ expenses. This tends to be magnified due to their lower income bracket.

proportion were first home buyers, making up 68% quarter a year earlier.

Likewise, investors are still finding it difficult to obtain

This increasing share of first home buyers indicates

exposed to carrying excessive debt - albeit it seems

don’t carry the same additional debt as subsequent

loans in the current market – particularly if they’ll be to be improving in recent months.

total buyers which was up from 13% a year earlier.

This illustrates that buyers are looking at the growth corridors as a way to enter the market given they’re largely priced out of established housing in the

middle ring and potentially have lost confidence in the quality of apartment developments.

Subsequently, families recorded a share of 43% for the September quarter 2019, which was down from 53% in the corresponding quarter a year earlier.

Through the recent downturn, the share of buyers

buyers. Also, if they have a deposit and are buying

quarter 2019, up from 53% in the previous

within their means, they can enter the market. In

townhouses where the price at completion sits well below $450,000.

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

Over the quarter, single buyers comprised 21% of

that while their expenses are heavily scrutinised, they

particular they’re snapping up lots under 300sqm or

40

subsequently a significant share who are single or in

born in Australia increased to 64% in September corresponding period a year earlier. Indian born

buyers, who were extremely prominent from 2016 to the first part of 2018, have fallen to just 21%.

While first home buyers make up over two-thirds of

While the land market has seen prices moderate, they

While the average priced lot remains out of reach

have a higher than average household income. Over

and conducive to an active market. Affordability

rather than slashing prices which would impact on

the September quarter, 48% of buyers recorded a

household income of over $100,000 – up from 40%

from the same quarter a year ago. Despite this upper income threshold, many buyers are still being priced

are still above what RPM would consider ‘fair value’ constraints are still front and centre for many

buyers – underscored by the increased appetite for townhouses and smaller lots.

out of the middle established market and see the

This is supported by RPM surveys indicating that

the home they want but also a long term asset.

value and affordability are also prominent. Over the

greenfields market as not only an opportunity to build

Reflective of the high level of first home buyer

activity is the increasing presence of townhouse

sales through the growth corridors. Over the current

apart from the usual key driver – location - price,

September quarter, 29% suggested affordability as

among the most important purchase considerations,

for many buyers, particularly first home buyers,

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

owner occupier purchasers, those who are buying

settlements on previously sold lots, developers are meeting buyer demand through well-designed and

built townhouses in key locations within an estate (i.e. overlooking a park or waterway). In general, there’s

been an increasing volume of lots that fit under the

Small Lot Housing Code which subsequently allows for products to be brought to market at a more affordable price point.

up from 19% in the same quarter a year earlier.

quarter, 19% of buyers bought a townhouse, up from just 4% in the same quarter a year earlier. Likewise,

house and land purchases also increased from 19% to 29% over the same period.

THE LARGER PRESENCE OF FIRST HOME BUYERS ALONG WITH TIGHTER LENDING STANDARDS HAS RESULTED IN AN INCREASED SHARE OF BUYERS PURCHASING A TOWNHOUSE INCREASING FROM 4% IN SEPTEMBER QUARTER 2018 TO 19% IN SEPTEMBER QUARTER 2019.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

41

COMMUNITIES BUYER SURVEY DATA

Q 3 MCAORMK M EU T NOI V TE I ER SV I E W

September Quarter 2018

Investor OWNER OCCUPIER VS INVESTOR

3rd Home

4%

2nd Home 1st Home

Single

Couple

Family

Colombia

Iran

Pakistan

United Kingdom

Sri Lanka China

COUNTRY OF PERSON 1&2 TOP 10

Nepal

Philippines India

Australia 42

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

Owner Occupier

4%

Group/Friends

HOUSEHOLD TYPE

67%

Other

4th Home

OWNER OCCUPIER TYPE

33%

September Quarter 2019

2% 27%

63% 2%

13%

Investor

Other

4th Home

3rd Home

2nd Home 1st Home

Group/Friends

Single

35%

65%

Owner Occupier

1%

1%

5%

25%

68% 1%

21%

32%

Couple

35%

1% 1% 2% 2% 3% 3% 3% 6% 26% 53%

New Zealand

1% 1% 1% 1% 2% 2% 3% 3% 21% 64%

53%

Family

Nepal

Malaysia Ireland

Zimbabwe

Iran

Philippines China

India

Australia

43%

September Quarter 2018 21%

$80-$100k

28%

$60-$80k

PURCHASE TYPE

24%

$60-$80k

24%

Townhouse

4%

Land Only

1%

19% 77%

Facilities

1%

Investment

1%

Community Design

Schools Shops

TOP 3 BEST FEATURES OF ESTATE

23%

7%

House & Land

Lot Size

Presentation Parks/Water Proximity

Affordability

Location/Area

25%

19%

$40-$60k <$40k

$120k>

$101-$120k

$80-$100k $40-$60k <$40k

Townhouse

House & Land Land Only

2%

Schools

3%

Lot Size

10% 19%

37%

19%

29% 52%

2%

Design

11%

3%

Investment

2%

5%

9%

1%

Community

3%

16%

Facilities

6%

Shops

Presentation Parks/Water Proximity

Affordability

Location/Area

Q 3 MCAORMK M ET U NOI V TE I ER SV I E W

$120k>

$101-$120k

HOUSEHOLD INCOME

September Quarter 2019

8% 2% 1%

2%

0% 8% 8%

6%

29% 32%

Source: RPM Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

43

OVERVIEW

VARIOUS STIMULUS MEASURES OVER THE LAST FEW MONTHS HAVE UNDERPINNED IMPROVING

APARTMENTS & TOWNHOUSES

CONDITIONS FOR VICTORIA’S HOUSING MARKET.

