D E C E M B E R
2 0 1 9
MARKET REVIEW
Q U A R T E R
RESIDENTIAL
RPM REAL ESTATE GROUP IS VICTORIA’S MOST SUCCESSFUL
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INSIDE
LEAD INDICATORS
DEVELOPMENT SITES
4 6
12
APARTMENTS / TOWNHOUSES
50
INTERNATIONAL
54
RESIDENTIAL INVESTMENT
Q4 MARKET OVERVIEW
FROM OUR CEO
44
FEATURE STORIES:
COMMUNITIES
16
Industry Leaders Insights Donnybrook Road breathes life back into development site market
10 15
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
3
FROM OUR CEO
RPM REAL ESTATE GROUP IS PLEASED TO BRING
For the December quarter, total sales throughout
WHERE WE UNPACK AND ANALYSE KEY TRENDS
compared to the previous quarter, and 34% from
Q4 MARKET OVERVIEW
YOU OUR Q4 RESIDENTIAL MARKET REVIEW, AND IMPACTS ACROSS MELBOURNE AND
GEELONG’S NEW HOUSING AND INVESTMENT MARKETS.
The final quarter of 2019 signalled a positive end to the year for the land market, with escalating
sales volumes and prices continuing to moderate KEVIN BROWN
CHIEF EXECUTIVE OFFICER RPM REAL ESTATE GROUP
recorded the eighth straight month of sales
growth while December, typically a slower month, outperformed the monthly average.
Greater Melbourne’s median lot price declined
2.1% to $308,900 from the previous quarter and
5% from the same period a year ago.
in the established market.
The continuing price correction can partly be
The key drivers underpinning a strengthening land
titled stock returning to market, which buyers are
particularly compared to the runaway price growth
activity from interest rate reductions and more
borrowing power, ongoing price correction and continued incentives and rebates.
R P M R E A L E S TAT E G R O U P
the same quarter last year. In addition, November
to meet buyer expectations around ‘fair value’,
market included improved buyer sentiment and
4
the growth corridors increased 17% to 3,185 lots
attributed to a still reasonable volume of discounted snapping up given they can settle quicker and move in sooner. Excess or overhang stock is also keeping prices at bay.
In the development site market, the quarter marked a pronounced turnaround resulting from pent up
back their properties for most of 2019 until they saw more stable market conditions where their values could again be supported.
There was also a perception shift following
Stockland’s acquisition of a large-scale site in
Donnybrook Road for over $100 million, brokered by RPM in conjunction with Biggin & Scott Land.
The transaction signified a big deal by a big player,
and gave other local developers confidence to invest, resulting in deal flows in the back half of the year of more than $327 million.
MICHAEL STAEDLER
optimism. In the December quarter, other dwelling
m.staedler@rpmrealestate.com.au
positive approval numbers provide cautious
RESEARCH MANAGER
approvals jumped 78% to 7,284 from the September
+61 434 619 280
Q4 MARKET OVERVIEW
demand from developers and landowners who held
In the townhouse and apartment market, tentative
quarter and 21% compared to the same period a year ago (albeit it came off a record low).
That said, the mismatch between supply and
The data contained within this report was prepared
project activity going through the pipeline is vital
property experts and GIS analysts.
readily available stock to meet demand, otherwise
Research underpins the core strategic decision
rates, rents and prices overall.
on current economic and housing conditions,
demand in this sector is still a key challenge. New given once supply is absorbed there will need to be a shortage will occur, putting pressure on vacancy
by RPM’s research team consisting of economists,
making capability at RPM, providing in-depth analysis sales rates and pricing, future supply and demand assessments, and buyer demographics. This rich intelligence enables clients to make informed
decisions that underscore the success of their
developments. RPM’s research is also highly valued in assisting clients to secure capital funding and
enhance their ongoing marketing and ROI strategies.
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
5
ECONOMIC ACTIVITY GROSS DOMESTIC PRODUCT (GDP)
1.80% 2.41% 12 month change to Sep qtr. 2019
5 year average
CONSUMER PRICE INDEX (CPI) Q 4L E M AA DR KI N ET D I OC VA ET RO VR ISE W
1.84% 1.78%
Dec-19
Source: ABS
Same month year earlier
VIC POPULATION
STATE FINAL DEMAND (SFD) - VIC
2.76% 4.14%
12 month change to Sep qtr. 2019
5 year average
RETAIL TURNOVER - VIC
2.51% 5.20% Dec-19
Same month year earlier
NATURAL INCREASE
13,165 Jun-19
9,851
Same qtr. year earlier
CASH RATE
0.75 % Dec-19
1.00% Sep-19
1.50% Dec-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 OVERSEAS MIGRATION
11,490 Jun-19
14,952 Same qtr. year earlier
4.80% Dec-19
4.94% Sep-19
5.34% Dec-18
4.15% Dec-19
3.10% Dec-19
4.25% 3.36% Sep-19
Sep-19
4.65% 4.07% Dec-18
Dec-18
83,244
12 months to Jun-19 23.2%
% change - 12 months earlier
2,436
3 YEAR FIXED RATE
4.6%
% change - same qtr. last year
Jun-19
DISCOUNTED RATE
33.6%
% change - same qtr. last year
NET INTERSTATE MIGRATION
BORROWING RATES
37,343
12 months to Jun-19
3,018
Same qtr. year earlier
2.6%
12,198
12 months to Jun-19
% change - same qtr. last year
19.3%
% change - 12 months earlier
14.8%
NATIONAL TOTAL CHANGE
VIC TOTAL CHANGE
381,619
132,785
1.53%
2.06%
change from Jun-18 to Jun-19 % change - same qtr. last year VIC share
35%
■ Negative change ■ Positive change
TOTAL POPULATION
AUS 25,364,307 VIC 6,594,804
VIC EMPLOYMENT EMPLOYMENT GROWTH (JOBS CREATED) Jobs (‘000s) TOTAL Sep-19 to Dec-19
FULL TIME Sep-19 to Dec-19 Last 12 months PART TIME Sep-19 to Dec-19 Last 12 months
0.23 39.27 26.40 51.05
0.8% 61.3% 2.7% 34.4% 0.0% -2.9% 1.7% 25.7% 2.4% 51.3% 4.7% 46.5%
$1,666 $1,625 $1,607 Nov-18
2.5% Source: ABS
4.9% 4.7% 4.2% Dec-19
Source: ABS
Sep-19
Same time last year
CONSUMER SENTIMENT
95.1 Dec-19
104.4 Dec-18
Source: Westpac-Melb institute
BUSINESS SENTIMENT
0.6
Dec-19
0.5
Source: RBA/NAB
Dec-18
The Westpac-Melbourne Institute Consumer Sentiment
WAGES
May-19
UNEMPLOYMENT RATE
Q 4L M E AA D R KI E NT D IOC VA ET ROVR ISE W
Last 12 months
26.63 90.32
% 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 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
7
VIC FINANCE NO. OF FHBS FINANCED
10,073 8,537 Dec-19
Same qtr. year earlier
NO. OF NON-FHBS FINANCED
19,537 17,430 Q 4L E M AA DR KI N ET D I OC VA ET RO VR ISE W
Dec-19
Same qtr. year earlier
FINANCE FOR NEW DWELLINGS
7,222 Dec-19
6,642
Same qtr. year earlier
VALUE OF LOANS - OWNER OCCUPIERS
$13.52B $12.34B Dec-19
Same qtr. year earlier
18% 12% 9% 10%
AVERAGE LOAN SIZE (FHBS)
$426,186 $384,578 Dec-19
Same qtr. year earlier
AVERAGE LOAN SIZE (NON-FHBS)
$472,388 $520,926 Dec-19
Same qtr. year earlier
FINANCE FOR ESTABLISHED DWELLINGS
17,941 Dec-19
19,325
Same qtr. year earlier
VALUE OF LOANS - INVESTORS
$5.27B Dec-19
$5.03B
Same qtr. year earlier
11% SHARE OF FHB LOANS
9% 7% 5%
34.0% 32.9% Dec-19
Same qtr. year earlier
Source: ABS
MELBOURNE PROPERTY MEDIAN HOUSE PRICE
$859,500 Previous qtr.
$804,500
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
Dec-19
Dec-19
$639,000
Dec-19
$829,000
MEDIAN UNIT PRICE
3.7% 6.8%
$615,500 Previous qtr.
$589,500
Same qtr. year earlier
AUCTIONS HELD
$308,900
3.8% 8.4%
$315,500 Previous qtr.
$325,000
Same qtr. year earlier
2,753
CLEARANCE
Dec-19 2.1% 5.0%
2,421 Sep-19
3,118
Same month year earlier
74% 78% 45%
VIC BUILDING DETACHED HOUSE APPROVALS 8,654 Dec-19 9,549 Same qtr. year earlier 34,805 Last 12 months
9.4% 12.0%
HOUSE COMMENCEMENTS
21.5% 20.3%
7.2% 7.1%
5,090 Sep-19 6,646 Same qtr. year earlier 23,748 Last 12 months
23.4% 31.6%
1.6%
Dec-19
15,542 2.5%
Same qtr. year earlier
57,358 15.5%
Last 12 months
13,940 Sep-19
16,181 13.8%
Same qtr. year earlier
23,748 31.6%
Last 12 months
TOTAL COMPLETIONS
OTHER COMPLETIONS
17.6%
15,938
TOTAL COMMENCEMENTS
OTHER COMMENCEMENTS
HOUSE COMPLETIONS 9,371 Sep-19 11,369 Same qtr. year earlier 37,341 Last 12 months
7,284 Dec-19 5,993 Same qtr. year earlier 22,553 Last 12 months
Q 4L M E AA D R KI E NT D IOC VA ET ROVR ISE W
8,850 Sep-19 9,535 Same qtr. year earlier 35,819 Last 12 months
TOTAL DWELLING APPROVALS
OTHER DWELLING APPROVALS
6,634 Sep-19 6,066 Same qtr. year earlier 24,533 Last 12 months
9.4% 15.7%
16,005 Sep-19
17,435 8.2%
Same qtr. year earlier
61,874 7.7%
Last 12 months
Source: ABS
MELBOURNE PROPERTY VACANCY RATE - MELB
2.2% 2.2% Dec-19
Dec-18
AVERAGE DAYS ON MARKET - METRO MELB
34
Dec-19
42
Dec-18
MEDIAN METRO HOUSE RENT
$480 Dec-19
$450 Dec-18
6.7%
MEDIAN METRO OTHER DWELLING RENT
$440 Dec-19
$420 Dec-18
4.8%
Source: REIV Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
9
FEATURE STORY:
INDUSTRY LEADERS INSIGHTS Auction results have been strong and there are greater levels of stock on the market and rising
Q4 MARKET OVERVIEW
transactions. It’s not just a short term sugar hit
ASSOCIATE DIRECTOR PROPERTY AT ANZ
RPM CONTINUES ITS INDUSTRY LEADERS Q&A
WITH DANIEL GRADWELL, ASSOCIATE DIRECTOR,
PROPERTY AT ANZ TO UNPACK THE KEY ECONOMIC AND PROPERTY MARKET DEVELOPMENTS OVER THE FINAL QUARTER OF 2019.