AUCTION CLEARANCE RATES IN SEPTEMBER ALSO REACHED 77% WHICH CONTRASTS WITH 60% THE SAME TIME A YEAR EARLIER.

A cautionary note, however, is the current limited

supply on the market, with the number of auctions down by roughly half from last year. This lack of

supply and increasing demand is placing upward

pressure on prices, which is further highlighted when examining the average time on market for property.

In September 2019 the average time on market was

33 days – 5 days less than this time last year. These

indicators all point to a recovery in the market and set the course for the next price upswing.

44

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

LUKE KELLY

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

Despite recent price growth, the market is in a

to households has resulted in property price

delivery of housing – building approvals – continues

since 1958, and an improvement in lending volumes gains exceeding losses from 12 months ago, with

detached houses up 0.1% and unit prices up 2.3%.

Even more robust price activity took place over

September quarter 2019, with the detached housing market increasing 4.5% and units up 3.9% from the

precarious position. The best lead indicator for future to crash. The September results show approvals for

the detached housing market down 12% from a year earlier, with a more pronounced 36% reduction in approvals in other dwellings.

previous quarter.

Since peaking at approximately 13,100 other

Until recently, lending experts were suggesting a flat

activity for medium and high density dwellings has

market at best for 2020, but more than likely a modest fall. However, many banks and property forecasters

dwellings in December quarter 2017, approval

continually declined in the 7 quarterly periods since.

have reassessed their housing forecasts, with some

As with past cycles, the most recent peak in

digits by the end of 2020. This outcome could reflect

would have normally driven a greater shift in

suggesting price growth pushing up towards double 2015/16 where cash rates were reduced to kickstart

the economy – which worked – however a side effect was the price growth surge that followed. The only

difference this time around is that household debt is already at a record high.

established house prices in late 2017/early 2018

4.5%

A P AQR3T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

On the back of a variable interest rate not seen

DETACHED HOUSING MARKET INCREASED 4.5%

OVER THE SEPTEMBER QUARTER 2019 FROM THE PREVIOUS QUARTER.

3.9%

UNITS MARKET UP 3.9% OVER THE SEPTEMBER

QUARTER 2019 FROM THE PREVIOUS QUARTER.

demand to relatively more affordable dwellings – townhouses and apartments. However, weak

purchaser sentiment has led to demand for these dwelling types to soften, exacerbated by other

factors including the removal of off–the–plan stamp duty concession for local investors and increased charges for overseas investors.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

45

OVERVIEW

OUTLOOK A P AQR3T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

The RBA is actively trying to stimulate the economy through lower cash rates. However, as stated in

previous official minutes, this stimulus is likely to

push up property prices, which will almost certainly increase affordability concerns.

To complicate matters further, cuts in the cash rate have not had the intended impact on household

spending unlike previous reductions given inflation remains anemic and the unemployment rate

stubbornly sits above 5%, with little prospect of it moving to the RBA’s desired 4.5% target.

Long lead times for high density construction

The numerous positive boosts in property market

sentiment in recent months should continue to drive both owner occupier and rental demand. Overall,

prospects for an improvement in activity for financial year 2019/20 are far stronger for townhouses than

apartments, although we believe the recovery will still be gradual rather than rapid and prolonged growth.

Despite the Melbourne median house price falling by roughly 11% from peak to trough, prices have

not only bottomed out but are now very much on the increase, with a solid gain recorded over the September quarter.

projects means the supply response to increase

While positive for current owners, it will do little

for existing stock. There is also growing concern of an

unaffordable for many. Broadly speaking, lower

housing demand can be slow, leading to higher prices undersupply of new dwellings to meet demand in the

apartment market in the near future – which is in stark contrast to commentary for most of the past 3 years.

46

WHILE THERE COULD POSSIBLY BE A SHORT-TERM OVERSUPPLY IN CERTAIN SUBURBS OF MELBOURNE IN THE NEXT 6 TO 12 MONTHS AS PROJECTS MOVE FROM CONSTRUCTION TO DELIVERY, THIS SUPPLY IS LIKELY TO BE ABSORBED RELATIVELY QUICKLY BY MELBOURNE’S CONTINUED STRONG POPULATION GROWTH.

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

to assist a market that has become increasingly lending rates have offset recent price growth,

however the inner and middle ring suburbs remain increasing out of reach for many buyers.

to less expensive townhouse in these areas, which will drive medium density development. Moreover, with townhouse prices also falling during the

downturn and recent improved borrowing power,

townhouses in inner and middle ring suburbs have become more attainable.

In the outer/greenfield areas, townhouses will

continue to appeal to first home buyers and budget conscious buyers.

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

commencements during the 4 years to 2018 is now translating into a substantial amount of apartment stock on the market. This will hopefully have a

material effect on renters in the short term and help ease an acute vacancy rate in general.

HOWEVER, ANY IMPROVEMENT IN VACANCY RATES ARE LIKELY TO BE SHORT LIVED GIVEN THE PIPELINE OF APARTMENT PROJECTS IS DRASTICALLY REDUCING. IN THE COMING YEARS THIS LACK OF NEW SUPPLY IN THE PIPELINE WILL LEAD TO LOWER APARTMENT COMPLETIONS, AND AS PENT–UP DEMAND BUILDS, WILL FACILITATE THE NEXT UPSWING IN APARTMENT PRICING AND RENT. A highly active apartment market needs an expanding

We believe there will be supply concerns across

needs a mix of local and overseas investors along

underscored by low approval numbers and rapidly

economy in which to operate successfully. The sector with downsizers and first home buyers. While first

home buyers have been holding up, downsizers have been missing due to weakness in the established market. Further still, investors—both local and

overseas—are actively discouraged to purchase due

the apartment market in the medium term

depleted pipeline activity. In addition, concerns

around construction quality and remediation costs will likely continue to dampen buyer confidence in the short term.

to continued disincentives.

That said, what looks to be a short term imbalance it

The apartment sector in general is anticipated to

and increasing activity by local investors along with

remain under pressure to get projects underway due

to build quality issues and recent cladding concerns.

And while lending restrictions have eased, developers are still finding it difficult to source finance for large

scale developments in a soft pre-sales environment.

A P AQR3T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

This should continue to support a shift in demand

is unlikely to remain for long. Improved lending criteria continued strong fundamentals including strong

population growth, low unemployment and relatively low vacancy rates will support a gradual recovery in new housing demand, including medium density.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

47

OTHER DWELLING APPROVALS

in September quarter 2019, representing a 19% decline in approval activity from the previous

1,863 apartments.

However, the weakening trend differed between

for approvals in any quarter since December

2019, townhouse approvals were down 11% from

quarter 2011.

Approval activity for both the medium density

This highlights that demand for townhouses has

the previous quarter, while apartment approvals

the market downturn over the last 18 months. This of townhouse development in greenfield areas,

Compared to the same quarter in 2018, approvals

to September 2019 was still the fourth highest on

TOWNHOUSE APPROVALS

held up better compared to apartments through is largely attributed to the growing prominence

recorded a more sizeable 27% reduction.

Additionally, from a longer-term perspective,

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

11,013 approvals - was the lowest financial year total

townhouses and apartments. In September quarter

and high density dwelling sectors experienced

significant annual falls in the September quarter.

record. The corresponding figure for apartments since 2009.

quarter and a significant 36% from the same

quarter in 2018. Notably, this is the lowest volume

48

were down 29% to 2,175 townhouses and 43% to

approvals of 10,186 townhouses over the 12 months

which is helping to maintain relatively high approval activity.

28,000

7%

Year to Sep 2015

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

16%

Year to Sep 2016

17%

Year to Sep 2017

4%

Year to Sep 2018

23%

Year to Sep 2019

APARTMENT APPROVALS

A P AQR3T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

Victoria recorded 4,038 other dwelling approvals

26,000 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

60%

Year to Sep 2015

20%

Year to Sep 2016

27%

Year to Sep 2017

47%

Year to Sep 2018

50%

Year to Sep 2019

Source: ABS

KEY MEDIUM DENSITY BUILDING DATA

TOTAL TOWNHOUSES

TOTAL APARTMENTS

TOTAL

Sep qtr. 2019

2,175

1,863

4,038

% change from previous qtr.

-10.9%

-27.4%

-19.4%

% change from previous yr.

-28.7%

-42.8%

-36.0%

12 months to Sep qtr. 2019

10,186

11,013

21,199

% change 12 months earlier

-22.7%

-50.5%

-40.2%

COMMENCEMENTS

OTHER DWELLINGS

COMPLETIONS

OTHER DWELLINGS

June qtr. 2019

6,808

June qtr. 2019

7,895

% change from previous qtr.

12.0%

% change from previous qtr.

63.4%

% change from previous yr.

-22.7%

% change from previous yr.

-5.2%

12 months to June qtr. 2019

25,310

12 months to June qtr. 2019

25,329

% change 12 months earlier

-31.1%

% change 12 months earlier

-12.9%

TOTAL APARTMENT & UNIT PRICES

MEDIAN PRICE

Sep qtr. 2019

$613,500

June qtr. 2019

$590,500

Sep qtr. 2018

$599,500

CHANGE FROM QTR.

3.9%

NOTE: Approvals are to the current quarter (Sep 2019), while commencements and completions are delayed by a quarter (June 2019). Source: ABS, REIV

A P AQR3T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

APPROVALS

CHANGE FROM PREV. YR.

2.3% Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

49

FEATURE STORY:

TOWNHOUSES GET THE TICK OF APPROVAL FROM BUYERS A P AQR3T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

TOWNHOUSES HAVE COME A LONG WAY IN COMMUNITY MASTERPLANS – AND IN

MATURING BUYER MINDSETS ABOUT HOW THEY WANT TO LIVE.

While townhouses have been around for some time,

“The percentage of total lots sold up to 300 sqm

“Medium density really gained traction during the last

has evolved significantly over the last 4 years. Once

corridors has increased from an average of 11%

smaller house and land packages when prices were

the perception and indeed quality of townhomes

considered boxy, compact and cheap, the diversity, innovation and quality of townhouses today has

made them a popular choice among buyers of all types including first home buyers, downsizers, families and couples.

to 12% to 18% last year,” he said. “While this

comprises both smaller house and land packages

today is about 15%.”

maintenance living, townhouses offer a very

of townhouse stock in master-planned communities

greenfields.

magnitude of our medium density projects is quite

the last 3 years the number of townhouses featuring on estates has continued to steadily grow.

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

going up,” he said.

“In parallel with shifting demographic and lifestyle

He added: “Currently there is medium density

Head of Project Marketing at RPM Luke Kelly said over

property boom a few years ago as an alternative to

and townhouses, we estimate the total proportion

RPM has been at the forefront of the development

and growth of the townhouse market in Melbourne’s

50

throughout Melbourne and Geelong’s growth

product on 24 active RPM-marketed estates. So the significant. Townhouses are here to stay.”

Mr Kelly also said the key driver of townhouse demand is not just affordability, but also quality of living.

trends including an ageing population and low desirable way to live – particularly as the size,

design and diversity of medium density product continues to evolve.”

According to Mr Kelly, the quality of the external

facades and internal design has improved significantly.

Pictured: Deanside Village by developer Moremac

He said some buyers also like buying into a precinct

but not their quality of living. They want a feeling of

Carlton and East Melbourne but in a modern context.

buyers are prepared to trade on the size of their home living in luxury, with features like stone benchtops,

of homes that evoke old-style terraces in suburbs like

timber flooring, split systems, fast broadband,

“This symmetry also creates a sense of place in a

natural lighting and blinds throughout.

certainty about what’s being built next to you.