RPM: What were the key takeouts regarding
Victoria’s residential property market in Q4? I think there were 2 pronounced developments:
the first being there was a broad acceptance that an improvement in the market is here to stay in terms of price growth.
10
R P M R E A L E S TAT E G R O U P
indicators telling us?
which people might have been expecting, and the
It’s a little mixed. On the economic front, the recent
why we’re seeing more people in the market keen
For people directly by the bushfires it’s catastrophic,
realisation that a stronger market is here to stay is DANIEL GRADWELL
RPM: What are the key economic and property
to purchase.
Secondly, the supply-demand imbalance continues. Over the final quarter last year we finally started to
see some positive signs regarding the construction
bushfires and Coronavirus present some challenges. but the impact on the broader economy is likely to
be temporary. There will be some rebuilding stimulus
which the federal government has already announced that will go directly to these communities.
pipeline, which has been a long time coming. We’re
Coronavirus will have a larger impact. A recent ANZ
green shoots emerging by way of building approvals
GDP, while Coronavirus will shave off 0.5% due to the
not talking about a sharp rebound, rather some
starting to stabilise rather than continuing to fall.
Building approvals fell more than 25% from the peak, and have now recovered just 3%.
Housing finance also picked up for construction of new dwellings for both owner occupiers and
investors, which is usually a good indicator of where building approvals will go. So we have reason to be
more optimistic about the construction cycle than we were 3 months ago.
Research note forecast the bushfires to take 0.2% off impact on tourism and foreign students. And, unlike
the bushfires, there won’t be any stimulus measures. If you compare it to the SARS outbreak in 2002-2003 when Chinese tourist arrivals fell by more than 80%, the share of Chinese tourism is now 5-times larger. But it’s not just about the number of visitors; they
also spend the most per person, which significantly magnifies the impact.
4.0
7
3.5
6
3.0
$AUD (BILLION)
4
2.0 3
1.5
2
1.0
1
0.5 0.0
$AUD (BILLION)
5
2.5
90
95
00
10
05
Owner-occupier finance for construction and new homes (LHS)
15
20
0
Building approvals (RHS)
THE DEMAND AND SUPPLY DYNAMIC WILL PUT UPWARD PRESSURE ON PRICES INITIALLY, BUT BUILDING APPROVALS SHOULD ACCELERATE IN THE SECOND HALF OF THE YEAR DANIEL GRADWELL
Source: ABS, ANZ Research
In terms of economic indicators, we’ve seen an
This is important given they were at very low levels
We’ll continue to see a pretty solid presence of first
month or 2 which is a real positive compared to mid-
houses. Of course apartments were hit harder which
because price growth doesn’t help affordability
improvement in the labour market over the past 2019 when unemployment was trending higher.
The challenge is will there be enough job creation over the next few months given the headwinds around the bushfires and Coronavirus.
throughout 2019 for both apartments and detached reflected concerns over build quality and cladding
issues which were more prominent in Sydney but still had an impact in Melbourne.
year. The RBA has emphasised its belief that rate cuts
RPM: What are your predictions for 2020?
time. The implications for the economy and property
Broadly it will be a good year from a housing
markets will continue to be felt through 2020.
In terms of property indicators, we’ve seen some tentatively positive numbers coming through in building approvals.
buyers a year, it won’t affect a material change.
and construction should start to accelerate in the
there will still be a housing shortage in the short term.
are having the desired impact, but that it does take
loan deposit scheme will help 10,000 first home
Even if building approvals start to pick up today,
lower and wages higher, which is expected to result
in 2 more interest rate cuts towards the middle of the
which is already challenging. While the new home
The demand and supply dynamic will put upward
lag times before getting product onto the market.
create enough additional jobs to drive unemployment
home buyers in the market. But it gets complicated
That said, it’s worth highlighting the large lead and
ANZ Research is anticipating the economy will not
standpoint. Anticipated rate cuts will further entrench
growth in prices for existing and new dwellings across both detached housing and apartments. Prices
Q4 MARKET OVERVIEW
Homeowners are getting more finance for construction, and building approvals look to have stopped falling.
pressure on prices initially, but building approvals second half of the year. That’s the key challenge;
supply can take 12-18 months to come through, and
the delay could put further pressure on both housing prices and rents. Vacancy rates are already low and
if we’re not building enough for the remainder of the year it’s likely the vacancy rate will continue to fall and result in continued rent increases.
are already above the previous peak for units and apartments in Melbourne.
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
11
OVERVIEW
THERE WAS A PRONOUNCED TURNAROUND IN THE
DEVELOPMENT SITE MARKET DURING THE DECEMBER
DEVELOPMENT SITES
QUARTER, RESULTING FROM PENT UP DEMAND
FROM BOTH DEVELOPERS – MANY OF WHOM SAT
OUT OF THE MARKET THROUGH MOST OF 2019 - AND LANDOWNERS, WHO HELD BACK THEIR PROPERTIES UNTIL SUCH TIME AS THE MARKET STABILISED AND THEIR VALUES COULD AGAIN BE SUPPORTED.
Slow sales and settlement valuation risk dampened
demand throughout the first half of the year, with few properties transacting apart from key sites where
decreases in value were offset through changes to
terms and structures and/or supply constraints meant securitisation of stock within the corridor overrode short term market conditions.
The slowing of retail lot sales also highlighted the
resilience of some markets and the deficiencies of
others. In particular, certain pockets such as Wollert became over-inflated and are still correcting to get back to more stable conditions in both retail and englobo values. 12
R P M R E A L E S TAT E G R O U P
CHRISTIAN RANIERI
DIRECTOR, TRANSACTIONS & ADVISORY christian@rpmrealestate.com.au +61 416 445 078
In addition, offshore developers are following their
INFILL MARKET
opportunities. This was reflected in Goldfields’
market, where there is strong demand to secure long
The infill market continues to struggle as developers
time for uplift, demonstrating their commitment to
uncertainty and delays, and land values that need to
with developers willing to pay big values to secure
purchase of Grossi Farm in May 2019, paying a very
high land rate with respect to retail values and trade volumes at the height of the downturn to secure a scale opportunity.
With the market bottoming out mid-year, developers were able to reset their baseline and model their
projects with real numbers. The latter part of the year also marked a perception shift following
Stockland’s acquisition of a large-scale site in
Donnybrook Road for over $100 million, brokered by RPM in conjunction with Biggin & Scott Land.
Representing a big deal by a big player, the sale of
the 89.5 hectare PSP-approved site gave other local players confidence to invest.
local counterparts in returning to the greenfield
term opportunities with a view to on-selling these in longevity in the Australian market.
stronger sales volumes, developers are seeking
the volumes required to drive growth. There has been a
stock to fill that gap. In addition, in the new era of
non-bank funding - which is much more expensive than traditional bank debt - the ability to recycle
capital quickly and provide solid returns to investors
different from the boom years, the market can’t absorb dramatic reduction in sales volumes and sales values, with strong traction in site values less than $5 million which have lower risk.
over shorter periods means developers have
greater support to acquire sites and more of them,
as opposed to dated sites with planning risks where timing is unknown.
Developers are keen to secure shorter term deals to
North, West and South East regions, totalled more
6-8 months given the retail market upswing.
than $350 million.
dramatically reduce before projects become viable. With the lending and selling environments now very
This transaction, combined with other key deals by local developers in the back half of the year in the
grapple with increased construction costs, planning
That said, the preference towards PSP-approved
sites is at its highest ever. Anticipating a return to
QD4E V M EA LROK PE M T EONVT E S R IVTI EE SW
Conversely, the South East continued to perform well,
be able to pop a project into the market in the next
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
13
DEVELOPMENT SITES
OUTLOOK We anticipate the englobo market to continue to
Industrial land opportunities will continue to grow and
In the infill market, until settings improve – including
areas having been scooped up over the boom years
local and international companies and the growing
investor disincentives – development site sales will
strengthen in 2020. With quality landholdings in key
between 2015-2018, developers are acutely aware of the limited amount of readily developable sites.
In addition, key landowners who saw significant
transactions come to fruition towards the latter
part of last year won’t want to miss the window of opportunity again.
14
R P M R E A L E S TAT E G R O U P
trade strongly, buoyed by huge interest from both demand for localised logistics. And as population
growth continues to penetrate the corridors, demand for these sites will rise.
greater planning certainty and the removal of foreign remain challenging. The market will remain moderate
at best over the next 12 months. If vacancy rates start to compress due to lack of supply, only then might we see the government amend policy controls to drive better outcomes.
FEATURE STORY:
September 2019 signalled a momentum shift in the
The site is surrounded by other major developments
acquired 975 Donnybrook Road for over $100 million.
Satterley Property Group, Mirvac, Dennis Family
development site market when Stockland Group
Brokered by RPM in conjunction with Biggin &
including Stockland’s existing Cloverton Estate, Homes and Wolfdene.