900mm cooktops and ovens, walk-in laundries,

master-planned community as well as providing

“They also want a practical floorplan that maximises

“We’ve built a strong capability in medium-density in

storage, an outdoor area and a double lock up garage.

buyer surveys and the volume of townhouse product

space that takes into consideration ceiling heights,

“It’s about understanding how a resident wants to live and bringing a well-designed, high quality medium

terms of product design and product mix through our

A P AQR3T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

“Our expertise in this type of product tells us many

IT’S ABOUT UNDERSTANDING HOW A RESIDENT WANTS TO LIVE AND PROVIDING A WELL-DESIGNED, HIGH QUALITY MEDIUM DENSITY PRODUCT TO MARKET AT AN AFFORDABLE RATE.

we’ve introduced to the market,” he said. “It’s a real point of difference for us and our clients.”

density product to market at an affordable rate.”

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

51

FEATURE STORY: TOWNHOUSES

DIVERSITY THE KEY TO SUCCESS FOR TOWNHOUSES The diversity of townhouse design today reflects

Deanside Village by developer Moremac and built

variety of buyers and their needs – which is key

and 1 and 2 garage options on 18.7 squares for

A P AQR3T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

the broad appeal of townhomes to suit a wide to achieving strong sales velocity and helps developers to de-risk their projects.

The following active medium density estates reflect

the range of quality townhomes on the market today, with varying configurations, size and price points.

Eliston Estate in Clyde North by developer National

Pacific Properties and built by Sienna Homes features 3 bedrooms, 2 bathrooms, 2 living areas and a 2 car garage on 20 squares for $397,000. These turnkey packages – including landscaping, driveway and

fencing - offer a no fuss solution, premium fixtures

by Sienna Homes features 4 bedrooms, 2 bathrooms $429,000 and 21.3 squares for $459,000. The homes feature a light filled, open plan living zone and guests bedroom downstairs with other bedrooms upstairs.

Showcasing a larger-style townhome, Alira Estate in Berwick by developer Moremac and built by

Shape Homes features 3 bedrooms, 2 living areas, 2 bathrooms and 2 garages on 27 squares for

$664,000. This latest addition to the estate includes 7 architecturally designed townhouse dwellings with luxury finishes, natural wood façade and waterfront views.

and fittings and a low maintenance style of living.

Kinsford Estate is the newest community from

developer and builder SOHO Living in Deanside in

Melbourne’s North West. It features a collection of

architecturally-designed townhomes encompassing 3 bedrooms, 2 living spaces, 2 bathrooms and 2 car garage on 18.9 squares for $404,950.

52

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

Pictures from top to bottom: 1. Deanside Village - Moremac 2. Tulliallan Estate - Sienna Homes 3. Alira Estate - Shape Homes 4. Aurora Estate - Soho Living

Estate: Kallo Townhouse price: $389,900 Median h&l price: $614,500 Difference: Estate: Rosenthal Townhouse price: $445,000 Median h&l price: $569,000 Difference:

-$124,000

Estate: Kinbrook Townhouse price: $379,900 Median h&l price: $569,000

-$224,600

Difference:

Estate: Highlands Townhouse price: $399,000 Median h&l price: $585,000 Difference:

Estate: The Ivy Townhouse price: $399,950 Median h&l price: N/A

-$186,000

Difference: Estate: Kerani Heights Townhouse price: $399,850 Median h&l price: $590,531 Difference: Estate: Atherstone Townhouse price: $372,550 Median h&l price: $556,000 Difference:

-$183,450

Estate: Westwood Townhouse price: $391,900 Median h&l price: $588,500

-$190,681

Difference:

Estate: Kinsford Townhouse price: $404,950 Median h&l price: $467,220

N/A

Estate: Aurora Townhouse price: $459,320 Median h&l price: $609,000 Difference:

-$149,680

Estate: Rosewood Townhouse price: $399,000 Median h&l price: $667,000

-$62,270

Difference:

TOWNHOUSE / HOUSE & LAND PRICE COMPARISON AVERAGES

-$268,000

Estate: Deanside Village Townhouse price: $419,760 Median h&l price: $634,000 Difference:

-$214,240

Estate: Orchard Townhouse price: $359,900 Median h&l price: $587,000 Difference:

Townhouse price: $432,822 Median H&L price: $596,010 Difference: -$163,188

Estate: Rothwell Townhouse price: $449,957 Median h&l price: $577,500 Difference:

A P AQR3T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S

Difference:

-$196,600

-$189,100

h&l = house & land

-$127,543

-$227,100

* House construction cost is fixed at $270,000.

Land price is based on the median for the estate in Q3 2019.

Estate: Harpley Townhouse price: $411,591 Median h&l price: $570,000 Difference:

10 K M S

-$158,409

20 K M S PORT PHILLIP BAY

Estate: Ironwood Townhouse price: $559,900 Median h&l price: $625,000

Estate: Alira Townhouse price: $439,000 Median h&l price: $775,000

Estate: Lochaven Townhouse price: $385,000 Median h&l price: $592,000

Estate: St Germain Townhouse price: $499,900 Median h&l price: $584,000

Estate: Octave Townhouse price: $435,900 Median h&l price: $627,000

Estate: Eliston Townhouse price: $397,000 Median h&l price: $597,500

Difference:

Difference:

30K M S Estate: Carter Place Townhouse price: $359,000 Median h&l price: $488,000 Difference:

-$129,000

Estate: Glenlee Townhouse price: $427,500 Median h&l price: $488,000 Difference:

-$60,500

Difference:

Estate: The Point Townhouse price: $780,000 Median h&l price: $747,478 Difference:

+32,522

-$65,100

-$207,000

-$191,100

Difference:

Difference:

Difference:

-$336,000

-$84,100

-$200,500

4 0 KM S

53

OVERVIEW

THE INCREASE IN THE FOREIGN PURCHASER

ADDITIONAL DUTY RATE FROM 7% TO 8% OF THE CONTRACT PRICE FROM JULY 2019 IN VICTORIA

INTERNATIONAL

HAS HAD THE INTENDED EFFECT OF DISCOURAGING

DEMAND. THIS IS HIGHLIGHTED BY THE PROPORTION OF NEW DWELLINGS IN VICTORIA PURCHASED BY FOREIGN BUYERS DECLINING FROM 12% IN JUNE QUARTER 2019 TO 7% IN THE SEPTEMBER QUARTER. MOREOVER, THE PROPORTION OF FOREIGN PERSONS PURCHASING

ESTABLISHED DWELLINGS REMAINED LOW AT 4% FOR THE CURRENT QUARTER.

The rebound in residential property markets - particularly

Melbourne and Sydney - has increased the possibility of a shortfall in dwellings in 2020. However, given the long lag between preâ&#x20AC;&#x201C;sales and commencements, the response

from supply to improving demand is likely to be subdued initially, with dwelling starts projected to fall further and

bottom out in 2020. This could result in upward pressure on dwelling prices and lead to further affordability

concerns from already relatively constrained levels.

One possible way to accelerate the supply of new 54

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

dwellings onto the market is for State Governments to

JINYIN ZHANG

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

allow foreign purchaser additional duties to be

more reactive to cyclical conditions to reduce the

26%

softer economic activity, encouraging foreign buyers can boost residential construction activity, which is

a significant segment of the economy and has one of the largest multiplier effects.

This in part is being done in countries such as

Portugal, Ireland, Malta and Spain who are all trying to kickstart their economy.

Closer to home, the Western Australia Government has gone down this path by announcing in October that all purchasers will receive a 75% rebate on

24%

% OF FOREIGN PURCHASES BY DWELLING TYPE

affordability in check. Furthermore, in periods of

stamp duty (up to $50,000) for the next 2 years.

market and the state economy more broadly, which

have both performed relatively poorly for most of the last 5 years.

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

0%

offsets the 7% increase to foreign buyers which

measure will improve conditions in Perth’s residential

22%

2%

This includes foreign buyers which, with this rule, was implemented in October 2018. It is hoped this

Q 3 IMNAT RE KR ENTA TOIVOENRAVLI E W

imbalance between supply and demand and keep

■ New

■ Established

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

DEC 18

MAR 19

JUN 19

SEP 19

15%

19%

14%

21%

14%

14%

12%

12%

13%

8%

5%

12%

7%

9%

11%

7%

9%

8%

9%

8%

6%

6%

4%

5%

4%

4%

Source: NAB Quarterly Residential Property Survey

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

55

AUSTRALIAN ECONOMIC OUTLOOK

The Australian economy is expected to weaken

The Reserve Bank of Australia (RBA) has stated that

Despite 3 interest rate reductions since June,

Product (GDP) slowing to 1.70% over the calendar

sufficient level of wage growth to increase the rate

coming through, this stimulus is not anticipated to

Q 3 IMNAT RE KR ENTA TOIVOENRAVLI E W

through the second half of 2019, with Gross Domestic

unemployment needs to be closer to 4.5% to drive a

year, down from 2.0% over financial year 2019.

of inflation to within its target range of between 2%

Consequently, unemployment is projected to edge

and 3%. However, with growth in the Consumer Price

higher to 5.4% by the end of 2019, with the resultant

Index continuing to remain below this target range,

spare capacity in labour markets limiting wages

the RBA acted by reducing the cash rate by a further

growth to around 2%.

25 basis points in October to a historical low level of just 0.75%.

56

2019-20 f

GDP

1.70

2.20

Employment

2.00

0.80

Unemployment Rate

5.30

5.50

Average Earnings

2.30

2.60

Inflation

1.60

1.90

RBA Cash Rate

0.50

0.50

$A/US cents

0.65

0.70

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

the Christmas period, which is forecast to increase

by a mild 1.4% over calendar 2019. In addition, while interest rate cuts have underpinned increased

turnover activity in the established dwelling market,

this rebound needs to translate into higher residential impact on economic growth.

2018-19 f

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

buoy private consumption expenditure leading into

construction activity for it to have a meaningful

AUSTRALIAN ECONOMY Economic indicators (% change)

combined with the first tranche of income tax cuts

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

Q 3 IMNAT RE KR ENTA TOIVOENRAVLI E W

ENCOURAGING FOREIGN PURCHASERS DURING A DOWNTURN WILL ASSIST IN BRINGING PROJECTS TO MARKET QUICKER WHICH WILL HELP WITH THE IMBALANCE IN THE MARKET.

57

OVERVIEW

ON THE BACK OF CERTAINTY AROUND NEGATIVE GEARING POLICIES COMBINED WITH MULTIPLE

RESIDENTIAL INVESTMENT

CASH RATE REDUCTIONS AND APRAâ&#x20AC;&#x2122;S EASING OF THE SERVICEABILITY TEST, THE MARKET

HAS GONE SOME WAY IN RECOUPING LOSSES INCURRED THROUGHOUT 2017/18.

Over the September quarter 2019, house prices

increased 4.5% while units rose 3.9% from June

quarter 2019. When compared to the September quarter a year ago, house prices remain steady

(+0.1%) while unit prices rose by 2.3%. This strong

recovery in the residential property market has been supported by the robust level of people moving

to Melbourne from interstate and overseas, which has resulted in continued solid demand for rental

accommodation. Subsequently, the vacancy rate for Metropolitan Melbourne remained static from the

previous quarter at 2.2%, and significantly below the balanced rate of 3%.