Scott Land, the landmark 89.52 ha site was the
With the potential to deliver in excess of 1,400
Melbourne’s north left in private hands. Located
strengthens its capacity to develop affordable new
last significant parcel of PSP-approved land in 30 kms from Melbourne’s CBD and close to
Donnybrook railway station and the Hume freeway,
residential lots, Stockland said the acquisition homes in desirable locations.
the landholding features frontage of more than 800
Head of RPM Transaction & Advisory Christian Ranieri
a proposed government school.
opportunities to come to the market in 2019.
metres, substantial open space and parkland and
said the site was one of Victoria’s best development
DEVELOPMENT SITES
DONNYBROOK ROAD BREATHES LIFE BACK INTO DEVELOPMENT SITE MARKET
THE SALE HELPED TO BREATHE LIFE BACK INTO THE MARKET, GIVING OTHER DEVELOPERS CONFIDENCE TO INVEST GIVEN THE SIZE OF THE TRANSACTION BY A MAJOR AUSTRALIAN DEVELOPER. IT RE-ENERGISED THE MARKET, WITH DEVELOPERS KEEN TO RE-STOCK THEIR PIPELINES IN ANTICIPATION OF AN UPLIFT IN DEMAND IN THE COMING 12-24 MONTHS.
CHRISTIAN RANIERI
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
15
OVERVIEW
BUYER CONFIDENCE AND SALES MOMENTUM CONTINUED TO GATHER PACE IN THE NEW
HOUSING MARKET THROUGHOUT DECEMBER
COMMUNITIES
QUARTER 2019, UNDERSCORED BY MODERATING PRICES, VARIOUS MARKET STIMULUS TAKING
EFFECT, INCREASED BORROWING CAPACITY AND CONTINUED INCENTIVES AND REBATES.
November recorded the eighth straight month of
sales growth, while December – typically a slower
month due to seasonal factors – outperformed the monthly average, delivering 78% of the average of the previous 3 months (usually it is around 50%).
For the December quarter, gross lot sales throughout the growth areas of Melbourne and Geelong
increased 17% from the previous quarter to 3,185 gross lot sales and 34% from the same quarter
in 2018. Nevertheless, this growth has come off relatively low sales activity.
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 continues to
It reinforces the fact that supplying the market with
quarter and 5% from the same period a year ago.
is still the biggest driver of sales activity. It is no
moderate, falling 2.1% to $308,900 from the previous
attributed to the volume of titled stock returning to
market which is generally priced at a slight discount, and the amount of unsold lots on the market, albeit
the pace of growth of this overhang stock slowed in
the second half of 2019 as developers limited new lot releases below lot absorption.
While buyers have a clearer idea of their borrowing
power following relaxed lending conditions, they’re still highly sensitive to affordability, hence the
attractiveness of well-priced titled stock which can be settled quicker and their homes built sooner.
coincidence that in the December quarter, annual
sales growth within Melbourne’s growth areas was strongest in Hume (98%) and Casey (73%) which
corresponded with the largest decline in median lot prices (8%).
The median lot size remained unchanged at 395sqm
as a result of many new and existing estates featuring a higher percentage of medium density and smaller conventional lots (under 300sqm).
17%
COMMUNITIES
The continuing price correction can partly be
the right product (lot size) at the right price point
FOR THE DECEMBER QUARTER, GROSS LOT
SALES THROUGHOUT THE GROWTH AREAS OF MELBOURNE AND GEELONG INCREASED 17%
FROM THE PREVIOUS QUARTER TO 3,185 GROSS LOT SALES.
395sqm
THE MEDIAN LOT SIZE REMAINED UNCHANGED AT 395SQM
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
17
OVERVIEW
MELBOURNE GROWTH CORRIDORS
7,000
200
120
4,000
100 3,000
80 60
2,000
40
GROSS LOT SALES
5,000
140
1,000
20 0
Dec-16
Active estates
MEDIAN LOT PRICE ($)
% OF TOTAL GROSS LOT SALES
6,000
160
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
0
Gross lot sales
$350,000
420
$300,000
415 410
$250,000
405
$200,000
400 $150,000
395
$100,000
390
$50,000 $0
385 Dec-16
Mar-17
Jun-17
Sep-17
$325>
$301 $325
$275 $300
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
380
MEDIAN LOT SIZE (SQM)
COMMUNITIES
NUMBER OF ESTATES
180
$251 $275
<$250
0%
10%
December quarter 2019 Median lot size
18
Median lot price
R P M R E A L E S TAT E G R O U P
20%
30%
December quarter 2018
40%
50%
December quarter 2017
Source: RPM
% CONTRIBUTION TO TOTAL GROSS LOT SALES DECEMBER QUARTER 2019
22%
HUME
14%
CARDINIA DEC QUARTER 2018
MITCHELL
WHITTLESEA MELTON
WYNDHAM
MOORABOOL
GREATER GEELONG
5%
3% 7%
18% 17% 2%
12%
DECEMBER QUARTER 2018
NORTHERN
SOUTH EAST
GREATER GEELONG
December quarter ‘19 median lot price
$299,000
$295,000
$332,500
$279,000
Change from December quarter ‘18
-$13,000
-$7,000
-$22,500
$4,000
% change from December quarter ‘18
-4.2%
-2.3%
-6.3%
1.5%
December quarter ‘19 median lot size
392.0
400.0
400.0
448.0
-8.0
2.0
2.0
0.0
% change from December quarter ‘18
-2.0%
0.5%
0.5%
0.0%
December quarter ‘19 gross lot sales
1,164
787
853
381
114
330
341
15
% change from December quarter ‘18
10.9%
72.2%
66.6%
4.1%
December quarter ‘19 sales contribution
36.5%
24.7%
26.8%
12.0%
December quarter ‘18 sales contribution
44.0%
19.2%
21.5%
15.3%
December quarter ‘19 active estates
88
50
45
33
Change from December quarter ‘18
18
7
6
5
December quarter ‘19 lot releases
872
459
639
394
Change from December quarter ‘18
-245
-79
120
-113
-21.9%
-14.7%
23.1%
-22.3%
Change from December quarter ‘18
Change from December quarter ‘18
CASEY
17%
HUME
10%
CARDINIA MITCHELL
WHITTLESEA MELTON
WYNDHAM
MOORABOOL
GREATER GEELONG
4%
3%
% change from December quarter ‘18
19%
December quarter ‘19 no. of trading days
249
200
196
270
Change from December quarter ‘18
173
86
71
176
228%
75%
57%
187%
7%
22% 2%
15%
% change from December quarter ‘18
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
COMMUNITIES
CASEY
WESTERN
19
WESTERN GROWTH CORRIDOR A GREATER NUMBER OF ACTIVE ESTATES AND
SUBSEQUENT HIGHER LOT SUPPLY UNDERPINNED A 14% QUARTERLY INCREASE IN SALES IN THE WESTERN GROWTH CORRIDOR IN DECEMBER
QUARTER 2019, WITH 1,164 GROSS LOT SALES.
NOTWITHSTANDING, IT WAS LOWEST RECORDED
MOORABOOL
COMMUNITIES
GROWTH AMONG THE FOUR CORRIDORS,
WITH THE SHARE OF TOTAL GROSS LOT SALES
MELTON
FALLING TO 36%.
The volume of unsold stock across the Western
growth corridor remains considerably higher than
other areas, surpassing 2,500 lots. The majority of overhang lots are in Melton and Wyndham and is
starting to apply downward pressure on prices. On
a quarterly basis, Wyndham experienced the largest fall in the median lot price (4%), while Melton’s
WYNDHAM
median lot price declined 2.7%.
Falling prices restricts the ability of developers to release new lots to market without further
dampening lot values. As such, new supply in PORT PHILLIP BAY
Wyndham was down 31% from the previous quarter. Although lot releases increased in Melton, this was likely attributed to a higher proportion of smaller lots/medium density stock.
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’s median lot price fell by 4% to $310,000
over the December quarter from the previous quarter and 6.9% annually, which was the largest decline
Consequently, the rebound in gross sales has been relatively weak, with 534 lot sales over December
20
corresponding increase in all other growth areas.
10
Active estates
and 277 fewer lots from the same quarter in 2018 was also the greatest among all Melbourne growth areas. In addition, poorer affordability is driving a shift in
buyer preference to smaller lots. This is evident in the
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
0
Gross lot sales
415
$300,000
410
$250,000
405
$200,000 400 $150,000 395
$100,000
390
$50,000 $0
quarterly reduction in the median lot size, which dipped below 400sqm to 395sqm for the first time.
Dec-16
$350,000
MEDIAN LOT PRICE ($)
new supply to 149 fewer lots from the previous quarter
500
5 0
In response, new supply continues to fall, slipping to
330 lot releases for the quarter. The resultant decline in
1,000
15
quarter equating to a marginal 1% rise compared to the same period in 2018 and significantly lower than the
1,500
25
GROSS LOT SALES
affordability concerns remain.
30
Median lot size
Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
the northern and western corridors, and as such,
2,000
35
COMMUNITIES
remains the most expensive median lot price across
40
NUMBER OF ESTATES
across Melbourne’s growth areas. Nevertheless, it
2,500
45
385
Source: RPM Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
21
WESTERN GROWTH CORRIDOR
MELTON 1,600
50
quarter but was still 4.1% smaller compared to the
same quarter a year ago. Consequently, the median lot price declined 2.3% annually to $292,000.
1,000
30
800
25 20
600
15
400
10
0
lot sizes continue to feature prominently in sales
sub–markets of Fraser Rise and Deanside, where
1,200
35
200
5
While Melton is generally an affordable area, smaller volumes. Most of these sales are occurring in the
1,400
40
Active estates
GROSS LOT SALES
COMMUNITIES
to 375sqm in the December quarter from the previous
NUMBER OF ESTATES
Melton’s median lot size kicked back up from 354sqm
45
Dec-16
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
0
Gross lot sales
pricing for conventional lots is relatively expensive.
number of active estates (45) was further boosted by an increase in new releases to 500 lots in the
latest quarter. This was supported a strong pick-up in demand, with gross sales climbing 16% from the previous quarter and 26% annually to 579 lots.
$300,000
400
$200,000 380 $150,000 360
$100,000
340
$50,000
Median lot size
R P M R E A L E S TAT E G R O U P
420
$250,000
$0
22
440
Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
The abundance of lot supply in Melton due to a high
MEDIAN LOT PRICE ($)
$350,000
320
Source: RPM
ROD ANDERSON
DIRECTOR, COMMUNITIES rod@rpmrealestate.com.au +61 417 595 859
MOORABOOL 8
This is highlighted by 42 new lot releases recorded for the quarter after no new lots were added to the
market in the previous quarter. Moreover, gross sales more than doubled on a quarterly basis to 51 lots.
Moorabool remains the most affordable growth area across Greater Melbourne and Geelong, with the
160
6
140
5
120
4
100 80
3
60
2
40
1 0
Active estates
GROSS LOT SALES
and demand for vacant lots within the growth area.
180
COMMUNITIES
December quarter 2019 promoted both new supply
200
7
NUMBER OF ESTATES
The addition of 2 new estates in Moorabool during
20 Dec-16
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
0
Gross lot sales
median lot price edging down 1.4% to $240,500. This
increase in the median per sqm lot price.
MEDIAN LOT PRICE ($)
in the median lot size to 480sqm, resulting in an
550
$300,000 $250,000
500
$200,000 450 $150,000 400 $100,000 350
$50,000 $0
Median lot size
Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
decline was induced by a 6.3% quarterly reduction
300
Source: RPM Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
23
NORTHERN GROWTH CORRIDOR
THE NORTHERN GROWTH CORRIDOR RECORDED
Despite containing more active estates, new supply
IN THE DECEMBER QUARTER TO 787 GROSS LOT
frequency and size of new lot releases in estates
A 16% QUARTERLY INCREASE IN SALES VOLUMES
COMMUNITIES
SALES, RETAINING ITS SHARE OF TOTAL LOT
SALES TO JUST UNDER 25%. INTERESTINGLY, LOT SALES OUTPACED NEW SUPPLY IN ALL 3 SUB-MARKETS, WITH TOTAL RELEASES MARGINALLY RISING TO 459 LOTS.
Titled lots accounted for a greater share of gross sales in Hume and Mitchell compared to all other
growth areas. This reduced the need for new supply
to match lot absorption, impacting median lot prices
which declined a little over 3% in these sub-markets.
24
R P M R E A L E S TAT E G R O U P
in Whittlesea remains below that for Hume, with the along Craigieburn Road in Wollert and Donnybrook Road in Donnybrook remaining low. Moreover,
uncompetitive pricing of conventional lots has
reduced demand for larger lots, and subsequently supply. This is highlighted in Whittlesea’s small
median size (351sqm), indicating a higher prevalence of medium density sales.
LUKE KELLY
DIRECTOR, COMMUNITIES luke@rpmrealestate.com.au +61 400 688 520
HUME
releases totalling 247 lots, with sales activity doubling from the same quarter in 2018 compared to a more moderate 9% annual rise in new supply.
Notably, titled lots comprised approximately half
Most of these lots were previously sold during the
10
6
Given titled lots are generally priced at a slight discount to new release stock, the median lot
price declined 3.2% from the previous quarter to
$300,000 and 8% from the same period in 2018. This
Dec-16
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-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
price correction coincided with the median lot size remaining static at 400sqm.
200
2
$400,000
MEDIAN LOT PRICE ($)
of sales activity on new lot supply abated.
400
4
Active estates
as sentiment collapsed. With titled lots absorbing a
relatively high proportion of demand, the dependence
600
8
0
market upturn before being returned to the market
800
12
of all lot sales in Hume over the quarter, which was considerably higher than all other growth areas.
1,000
14
COMMUNITIES
totalling 461 lots was considerably higher than new
16
NUMBER OF ESTATES
from the previous quarter. However, gross sales
1,200
18
GROSS LOT SALES
new lot releases increased slightly more than 20%
370 Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
In December quarter 2019, both gross lot sales and
360
Source: RPM Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
25
NORTHERN GROWTH CORRIDOR
MITCHELL
and the first time sales volumes surpassed 100 lots since mid-2018.
The escalation in sales activity was underpinned by a jump in active estates to 10, which in turn led to new
10
affordability, with the median lot price falling 3.5% to
200
8 150 6 100 4 50
2 0
releases almost trebling to 77 lots. Also contributing to stronger demand was an improvement in
250
Active estates
Dec-16
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
GROSS LOT SALES
COMMUNITIES
quarter 2019 - more than double the previous quarter
NUMBER OF ESTATES
12
Mitchell recorded 109 gross lot sales in December
0
Gross lot sales
$275,000, while the median lot size remained steady
MEDIAN LOT PRICE ($)
$350,000 $300,000
500
$200,000 450 $150,000 400
$100,000
350
$50,000
Median lot size
R P M R E A L E S TAT E G R O U P
550
$250,000
$0
26
600
Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
at 401sqm.
300
Source: RPM
PETER GRANT
DIRECTOR, COMMUNITIES
peterg@rpmrealestate.com.au +61 411 494 499 WHITTLESEA The median lot size in Whittlesea contracted to 351sqm in the December quarter and was
significantly smaller than all other growth areas
Wollert, has been impacted by the fall in established house prices through much of 2018 and early 2019
in suburbs including Thomastown, Lalor and Epping. As the price premium for existing houses in these
Wollert has become increasingly uncompetitive,
to 217 lots. Notably, Whittlesea was the only growth area in Melbourne to record a quarterly decline
in lot sales. This has in turn led to new lot supply decreasing by more than a third from both the
400 300
10
200
5
100 Dec-16
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
0
Gross lot sales
410 400
$300,000
390
$250,000
380
$200,000
370
$150,000
360 350
$100,000
340
$50,000 $0
previous quarter and the same quarter in 2018 to a long term low of 135 lot releases.
500
$350,000
MEDIAN LOT PRICE ($)
momentum, with quarterly gross sales falling 11%
600
15
Active estates
existing houses.
As a result, sales activity has struggled for
700
20
0
resulting in demand for family dwellings shifting to
800
25
suburbs has subsequently narrowed, the price of
a new house/land package on a conventional lot in
900
Median lot size
COMMUNITIES
Demand for conventional size lots, particularly in
NUMBER OF ESTATES
previous quarter to $299,000.
30
GROSS LOT SALES
median lot prices, which declined 1.2% from the
330 Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
during most of 2019. This has placed a ceiling on
320
Source: RPM Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
27
SOUTH EAST GROWTH CORRIDOR
THE SOUTH EAST GROWTH CORRIDOR
MAINTAINED ITS 27% SHARE OF OVERALL GROSS LOT SALES IN DECEMBER QUARTER 2019, WITH COMMUNITIES
SALES INCREASING 17% FROM THE PREVIOUS QUARTER TO 853 LOTS.
Casey and Cardinia’s median lot prices ($330,000 and $349,500 respectively) are still the most expensive among all growth corridors but have not impeded
sales activity given improved market conditions and sentiment through the second half of 2019.
The continuing increase in active estates has
underpinned rising new lot supply and subsequent competition for purchaser demand. As a result,
price points for lots are becoming more attractive, evident by falling per sqm lot prices, which is supporting lot sales.
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
previous quarter and 73% from the same quarter in 2018.
Continuing improved relative affordability for
600 15
of $330,000 is marginally higher than its low point
Active estates
The volume of titled lots on the market has also been relatively higher in Casey, accounting for
approximately one third of gross lot sales which has
reduced the need for new supply to correspond with
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
460 450 440
$300,000
430
$250,000
420
$200,000
410 400
$150,000
390
$100,000
380
$50,000 $0
0
Gross lot sales
$350,000
MEDIAN LOT PRICE ($)
lot sizes.
Dec-16
$400,000
Conversely, the median lot size has been static at
392sqm, resulting in more attractive price points for
200
5 0
in the previous quarter and down 8.3% annually.
400
10
a house/land package has been a key driver of
strengthening sales activity. Casey’s median lot price
800
20
GROSS LOT SALES
quarter. Sales volumes climbed 16% from the
1,000
25
COMMUNITIES
Geelong, with 709 gross lot sales in the December
1,200
30
NUMBER OF ESTATES
growth area throughout Greater Melbourne and
35
370 Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
Casey retained its status as the highest selling
360
lot sales, evident by releases for the quarter being somewhat lower at 527 lots.
Median lot size
Median lot price
Source: RPM Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
29
COMMUNITIES
THE CONTINUING INCREASE IN ACTIVE ESTATES HAS UNDERPINNED RISING NEW LOT SUPPLY AND SUBSEQUENT COMPETITION FOR PURCHASER DEMAND.
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
12, a near 3-year high. However, new supply fell 6%
from the previous quarter to 112 lot releases, and was outpaced by demand, with gross sales increasing 17% to 144 lots.
450
18
400
16
350
14
200
8
150
6 4
100
2
50
Already the most expensive growth area, Casey’s
for the quarter, signalling a return to its previous peak
250
10
0
median lot price escalated by almost 3% to $349,500
300
12
Active estates
Dec-16
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
COMMUNITIES
quarter has lifted the number of active estates to
20
GROSS LOT SALES
The addition of 2 new estates in Cardinia in the latest
NUMBER OF ESTATES
CARDINIA
0
Gross lot sales
opposed to demand being higher than new supply.
MEDIAN LOT PRICE ($)
a 7% increase in the median lot size to 448sqm as
$400,000
530
$350,000
510 490
$300,000
470
$250,000
450
$200,000
430
$150,000
410
$100,000
390
$50,000 $0
Median lot size
370 Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
value. This price growth was mostly in response to
350
Source: RPM Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
31
GREATER GEELONG GROWTH CORRIDOR
MOVEMENTS IN GREATER GEELONG’S PROPERTY
MARKET GENERALLY LAG THOSE OF MELBOURNE, AND WITH THE LAND MARKET RECOVERY STILL COMMUNITIES
IN AN EARLY PHASE, THE REBOUND IN ACTIVITY HAS NOT BEEN AS STRONG IN GEELONG’S GROWTH AREAS.
Consequently, the proportion of total lot sales
in Greater Geelong’s growth corridors remained relatively low at 12%, with gross lot sales
experiencing only a small annual increase of 4% to
381 lots. Subdued demand has in turn impacted new supply, which declined 22% annually to 394 lots. In addition, a bigger fall in Melbourne’s lot prices has narrowed Greater Geelong’s traditional
affordability advantage, with lot prices in Greater
GREATER GEELONG
Geelong’s growth areas on par with corresponding PORT PHILLIP BAY
32
R P M R E A L E S TAT E G R O U P
values in the western sub-markets of Wyndham and Melton.
PETER GRANT
DIRECTOR, COMMUNITIES
peterg@rpmrealestate.com.au +61 411 494 499
ARMSTRONG CREEK 600
9
lots, and a near doubling of new releases to 160 lots. However, both sales activity and new supply remain
relatively weak, recording annual declines of 15% and 41% respectively.