58

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

DAVID YANG

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

Three-bedroom units and apartments in the inner

across most of the defined areas for established

increase of 10.4%, followed closely by 4-bedroom

annual gains (albeit modest) have persisted in rents houses, units and apartments. Interestingly, rental

increases are not taking place between regions as

previously seen, but in dwellings sizes. For instance, 4-bedroom houses and 3-bedroom apartments

ring recorded the largest annual rental gain with an houses in the middle ring with gains of 9.4%. This

increase is on the back of weekly rental growth over the past 12 months of $65 and $53 respectively.

largely experienced the highest rental growth across

From a regional perspective, Geelong continues to

the inner and middle rings and 3-bedroom units in

types. This has been the case since 2017 as some

each region. In particular, 3 to 4-bedroom houses in inner Melbourne showed strong growth.

This suggests more families are choosing location (rent in desirable area) over affordability (buying

further out). Also impacting on rents is that these dwelling sizes are scarcer than for instance,

1-2-bedroom apartments which make up most

rental stock. As such, the modest available supply is

being absorbed by growing demand which is placing upward pressure on rents.

see strong growth across all bedroom and dwellings government agencies have been progressively

moving to Geelong as part of a plan to expand the employment base of the region. This results in an

increasing number of households moving into rental

accommodation while they decide whether Geelong

is a long-term prospect for the family. Likewise, these households remain in rental accommodation while

they wait for their house to be built or try to buy into the established market.

WHILE THIS GOVERNMENT INITIATIVE HAS BEEN IMPORTANT IN DRIVING REGIONAL JOBS GROWTH, IT HAS NOT ONLY RESULTED IN INCREASED RENTS BUT ALSO PLACED UPWARD PRESSURE ON BOTH LAND PRICES AND THE ESTABLISHED MARKET. IN ADDITION, THE INCREASING GROWTH IN PURCHASE PRICES HAS SUBSEQUENTLY LEFT MORE PEOPLE IN RENTAL ACCOMMODATION â&#x20AC;&#x201C; THUS IMPACTING FURTHER ON DEMAND AND RENTS. Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

R E QS 3I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

As a result, with vacancy rates remaining tight,

59

OVERVIEW

In general, the larger houses (3 and 4-bedroom) and

These families are largely priced out of buying in the

over the past 2 years. The largest gains over this

requirements ahead of home ownership. In addition,

R E QS 3I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

3-bedroom apartments have seen steady growth

period have been in family-sized houses in the inner and middle rings. This suggests families are looking for amenity-rich suburbs and possibly in highly regarded school zones.

suburb they want but are putting lifestyle/schooling

access to retail amenity and public transport for more convenient living.

strong growth has also been seen in 3-bedroom

Worth noting is rents for houses in the inner ring

in recent times expressed a desire for larger and

demand. In fact, supply is extremely tight (vacancy

units in the outer ring which suggests renters have

continue to fluctuate. This is not due to a lack of

more centrally located dwellings which allows easier

rates sitting at 1.9%) and as such any fluctuation

MEDIAN RENTS HOUSE:

INNER

Bedrooms 2

3

$550 $700

4

$838

MIDDLE

2

3

$430

OUTER

2

$350

GEELONG

4

3

4

2

3

4

60

Sep-18

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

$390 $560

Jun-19 $570

$700

Sep-19 $550

-4%

-$45

-6%

$390

-$10

-3%

$0

0%

$360

$340

-$20

-6%

$430

$10

$370

$0

$613

$380

$310

$320

$323

$420

$430

$420

$370

0%

-6%

$440

$570

$0

-$45

$450

$400

Change from Previous Year

$655

$890

$380

$350

-$20

$900

$380 $420

Change from Previous Quarter

$433

-$10

-$10 $43 $0

$3

$3

-1%

-2%

$53

2.4%

0.8% 5.5% 1.9%

2%

2.0%

-$10

-3%

0.0%

2%

$10

2%

1.2%

0%

$20

7%

0% 1%

1%

$10

6%

2 Year Average Annual Gain

$53 $0

$13

$13

9%

0% 4%

6% 3%

5.5% 1.3%

5.5%

2.8% 2.7%

DAVID YANG

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

composition of the type of property for rent. For instance, a well appointed 3-bedroom detached house will command more than an older terrace needing renovation.

4.5%

THREE-BEDROOM UNITS AND APARTMENTS IN THE

OVER THE SEPTEMBER QUARTER 2019,

RENTAL GAIN WITH AN INCREASE OF 10.4%.

QUARTER 2019.

INNER RING RECORDED THE LARGEST ANNUAL

R E QS 3I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

10.4%

in the average rental price is dictated by the

HOUSE PRICES INCREASED 4.5% FROM JUNE

UNITS & APARTMENTS:

INNER

MIDDLE

OUTER

GEELONG

Bedrooms

Sep-18

Jun-19

2

$490

$495

1

3

1

$380 $625

$320

$390

-3%

$0

$700

$690

-$10

-1%

$65

10%

$410

$5

1%

$10

2%

$330

$405

1

$260

$280

$395

2 3

1

2

3

$350 $220

$300 $393

Change from Previous Year

-$10

$400 $520

Change from Previous Quarter

$380

2 3

Sep-19 $495 $325

$530

$520

$345

$350

$0

-$5

-$10

0%

-2% -2%

$5

$5

$0

0%

2.0%

$0

0%

2.2%

-4%

$10

$393

$430

$38

10%

$35

$320

$320

$0

0%

$20

$220

$400

$230

$400

$10 $0

5%

0%

1.6%

5.7%

0.8%

-$10

1%

1%

1.3%

2%

$270

$5

0%

2 Year Average Annual Gain

$10 $8

4%

9% 5%

7%

2%

1.2% 1.4%

5.7% 4.7%

5.0% 2.6%

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

61

R E QS 3I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

OVERVIEW

VACANCY RATES & YIELDS

Consistently low vacancy rates reinforce the

far more appealing than other types of investment

Vacancy rates in September quarter 2019 reflect

the market.

uncertainty in the sharemarket due to a weakening

consensus there is no oversupply of stock in

minimal change across the board, with those that did record a change from the previous quarter showing

Due to significant capital gains seen in both detached

the middle ring (3.1%) and the outer ring including

rental yields in general have been below long-term

a slight improvement. Nevertheless, except for

Mornington Peninsula (3.3%), all areas remained below the acceptable level of 3%.