As a result, the median lot price for Armstrong Creek was steady at $272,000, although per sqm lot prices
400
6 5
300
4 3
200
2
100
1 0
Active estates
Dec-16
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
GROSS LOT SALES
by a 13% quarterly increase in gross sales to 171
500
7
COMMUNITIES
recovering across Armstrong Creek, underscored
8
NUMBER OF ESTATES
Sentiment in the new housing market is slowly
0
Gross lot sales
increased with the median lot size falling to 400sqm. 450
MEDIAN LOT PRICE ($)
$250,000
440 430
$200,000
420
$150,000
410 400
$100,000
390
$50,000 $0
Median lot size
380 Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
460
$300,000
370
Source: RPM Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
33
GREATER GEELONG GROWTH CORRIDOR
COMMUNITIES
Bellarine Peninsula over the December quarter.
While there was a moderate 8% rise in sales activity to 65 gross lot sales, the majority of lots sold was existing stock.
The decrease in stock overhang has placed
16
450
14
400
growth (10.2%) from the previous quarter, rising to
300
10
250
8
200
6
150
4
100
2 0
some upward pressure on prices, with Bellarine
Peninsula’s median lot value recording the highest
350
12
Active estates
GROSS LOT SALES
New lot supply collapsed to just 4 releases in
NUMBER OF ESTATES
BELLARINE PENINSULA
50 Dec-16
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
0
Gross lot sales
to 448 sqm.
MEDIAN LOT PRICE ($)
achieved while the median lot size contracted 11%
$400,000
540
$350,000
520
$300,000
500
$250,000
480
$200,000 460
$150,000
440
$100,000
420
$50,000 $0
Median lot size
34
R P M R E A L E S TAT E G R O U P
Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
$325,000. Notably, this sizeable price growth was
400
Source: RPM
ROD ANDERSON
DIRECTOR, COMMUNITIES rod@rpmrealestate.com.au +61 417 595 859
periods, although at 52 lot releases, new supply still
represents a considerable annual fall of 44%. Gross
sales in the December quarter were almost identical to lot releases, with 51 lots sold, but equated to a substantial 89% growth in annual sales.
Geelong’s large median lot size (604sqm) is
supporting a relatively expensive median lot
140
6
120
5
100
4
80
3
60
2
40
1
20
0
Active estates
Dec-16
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
COMMUNITIES
from long term lows in the 2 preceding quarterly
7
GROSS LOT SALES
New lot supply in the Geelong growth area rebounded
NUMBER OF ESTATES
GEELONG
0
Gross lot sales
MEDIAN LOT PRICE ($)
previous quarter.
$400,000
750
$350,000
700
$300,000
650
$250,000
600
$200,000
550
$150,000
500
$100,000
450
$50,000
400
$0
Median lot size
Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
price of $327,000, which increased 6% from the
350
Source: RPM Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
35
GREATER GEELONG GROWTH CORRIDOR
LARA
gross sales (79 lots).
A 4.4% correction in the median lot price to $262,950
resulted in Lara becoming the most affordable growth
prices increased.
100
4
80 3 60 2
40
1 0
area in Geelong. This was below a 10.9% reduction in
the median lot size to 428sqm. As a result, per sqm lot
120
5
Active estates
20
Dec-16
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
490
MEDIAN LOT PRICE ($) R P M R E A L E S TAT E G R O U P
470
$250,000
450
$200,000
430 $150,000 410 $100,000
390
$50,000
Median lot size
36
0
Gross lot sales
$300,000
$0
GROSS LOT SALES
substantial growth in both new releases (140 lots) and
140
370
Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
COMMUNITIES
area in the latest quarter was the main driver of the
NUMBER OF ESTATES
6
The addition of Coridale estate in the Lara growth
350
Source: RPM
LUKE KELLY
DIRECTOR, COMMUNITIES luke@rpmrealestate.com.au +61 400 688 520
TORQUAY 160
5
the median lot price edge higher by 1.6% to $437,000, which was more moderate than an 8.6% increase in the median lot size to 486sqm.
100
3
80 2
60 40
1
20 0
Active estates
Dec-16
Mar-17
New estates
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
0
Gross lot sales
650
$500,000 $450,000
MEDIAN LOT PRICE ($)
GROSS LOT SALES
releases in the previous quarter. Weaker demand saw
120
600
$400,000 $350,000
550
$300,000 500
$250,000 $200,000
450
$150,000 $100,000
400
$50,000 $0
Median lot size
Dec-16
Mar-17
Median lot price
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
MEDIAN LOT SIZE (SQM)
supply increased to 38 lots, up from 33 new lot
4
COMMUNITIES
lot sales recorded for the quarter. Conversely, new
140
NUMBER OF ESTATES
Sales activity dwindled in Torquay, with 15 gross
350
Source: RPM Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
37
OUTLOOK
The outlook for the new housing market is
considerably more buoyant heading into 2020 compared to 2019. Encouraged by improved COMMUNITIES
borrowing power and possible further interest
rate reductions this year, strengthening purchaser
demand is expected to underpin an escalating trend in lot sales, which will also start to absorb stock
RISING VALUES IN THE ESTABLISHED MARKET AND MODERATING PRICES IN THE LAND MARKET ALSO REDUCES THE LAND-PRICE-TO-HOUSE-PRICE RATIO, MEANING BUYERS SEE MORE VALUE IN A BLOCK OF LAND/HOUSE AND LAND PACKAGE THAN AN EXISTING HOUSE.
overhang that built up throughout 2019.
In addition, the opportunity to tap into discounted
As market conditions improve, the use of incentives
A further stimulant that will play out through 2020 is
capitalise on incentive and rebates (albeit at
off. This could bring forward purchasing decisions
In January 3,000 applications were completed with
titled stock as it continues to wash out and
reduced rates) puts buyers in the hot seat as real prices continue to moderate.
The projected double-digit growth in established
house prices will likely further boost the purchasing capacity of second and third home buyers,
encouraging them to trade up to a new dwelling.
38
R P M R E A L E S TAT E G R O U P
and rebates and low deposit terms may start to drop among buyers in the first half of 2020, who may
feel this window will be their best opportunity to
purchase something larger than a townhouse or small lot (<300sqm).
the take up of the First Home Loan Deposit Scheme. 2,000 more on offer that month and a further 5,000
loans available through to June 2020. An additional
10,000 loans will be on offer in the new financial year (2020/21). These loans will provide further support
for first home buyers that otherwise might not be able to enter the market.
Wallan $234,000 Beveridge $275,000
Kalkallo $295,000 Sunbury $297,000 Mickleham $290,000
Donnybrook $288,000
Craigieburn $355,000
Wollert $360,250
Greenvale $356,500
Bacchus Marsh $209,000 Bonnie Brook $343,500 Melton South $260,000 Aintree $295,000
Thornhill Park $275,000
Weir Views $253,250
Fraser Rise $337,000
Rockbank $310,000 Deanside $323,000
Strathulloh $276,500 Mt Atkinson $346,200
WHAT DOES A 400SQM LOT COST? December quarter 2019 COMMUNITIES
Mount Cottrell $336,900 Tarneit $315,000
Truganina $350,000
Manor Lakes $284,750 Mambourin $288,500
Wyndham Vale $300,500 Werribee $305,000
Berwick $428,000 Officer $349,000
Lara $251,400
Officer South $330,000 Cranbourne $346,000
Cranbourne East $327,750
Junction Village $355,000
Clyde North $310,000 Clyde $335,000
Geelong $325,000 Cranbourne South $360,000
Armstrong Creek $272,900 Torquay $385,000
39
COMMUNITIES BUYER SURVEY DATA
Early signs of a stabilising property market in the
While investor activity has increased, owner
Historically, the dominant owner occupier household
reductions and APRA’s reduced serviceability test
share of 63%. Of these owner occupiers, first home
survey reveals a growing share of single household
COMMUNITIES
September quarter on the back of interest rate
have translated into material gains in the December
quarter, with losses in the established market largely recovering. This was further encouraged by a third
occupiers remain the most prominent buyers with a buyers remain the dominant buyer cohort, making up 65% of purchases.
interest rate cut in quick succession in October to
type is families, however the December quarter purchasers. The data supports the increasing
presence of first home buyers who are largely priced out of the established market and have decided
against buying an apartment – particularly in the
take the rate to an historical low of 0.75%.
aftermath of recent cladding issues and the overall integrity of high-rise residential construction.
The recovery in established housing has fuelled increased confidence across the market more
broadly, including investors. Unable to obtain finance, investors were the missing ingredient through the first half of 2019. However, with improved lending
conditions, investors are projecting further capital gains in the short to medium term as the property cycle moves through the next upswing.
63%
OWNER OCCUPIERS REMAIN THE MOST
PROMINENT BUYERS WITH A SHARE OF 63%.
40
R P M R E A L E S TAT E G R O U P
65%
OF THESE OWNER OCCUPIERS, FIRST HOME
BUYERS REMAIN THE DOMINANT BUYER COHORT, MAKING UP 65% OF PURCHASES.
Affordability constraints are very much front and
While the average priced lot remains out of reach
RPM’s data also revealed a slight increase in the
popularity of townhouses and house and land
rather than significantly dropping prices which
December quarter 2018 to 9% this quarter. Indicative
centre for first home buyers, underscored by the
buyers purchased either a townhouse or house and land package - up from 31% for the same quarter a
year earlier, indicating buyers see value for money for these types of dwellings over traditional vacant land opportunities.
40%
40% OF BUYERS BOUGHT EITHER A TOWNHOUSE OR HOUSE AND LAND PACKAGE.
would impact on settlements on previously sold
lots, developers are meeting buyer demand through well designed and built townhouses in envious
locations within an estate (i.e. overlooking a park or
waterways). In general, lots that fit under the small lot housing code at attractive price points continue to grow in popularity.
9%
youngest buyer cohort (aged 18-24), up from 6% in household incomes also continue to rise, with
30% of buyers recording a household income of
over $120,000 – up from 24% for the same quarter a year ago. This could indicate that households
with good incomes are still being priced out of the
established market and see the greenfield market as
an opportunity to build the home they desire and also view it as a long term asset.
30%
IN THIS QUARTER THE YOUNGEST BUYER COHORT
HOUSEHOLD INCOMES CONTINUE TO RISE, WITH
FROM 6% IN DECEMBER QUARTER 2018.
INCOME OF OVER $120,000.
(AGED 18-24) INCREASED SLIGHTLY TO 9%, UP
COMMUNITIES
packages. Over the December quarter, 40% of
for many buyers (particularly first home buyers),
30% OF BUYERS RECORDING A HOUSEHOLD
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
41
COMMUNITIES BUYER SURVEY DATA
COMMUNITIES
December Quarter 2018
OWNER OCCUPIER VS. INVESTOR
Investor
3rd Home
8%
2nd Home 1st Home
Single
42
R P M R E A L E S TAT E G R O U P
Owner Occupier
2%
Group/Friends
HOUSEHOLD TYPE
76%
Other
4th Home
OWNER OCCUPIER TYPE
24%
December Quarter 2019
Couple
Family
2%
26%
62%
1%
10%
37% 52%
Investor
37%
63%
Owner Occupier
Other
4%
3rd Home
7%
4th Home
2nd Home
1st Home
Group/Friends
Single
Couple
Family
3% 21%
65%
0%
19%
30% 51%
December Quarter 2018 $120k>
24%
$80-$100k
21%
$101-$120k
$40-$60k <$40k
60>
23%
$60-$80k
10% 1%
1%
$80-$100k $40-$60k <$40k
60>
30% 18% 18%
23%
10% 2%
5%
35-49
12% 31%
35-49
9% 31%
18-24
6%
18-24
9%
25-34
Townhouse
House & Land PURCHASE TYPE
$101-$120k
50-59
50-59 COMBINED AGE
$120k>
21%
Land Only
49%
11%
20% 69%
25-34
Townhouse
House & Land Land Only
COMMUNITIES
$60-$80k
HOUSEHOLD INCOME
December Quarter 2019
45%
12%
27% 60%
Source: RPM
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
43
OVERVIEW WITH THE PROPERTY MARKET PEAKING IN EARLY 2018 BEFORE EXPERIENCING A SUSTAINED
DOWNTURN OVER THE FOLLOWING 12 MONTHS, SEVERAL INTERRELATED MACROECONOMIC AND POLITICAL MEASURES PROPELLED A
TURNAROUND THROUGH THE BACK HALF OF 2019
APARTMENTS & TOWNHOUSES
WHICH IS SET TO CONTINUE IN 2020.
While these measures provided the necessary
market stimuli, interest rate reductions have not
had the same positive effect on the wider economy as in previous periods. Key parts of the economy,
particularly the retail and the tourism sectors, have suffered significantly over the past 12 months. In addition, the recent bushfires and onset of
coronavirus have decimated the tourism sector.
Both sectors are vital to the Victorian economy due to the vast numbers they employ.
While the broader economy is stagnating, the same cannot be said for the housing market. Stimulus
aside, the continuing success story is the state’s
population growth. Over the 12 months to June 2019, an additional 138,800 people called Victoria home. Of this, 99,700 people came from interstate or
overseas which suggests they need accommodation on arrival. 44
R P M R E A L E S TAT E G R O U P
This significant population gain has resulted in demand outstripping supply.
Moreover, there was a certain inevitability about the market’s response given our love affair with home
buyers, prices were destined to rise even in an overall weak economy.
By the end of 2019, the established house market
the boom years between 2013 and 2017 given the
economy is in a vastly different position along with household debt already at record levels.
This has already been seen with a substantial pick-up in new loans but only a modest increase in borrowing
levels, which indicate buyers are conscious about the level of debt they want to take on.
saw price growth of 8.2% from a low in June 2019
One of the reasons for the sharp price increase
apartment/unit market increased 9% from a low in
encourage more sellers to put their properties
to record a new peak of $859,500. Similarly, the
March 2019 to record a median price of $639,000.
Many analysts are suggesting double digit growth in 2020, with some predicting as high as 17% if further rate cuts come to fruition.
WHILE THE MEDIAN PRICE INCREASE OVER THE DECEMBER QUARTER WAS LESS THAN THE QUARTERLY CHANGE FROM SEPTEMBER (WHICH INDICATES THAT INCREASES THROUGH 2020 MIGHT BE MORE MODEST), IT IS FAIR TO SAY WE HAVE ENTERED A ‘MINI’ BOOM.
is a lack of supply. However, the rise in prices will up for sale, alleviating part of the supply problem. Nevertheless, continuous price growth is not
beneficial for the broader economy. Household debt will continue to weigh on the economy, reflected in
sluggish retail sales. There are also concerns around job security and wage growth.
In addition, prices are rising from an already
overvalued position given price falls over 2018/2019
did not drop back anywhere near enough from which to begin the next upswing. As a result, the upturn will likely only be short-lived.
From a supply perspective, building approvals continue to decline on an annual rolling basis.
Over calendar year 2019, detached house approvals fell 12% while other dwellings (townhouses and apartments) declined 20%.
A P AQR4T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S
ownership. With so many positive factors in place for
However, it’s highly unlikely there will be a repeat of
Nevertheless, there is hope that the worst is over.
In the December quarter, other dwelling approvals
rose 21% from the same period a year ago, albeit it came off a record low. We believe approvals won’t dramatically increase; rather the response from
buyers for off-the-plan properties will be muted for some time yet due to widely reported cladding and build quality issues.
The mismatch between supply and demand will likely persist over the next few years. By all
indicators, new stock delivered to the market in
2017 and 2018 will largely be absorbed by 2020.
Hence, new projects need to start construction in 2020 or there will be a severe shortage in 2021.
This mismatch will drive buyer demand – particularly from investors who will be chasing bigger capital gains while finance is cheap.
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
45
OTHER DWELLING APPROVALS
Victoria recorded 7,284 other dwelling approvals in
Again it should be noted this sector is coming off
78% increase in approval activity from the previous
lowest since 2009. In addition, on a quarterly basis,
quarter and a significant 21% increase from the
same quarter in 2018. This is the highest volume of
approvals in any quarter since March 2018 although
it should be noted the September quarter 2019 result was the lowest since 2011 and March 2018 was the
beginning of the sustained downturn in apartments. The most substantial increase occurred in
apartments, which rose 149% over the quarter and
TOWNHOUSE APPROVALS
69% from December 2018.
15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 -
19%
Year to Dec-15
6%
Year to Dec-16
25%
Year to Dec-17
a long term low - the September result was the approvals numbers jump around significantly. Notwithstanding, even if these approvals are
compared to the same period a year earlier. From a longer-term perspective, approvals of
9,687 townhouses over the 12 months to
attributed to only a few large projects, it provides a
December 2019 was still the fifth highest on
back into the high rise apartment market.
12,875 approvals - was the lowest annual outcome
glimmer of hope that developers are slowly coming
Moreover, the improved December quarter results have helped ease the rolling annual falls, with the townhouse market down 24% and the apartment
6%
Year to Dec-18
24%
Year to Dec-19
APARTMENT APPROVALS
A P AQR4T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S
December quarter 2019, representing a substantial
market down 18% over the past year when
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 -
record. The corresponding figure for apartments since 2009.
The popularity of townhouse developments in
greenfield areas is helping to maintain this relatively high approval activity.
21%
Year to Dec-15
15%
Year to Dec-16
2%
Year to Dec-17
20%
Year to Dec-18
18%
Year to Dec-19
Source: ABS 46
R P M R E A L E S TAT E G R O U P
KEY MEDIUM DENSITY BUILDING DATA
TOTAL TOWNHOUSES
TOTAL APARTMENTS
TOTAL
December quarter 2019
2,559
4,725
7,284
Change from previous quarter
16.7%
149.1%
78.1%
Change from previous year
-20.2%
69.5%
21.5%
9,678
12,875
22,553
-23.6%
-17.7%
-20.3%
12 months to December quarter 2019 % Change 12 months earlier COMMENCEMENTS September quarter 2019
OTHER DWELLINGS 5,090
COMPLETIONS
OTHER DWELLINGS
September quarter 2019
6,634
Change from previous quarter
-25.2%
Change from previous quarter
-6.6%
Change from previous year
-23.4%
Change from previous year
9.4%
12 months to September quarter 2019 % change 12 months earlier TOTAL APARTMENT & UNIT PRICES
23,748 -31.6% MEDIAN PRICE
December quarter 2019
$639,000
September quarter 2019
$615,500
December quarter 2018
$589,500
12 months to September quarter 2019
24,533
% change 12 months earlier
-15.7%
CHANGE FROM PREV. QTR.
NOTE: Approvals are to the current quarter (Dec 2019), while commencements and completions are delayed by a quarter (Sep 2019).
A P AQR4T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S
APPROVALS
3.8%
CHANGE FROM PREV. YR.
8.4% Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
47
OUTLOOK
Overall, there are two positive domestic policy
Nevertheless, price growth will continue,
Additionally, demand fundamentals for property
price growth throughout 2020. Two tranches of the
out. This is especially the case while there is a lack
growth, solid employment numbers and low
A P AQR4T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S
settings that will spur robust activity and subsequent First Home Loan Deposit Scheme rolling out on
January 1 and July 1 will likely boost prices in both the first and third quarters of this year.
Secondly, the Federal Government has held a strong line against being more fiscally expansive in the
face of a slowing domestic economy. As a result,
the Reserve Bank has signalled its commitment to
of established property stock for sale. The catch-22 is that buyers are reluctant to put their property on
the market if they feel there is a lack of options to buy (unless they want a new house and land package). As such, owners who may hold on to their property for
longer also suggests an undersupply could become structural and persistent.
provide stimulus to prevent an economic downturn.
A surge in prices from an already elevated level
positive effect of reduced interest rates for the
policies. This will be particularly the case if price
However, as noted in their previous minutes, the
economy is less pronounced than in previous rate reduction periods.
could force regulators to once again tighten lending growth forces new loans to be at higher levels which will further increase household debt positions.
Moreover, we are currently at historical low levels
This places the RBA in a difficult position. Their
a downturn among mortgage holders who may
through cash rate cuts. However, only the housing
and further rate cuts could trigger concern about increase their savings rather than go out and spend which is the outcome the RBA is seeking.