Inner Total

Inner (0-4km)

Inner (4-10km)

Middle (10-20km)

Outer Total

Outer (20+km exc. Mornington Peninsula) Outer (Mornington Peninsula) Melbourne Total Geelong Source: REIV

global economy.

houses and other dwellings over the past 5 years,

For those investing in detached housing in the outer

levels. Nevertheless, in the current market a rental

be the driving force in the earlier stages. However,

yield of 2.5-3.0% in some areas of the market is

and regional areas, land value appreciation tends to with vacancy rates at acute levels, and what seems YIELDS:

VACANCY RATE: Melbourne

currently on offer due to low interest rates and

Sep-18

Jun-19

Sep-19

2 Year Average

1.4

1.6

1.7

1.7

2.0

2.2

1.9

2.0

2.6

3.4

1.5

1.7

1.6

2.8 2.0 2.1

1.9 2.1

3.0

1.7

1.6

1.8

2.5

3.3

1.7

2.0

3.1

1.8

2.2

1.9

2.2

2.0

1.7

2.5 2.1

1.7

Houses

Sep-18

Jun-19

Sep-19

Middle

2.32%

2.58%

2.33%

Metro

2.67%

2.82%

Units

Sep-18

Jun-19

Sep-19

Middle

3.17%

3.22%

3.13%

Inner

Outer

Regional Inner

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

2.94% 4.15%

4.28%

Outer

3.49%

Regional

4.56%

Metro

Source: REIV, RPM 62

2.52%

3.73%

2.71%

2.47%

3.13%

3.00%

4.37%

4.26%

4.38%

2.69%

4.28%

3.62%

3.50%

4.97%

4.64%

3.96%

3.73%

DAVID YANG

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

OUTLOOK to be a movement from the middle to the outer ring

Tighter lending criteria over the past 12 months

Also assisting first home buyers and by extension the

Melbourne’s property rings.

necessary finance. While this impacted all buyers, first

being introduced at the start of 2020. First home

Over the September quarter 2019, houses and units

in regional areas recorded an average yield of 4.26% and 4.64% respectively. These robust returns are

due to a lower purchase price, coupled with robust rental pricing given regional areas are traditionally tightly held.

made it increasingly difficult for buyers to obtain the

home buyers were most affected given their borrowing capacity was reduced coupled with a mandatory

10% deposit requirement. This forced many ‘would

be’ homeowners to remain in rental accommodation.

Coupled with continuing high population growth,

vacancy rates have remained at low levels – particularly in suburbs with strong infrastructure and amenities.

Similarly, units in the inner ring recorded an attractive

While household expenses are being heavily

suggests there is a high prevalence of demand for 1

the market – in both the established market and the

average yield of 4.28% in the September quarter. This and 2-bedroom units in or on the fringe of the CBD. Over the September quarter the vacancy rate for dwellings within 4km of the CBD was recorded at

1.7%. This tightly held area suggests there is not an

oversupply of stock currently in the market as these

dwelling sizes are favoured by singles/couples with no children households (including students who share) who wish to remain in and near the city centre.

scrutinised by lenders, buyers are slowly re-entering land market. This uptick in activity has been largely driven by first home buyers which, if having bought in the established market, should help improve

the rental market. However, if they have bought

in the greenfield market, they will remain in rental accommodation for at least the next 12 months

while their house is being built. This ultimately means vacancy rates will remain tight.

rental market is the new first home buyers’ scheme

R E QS 3I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

for renters, yields are at the higher end among all of

buyers will be able to enter the market sooner with a 5% deposit for properties up to $600,000. The

downside is that the grants are capped at 10,000 each year nationally which accounts for only 9% of current annual first home buyer demand.

WHILE VACANCY RATES REMAIN ACUTE IN MOST AREAS ACROSS METROPOLITAN MELBOURNE, THERE IS A STRONG LEVEL OF SUPPLY LIKELY TO ENTER THE MARKET IN THE COMING 6 TO 12 MONTHS. THIS STOCK WILL PROVIDE WELCOME RELIEF TO RENTERS. Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

63

RESIDENTIAL INVESTMENT BUYER SURVEY DATA

IT APPEARS INVESTORS ARE GETTING THEIR HEADS

RPM surveys feature a question to investors about

Prudent lending criteria has affected the limit investors

INTEREST RATE CUTS AND PRICE REDUCTIONS HAVE

indicate household wealth). While current household

46% of purchasers indicated a budget of between

R E QS 3I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

AROUND STILL TIGHT LENDING CRITERIA. RECENT ALSO ASSISTED IN REDUCING THEIR POTENTIAL REPAYMENTS AND GEARING LEVELS.

As a result, the share of investors rose to 35% in

September quarter 2019, up from 33% in the same

period a year earlier and, importantly, an increase from a low of 28% in the June Quarter 2019.

There is an oft-held view that only more affluent

the value of their current home (a proxy often used to values sitting above $600,000 comprise the largest overall price bracket, this share fell from 60% in the

September quarter last year to 40% in the September quarter this year.