48
underpinned by buyer urgency and a fear of missing
R P M R E A L E S TAT E G R O U P
overarching goal is to stimulate the whole economy market has been affected and not in a good way given demand is chasing low levels of supply.
in Melbourne remain high with robust population borrowing costs. This should underpin both owner
occupier and rental demand. However, wage growth
is subdued, and overall consumer sentiment is below average. As a result continued high price growth
seems unsustainable in the second half of 2020 as affordability constraints increase further.
WITH INCREASING AFFORDABILITY CONCERNS, OVERALL PROSPECTS FOR AN IMPROVEMENT IN THE MORE AFFORDABLE TOWNHOUSE AND APARTMENT MARKET IS LIKELY IN BOTH ACTIVITY AND PRICE GROWTH, ALBEIT AT A GRADUAL RATE.
LUKE KELLY
DIRECTOR, PROJECT MARKETING luke@rpmrealestate.com.au +61 400 688 520
The apartment sector in general is anticipated to
Moreover, with townhouse prices also falling during
due to concerns over build quality and cladding
townhouses in inner and middle ring suburbs have
remain under pressure to get projects under way
eased, developers are still finding it difficult (but
not impossible) to source finance for large scale developments in a soft pre-sales environment.
This new project activity going through the pipeline
is vital given once supply is absorbed there will need to be ready-to-be-sold dwellings to meet demand.
Otherwise, a significant shortage will occur which will
A P AQR4T M E AN R TK SE T/ T OO VW E RN VH IOE UWS E S
issues. In addition, while credit restrictions have
the downturn and recent improved borrowing power, become more attainable.
In the outer/greenfield areas, townhouses will
continue to be a more realistic option for first home buyers and budget conscious buyers after strong lot price growth and tough lending conditions in recent years priced them out of the detached housing market.
impact vacancy rates, rents and overall prices.
We believe there will be supply concerns across the
apartment market in the medium term as indicated by low approval numbers and rapidly depleted activity in the pipeline.
Price growth for detached houses will continue to support a shift in demand to less expensive
townhouses in the middle ring which will drive medium density development.
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
49
OVERVIEW
OVERSEAS DEMAND FOR RESIDENTIAL PROPERTY IN VICTORIA REBOUNDED IN DECEMBER QUARTER 2019, WITH FOREIGN BUYERS ACCOUNTING FOR
INTERNATIONAL
12% OF NEW DWELLINGS PURCHASED AND 6% OF ESTABLISHED DWELLING PURCHASES. THE EARLY PHASE OF THE RECOVERY THROUGH
THE SECOND HALF OF 2019 HAS ENCOURAGED MORE FOREIGNERS TO INVEST IN RESIDENTIAL
PROPERTY, BELIEVING THIS TO BE THE START OF THE MARKET UPSWING.
Additionally, political unrest in Hong Kong (a major competitor for overseas purchasers of residential
property across Asia Pacific) likely resulted in some demand from overseas buyers shifting to Australia, and particularly to large cities such as Melbourne.
50
R P M R E A L E S TAT E G R O U P
JINYIN ZHANG
DIRECTOR, RPM INTERNATIONAL jinyin@rpmrealestate.com.au +61 451 898 886
However, the share of foreign persons among total residential property purchases in Victoria remains
duty rate.
12%
% OF FOREIGN PURCHASES BY DWELLING TYPE
the introduction of the foreign purchaser additional
22%
Q 4 IMNAT RE KR ENTA TOI VOENRAVLI E W
below the long term average, mostly in response to
20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
OVERSEAS DEMAND FOR RESIDENTIAL PROPERTY
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
19%
14%
21%
14%
14%
12%
12%
13%
8%
5%
12%
7%
12%
IN VICTORIA REBOUNDED IN DECEMBER QUARTER
■ New
12% OF NEW DWELLINGS PURCHASED AND 6% OF
Source: NAB Quarterly Residential Property Survey
2019, WITH FOREIGN BUYERS ACCOUNTING FOR ESTABLISHED DWELLING PURCHASES.
■ Established
11%
7%
9%
8%
9%
8%
6%
6%
4%
5%
4%
4%
6%
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
51
AUSTRALIAN ECONOMIC OUTLOOK The Australian economy is forecast to record below
Moreover, the unemployment rate of 5.1% in
This could possibly result in negative economic
there could be some upside to Gross Domestic
Consequently, interest rates remained steady at
of these effects on the economy thereafter are
trend growth of 1.8% over calendar 2020. However,
December 2019 was lower than expectations.
Product (GDP). The stimulus from 3 interest rate
0.75% in February 2020, with the RBA also noting
reductions last year combined with the first tranche
the escalation in property prices during the latter
Q 4 IMNAT RE KR ENTA TOI VOENRAVLI E W
of income tax cuts coming through has underpinned
part of 2019.
stronger than expected retail sales growth in December quarter 2019.
However, the Australian economy will experience
This is likely to flow through to higher than projected
Sectors including exports, tourism and higher
severe headwinds during the first quarter of 2020.
private consumption growth, the largest component
education will all be adversely impacted by the
of the economy.
bushfires, drought and Coronavirus.
52
Economic indicators (% change)
2019
2020 f
GDP
1.80
2.00
Employment
2.20
0.90
Unemployment Rate
5.10
5.60
Average Earnings
2.50
2.70
Inflation
1.80
1.90
RBA Cash Rate
0.75
0.25
$A/US cents
0.69
0.71
R P M R E A L E S TAT E G R O U P
unknown, annual GPD growth in 2020 is still currently projected to be similar to the previous year.
That said, the continuation of below trend economic
growth is anticipated to lead to slowing employment growth and subsequently higher unemployment
through 2020. Also, with growth in the Consumer
Price Index remaining below 2%, the RBA is expected to reduce the cash rate by a further 25 basis points
in April, with a possible further cut in the second half of 2020.
AUSTRALIAN ECONOMY
Source: NAB. The Forward View. f = forecast.
growth in March quarter 2020, and while the extent
Q 4 IMNAT RE KR ENTA TOI VOENRAVLI E W
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
53
OVERVIEW
THE RECOVERY IN THE HOUSING MARKET FUELLED BY MULTIPLE CASH RATE REDUCTIONS AND
APRA’S RELAXATION OF LENDING SERVICEABILITY TESTS CONTINUED THROUGHOUT THE FINAL
RESIDENTIAL INVESTMENT
QUARTER OF 2019 AND HAS NOW REACHED A NEW PEAK AFTER SURPASSING THE PREVIOUS PEAK IN 2017/2018.
Over the December quarter, house prices in
metropolitan Melbourne rose by a healthy 3.7% and unit prices 3.8% compared to the previous quarter.
When comparing house and unit prices to the same period a year earlier, the recovery is even more
evident; housing values are 6.8% higher while unit prices have increased 8.4%.
The market rebound has been supported by overall
upbeat sentiment for the first time since early 2018,
in addition to sustained underlying factors including strong population growth and low unemployment,
which is driving a continuing robust level of demand for rental accommodation. The vacancy rate for
metropolitan Melbourne remained static at 2.2%
from the previous quarter, but slightly higher (+0.1%) compared to the past 2-year average. 54
R P M R E A L E S TAT E G R O U P
PROPERTY MANAGEMENT RPM REAL ESTATE GROUP
contactus@rpmrealestate.com.au +61 3 9862 9555
With vacancy rates remaining tight, rental gains can
Looking at houses, inner-ring 2 and 3 bedroom
Victoria across almost all dwelling sizes. Movement
the previous quarter, with rents increasing 5% and
be seen in both metropolitan Melbourne and regional
although the majority have seen rents go up relative to the previous quarter.
Additionally, rental increases can primarily be seen
in smaller dwellings. For example: 2 and 3 bedroom
4% respectively. Changes are similarly high for the
same houses in the middle ring. On an annual basis,
however, the greatest change can be seen in middle ring 3 and 4 bedroom houses, sitting 10% and 13% above the same quarter a year ago.
houses and 1 bedroom units have seen the highest
Units and apartments recorded strong rental gains
been strongest in the inner and middle rings. This
increased 8% or $25 weekly compared to the
rental growth in all areas. For houses, growth has
indicates renters (particularly families) are continuing to prioritise location (renting in more desirable areas closer to amenity) over affordability (purchasing further out in newly established areas).
The relatively high levels of rental growth in 2 and 3 bedroom houses in the inner and middle rings is a
result of modest levels of supply in established areas being absorbed by growing demand, putting upward pressure on rents.
WITH VACANCY RATES REMAINING TIGHT, RENTAL GAINS CAN BE SEEN IN BOTH METROPOLITAN MELBOURNE AND REGIONAL VICTORIA ACROSS ALMOST ALL DWELLING SIZES.
R E QS 4I DME A N RT K I AE LT IONVVEERSVTI M EE WN T
is a little more volatile for units and apartments,
homes recorded the highest change relative to
in certain products (middle ring 1 bedroom units
previous quarter and 9% year-on-year), but losses in others (including inner ring 3 bedroom units falling 3% quarter-on-quarter, or $20 per week).
Overall, however, smaller rental units (1 and 2
bedrooms) and apartments appear to maintain the same level of popularity, with only middle ring 2
bedroom units recording a rental loss (2% or $10 a week compared to the previous quarter).
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
55
OVERVIEW
From a regional perspective, Geelong continues to
at levels well above those of metropolitan Melbourne.
These families are largely priced out of buying
types. This has been the case since 2017 when
bedroom apartments have seen steady growth over
requirements ahead of home ownership.
see strong growth across all bedroom and dwelling Government agencies relocated offices to drive
R E QS 4I DME A N RT K I AE LT IONVVEERSVTI M EE WN T
employment to the region which created demand
In general, larger houses (3 and 4 bedroom) and 2 the past 2 years.
for rental accommodation in the short term while
Overall, the largest gains over this period have been
or relocate back to Melbourne.
extent the inner rings. This suggests families are
employees decided whether to buy a home there
This spike in demand resulted in material increases in rents, particularly houses, over the past 2 years
in the suburb but are putting lifestyle/schooling
In addition, strong growth has also been recorded across the board in Geelong, which suggests
in family-sized houses in the middle and to a lesser
renters have increasingly relocated to Geelong for
looking for amenity rich suburbs and possibly in well regarded school zones.
employment and are in the rental market while they decide whether to stay permanently or while their home is being built.