Interestingly, investors with a current house value of

between $450,000 to $600,000 increased from 34% to 44% for the 2 September periods.

households can afford land or house and land

The age of investors in the greenfield market is also

household incomes limited to 1 or 2 bedroom

accounted for 40% of all purchases in the current

purchases, with other investors on more modest apartments where prices are lower.

getting younger. Investors aged between 18 and 34

quarter, up from 34% in the same quarter a year earlier.

However, with the growth of townhouses or smaller

With buyers getting younger, household type is also

the uncertainty around apartment prices and build

buyers were couples compared to 29% at the same

house and land packages that sit under $450,000 and quality, this trend appears to be changing.

changing. In the current September quarter, 46% of

time a year ago. While family households make up the largest mix of buyers, this share fell from 63% in the September quarter 2018 to 49% this quarter.

64

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

are willing or able to spend. Over the current quarter,

$350,000 and $450,000, up from 30% in the September quarter last year. Interestingly, a sharp increase was

recorded in the $350,000 to $400,000 price bracket,

with the share increasing from 6% in September quarter 2018 to 23% in the most recent quarter.

The increasing presence of buyers in the sub-$450,000 range, and in particular the sub-$400,000 price level is due to the growing prominence of townhouses within

this bracket. Townhouse purchases rose to 24% in the September quarter 2019 - up significantly from 4% in the September quarter last year.

NOT SURPRISINGLY, PRICE, VALUE AND AFFORDABILITY WERE THE KEY DRIVERS BEHIND TOWNHOUSE PURCHASES, UP FROM A SHARE OF 22% IN THE SEPTEMBER PERIOD LAST YEAR COMPARED 36% IN THE CURRENT QUARTER.

RPM surveys every buyer on its clientsâ&#x20AC;&#x2122; estates in the greenfield market. 35% of all buyers indicated they were investors. The following illustrates demographic and purchase intent changes amongst this cohort based on surveys from the September quarter 2019 compared to the same quarter in 2018.

September Quarter 2018

OWNER OCCUPIER VS INVESTOR

33%

67%

Owner Occupier

0%

Group/Friends

8%

Single

HOUSEHOLD TYPE

29%

Couple

63%

Family

3%

60>

Owner Occupier

0%

Group/Friends

Single

5%

Family

49%

46%

Couple

4%

60>

35-49

50-59 35-49

9% 47%

18-24

2%

18-24

3%

32%

25-34

Townhouse

PURCHASE TYPE

65%

10% 53%

50-59

COMBINED AGE

35%

Investor

4%

House and Land

23%

Land Only

72%

R E QS 3I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

Investor

September Quarter 2019

37%

25-34

Townhouse

24%

House and Land

11%

Land Only

65%

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

65

RESIDENTIAL INVESTMENT BUYER SURVEY DATA

September Quarter 2018 $600K>

$550-$600K $500-$550K

$450-$500K

R E QS 3I DME AN RT KI AE LT IONVVEERSVTI M EE WN T

VALUE OF PRESENT HOME

<$250K

Facilities

1%

Investment

4%

$350-$400K $300-$350K $250-$300K

Design

Schools Shops

Lot Size

Presentation Parks/Water Proximity

Affordability

Location/Area

$300-$350K < $300K

66

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

$350-$400K $300-$350K $250-$300K <$250K

Facilities

4% 0% 4% 6% 2%

3%

1%

Design

1%

Investment

3%

Schools

3%

Lot Size

4%

2% 0%

Shops

1%

5%

Presentation

5%

9%

Proximity

8% 22%

34 %

18%

$350-$400K

$400-$450K

5%

$500-$550K

$450-$500K

$500-$550K

$450-$500K

40% 17% 19% 8%

Community

10%

$400-$450K

$600K>

$550-$600K

5%

$600K>

$550-$600K

HOME & LAND PACKAGE BUDGET

60% 20% 9% 5% 3% 1% 0% 2% 0%

$400-$450K

Community

TOP 3 BEST FEATURES OF ESTATE

September Quarter 2019

11%

Parks/Water

Affordability

Location/Area

$600K>

$550-$600K

1%

4%

6%

36%

36%

2%

13%

$500-$550K

13%

24%

$400-$450K

23%

3%

$300-$350K

27% 6% 1%

$450-$500K

$350-$400K < $300K

25%

23% 0% 2%

OUR TEAM

ERIC DICK

KEVIN BROWN

LUKE KELLY

eric@rpmrealestate.com.au

kevin@rpmrealestate.com.au

luke@rpmrealestate.com.au

EXECUTIVE CHAIRMAN +61 418 349 267

+61 418 397 577

DIRECTOR

+61 400 688 520

PETER GRANT

ROD ANDERSON

JINYIN ZHANG

peterg@rpmrealestate.com.au

rod@rpmrealestate.com.au

jinyin@rpmrealestate.com.au

DIRECTOR, COMMUNITIES +61 411 494 499

68

CHIEF EXECUTIVE OFFICER

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

DIRECTOR, COMMUNITIES +61 417 595 859

DIRECTOR, RPM INTERNATIONAL +61 451 898 886

CHRISTIAN RANIERI

MICHAEL STAEDLER

DAVID YANG

christian@rpmrealestate.com.au

m.staedler@rpmrealestate.com.au

d.yang@rpmrealestate.com.au

DIRECTOR, TRANSACTIONS & ADVISORY +61 416 445 078

RESEARCH MANAGER +61 434 619 280

MANAGER, PROPERTY MANAGEMENT +61 402 446 058

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 019

69

DISCLAIMER

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

T +61 3 9862 9555

Level 5, 52 York Street

South Melbourne VIC 3205 rpmrealestate.com.au