MEDIAN RENTS HOUSE:
INNER
Bedrooms
MIDDLE
OUTER
GEELONG
2
3
R P M R E A L E S TAT E G R O U P
$550 $720
Sep-19 $550 $655
4
$895
$890
3
$420
$440
$350
$340
2
$378
$380
$320
$323
2
3
$360 $420
5%
$900
$10
1%
$680
$630
$385 $428
$30
$613
3
$430 $370
$433
Change from Previous Quarter
$580
$400
$560
4
Dec-19
$390
4
2
4 56
Dec-18
$25 $10
$460
$20
$350
$10
$430
$0
$380 $325
$380
$440
$18 $0
$3
$10 $8
Change from Previous Year
$30
5%
2 Year Average Annual Change 2.7%
4%
-$40
-6%
2.3%
3%
$23
6%
2.6%
$5
1%
2.4%
5%
$40
10%
3%
$0
0%
0.0%
1%
0.0%
3%
0%
0% 1%
3%
2%
$70 -$5 $3 $5
$20
$20
13% -1% 2%
6% 5%
3.4% 5.1%
0.7%
5.0% 4.2%
4.9%
PROPERTY MANAGEMENT RPM REAL ESTATE GROUP
contactus@rpmrealestate.com.au +61 3 9862 9555
continue to fluctuate. This is not due to a lack of
demand. In fact, supply is extremely tight (vacancy rates sit at 1.9%) and as such any fluctuation in the
average rental price is dictated by the 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.
10%
HOUSES: 4 BEDROOM HOUSES IN THE MIDDLE
UNITS & APARTMENTS: 2 BEDROOM UNITS
CHANGE IN MEDIAN RENT SITTING 13% ABOVE
IN MEDIAN RENT UP 10% FROM THE SAME
RING RECORDED THE GREATEST ANNUAL
R E QS 4I DME A N RT K I AE LT IONVVEERSVTI M EE WN T
13%
Worth noting is that rents in houses in the inner ring
RECORDED THE GREATEST ANNUAL CHANGE
THE SAME QUARTER A YEAR AGO
QUARTER A YEAR AGO
UNITS & APARTMENTS:
INNER
MIDDLE
OUTER
GEELONG
Bedrooms
Dec-18
2
$480
1
3
$380
Sep-19
Dec-19
$495
$500
$380
Change from Previous Quarter
$5
1%
$670
-$20
-3%
-$10
-1%
-0.4%
$0
0%
0.6%
$23
8% 5%
3.8%
10%
5.8%
$5
1%
$690
2
$400
$410
$400
-$10
-2%
1
$268
$270
$290
$20
7%
1
3
2
$320
$325
$510
$520
$340
$350
3
$400
$430
2
$300
$320
1
3
$220
$393
$230
$400
$350
$540 $350
$25
$20 $0
8%
$20
$30
4%
$30
0%
$10
$420
-$10
-2%
$20
$330
$10
3%
$30
$228
$400
-$3 $0
-1% 0%
$8 $8
1%
2 Year Average Annual Change
$385
$680
$5
Change from Previous Year
4%
9%
3.4%
4.3% 4.6%
6%
3.9%
3%
2.6%
3%
2%
7.7%
4.1%
2.6%
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
57
OVERVIEW
R E QS 4I DME A N RT K I AE LT IONVVEERSVTI M EE WN T
VACANCY RATES & YIELDS Vacancy rates in the December quarter reflect
Due to significant capital gains seen in both detached
However, within the market there are segments
did record a change from the previous quarter
rental yields in general have been below long-term
of sub 2.5% would be considered poor, for those
Nevertheless, except for the middle ring (3.3%) and
yield above 2.5% is far more appealing than other
and regional areas, land value appreciation tends to
(3.4%), all geographic rings remained below the
environment, therefore money is cheaper to borrow
with vacancy rates at acute levels, and what seems
rates reinforce the consensus there is no oversupply
market resulting from weakening global economy
minimal change across the board with rates that
houses and other dwellings over the past 5 years,
showing a slight improvement – albeit only marginally.
levels. Nevertheless, in the current market a rental
the outer ring including Mornington Peninsula
types of investment due to the low interest rate
acceptable level of 3%. Consistently low vacancy
to chase higher returns. Uncertainty in the share
to be a movement from the middle to the outer ring
of stock in the market.
and geo-political tensions is also driving investors
outlier areas.
into property as an asset class.
VACANCY RATE: Melbourne Inner Total
Inner (0-4km)
Dec-18
Sep-19
Dec-19
2 Year Average
1.5
1.7
1.7
1.7
2.1
1.9
2.3
Outer Total
1.5
1.8
Outer (Mornington Peninsula)
2.2
3.3
Outer (20+km exc. Mornington Peninsula)
3.1
1.4
Melbourne Total
2.2
Geelong
1.9
Source: REIV
investing in detached housing in the outer
be the driving force in the earlier stages. However,
for renters, yields are at the higher end for these
YIELDS:
Inner (4-10km)
Middle (10-20km)
offering far more attractive yields. While a rental yield
2.1
3.1 1.7
2.2
2.0
1.9
1.9
2.1
2.0
1.9
1.7
3.3 1.8
3.4 2.2
2.2
3.1
1.6
2.6 2.1
1.8
Houses Inner
Middle
R P M R E A L E S TAT E G R O U P
Sep-19
2.41%
2.32%
2.71%
2.39%
Outer
3.09%
2.98%
Regional
4.18%
4.21%
Metro
2.77%
Middle
3.22%
3.12%
Outer
Metro
Regional
4.25%
3.40%
3.50%
4.39%
4.71%
3.88%
2.34%
2.92%
Dec-19
Sep-19
4.24%
2.37%
2.66%
Dec-18
Inner
Dec-19
2.70%
Units
Source: REIV, RPM 58
Dec-18
3.72%
4.18%
4.09% 2.94%
3.35%
3.66% 4.65%
PROPERTY MANAGEMENT RPM REAL ESTATE GROUP
contactus@rpmrealestate.com.au +61 3 9862 9555
OUTLOOK Over December quarter 2019, houses and units in
While lending restrictions eased over the second
level of supply likely to enter the market in the coming
and 4.65% respectively.
– particularly among first home buyers – continued
to renters.
regional areas recorded an average yield of 4.18%
price coupled with robust rental prices given regional areas are traditionally tightly held.
high population gains have resulted in demand
outstripping supply which has caused vacancy rates
In addition, the continued market upturn - with many
for suburbs with strong infrastructure and amenities.
growth in 2020 - will likely result in a broad easing
to remain at acute levels. This is particularly the case
Similarly, units in the inner ring recorded an attractive
First home buyers continuing to enter the property
which suggests there is robust demand for 1 and
rates coupled with Government assistance programs
average yield of 4.09% in the December quarter,
2-bredroom units in the CBD and fringe suburbs. The vacancy rate for dwellings within 4km of the
CBD was 1.7% in the December quarter. This tightly held area suggests there is no oversupply as these
dwelling sizes are geared towards single households
and couples with no children (including students who share) who want to live in and near the city centre.
6 to 12 months. This stock will provide welcome relief
market in 2020 on the back of record low borrowing should create some space in the rental market.
However, the possibility of higher vacancies is likely
to be marginal as many first home buyers will seek to enter the new house market and therefore need to
commentators forecasting close to double digit price in rental yields. Already coming off a relatively low
base, further falls in anticipated yields could result in
investors deciding against purchasing an established investment property. With lower levels of investors
(both locally and overseas) entering the market, the
development and delivery of necessary stock to the rental market will result in rental increases.
continue renting while their home is being built.
However, from a greenfield investment perspective,
While vacancy rates remain acute in most areas
priced townhouse products are increasing in
across metropolitan Melbourne, there is a strong
R E QS 4I DME A N RT K I AE LT IONVVEERSVTI M EE WN T
These strong returns are due to a lower purchase
half of 2019 which drove an uptick in buyer activity
competitive house and land packages and well-
popularity as an alternative investment opportunity which in time will add to rental stock.
Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
59
RESIDENTIAL INVESTMENT BUYER SURVEY DATA
Continuing an upward trajectory, the share of investors
With the younger age of buyers, household type has
35% from the previous quarter and substantially
buyers were families. This has fallen substantially a
R E QS 4I DME A N RT K I AE LT IONVVEERSVTI M EE WN T
rose to 37% for December quarter 2019, up from
higher than December quarter 2018 (24%). The data
reaffirms that property remains the primary investment strategy for many Victorian households and credit
constraints rather than reduced buyer appetite drove
also changed. In December quarter 2018, 79% of
year later to just 50%. While families still make up the largest share, couple households increased to 36%, up from just 7% in December quarter 2018.
the slowdown through 2018/19.
There was also a small increase in single households,
While previously investors have favoured established
This reinforces the changing preferences of younger
dwellings, the growing presence of smaller lots and
townhouses in envious positions within land estates at attractive prices has gained significant traction, with
investors eyeing off both long term capital growth and
up from 12% to 14% over the two periods.
people, who are moving their investment decisions
away from apartments as a first entry point into the property market.
solid rental yields.
During the market downturn through 2018/19, there
With traditional vacant land purchases falling, builder
Investors buying in the greenfield market are also
in the greenfield market. However the latest December
advertising, increasing from 16% in December 2018 to
getting younger, with those aged 25-34 accounting for
33% of all purchasers in the December quarter, up from 28% in the same quarter a year ago.
was a stark reduction in Indian and Chinese investors quarter results indicate a re-entry of these buyers. Combined, 50% of all investors were either Indian or Chinese - a substantial increase from 27% in
the corresponding period a year earlier. The data
highlights the increasing confidence among foreign buyers that weren’t traditionally brought up with a 60
NOT SURPRISINGLY, WITH AFFORDABILITY AND LENDING PRACTICES STILL A CONSTRAINT AMONG SOME INVESTORS, ATTRACTIVELY PRICED TOWNHOUSES AND HOUSE AND LAND PACKAGE PURCHASES GREW SIGNIFICANTLY. COMBINED, 55% OF ALL PURCHASE TYPES WERE EITHER A TOWNHOUSE OR HOUSE AND LAND PACKAGE IN THE DECEMBER QUARTER, UP FROM 29% FOR THE SAME PERIOD A YEAR AGO.
R P M R E A L E S TAT E G R O U P
‘property is king’ mindset.
referrals recorded the most significant source of
42% in December 2019. In addition, signage remains a prominent advertising vehicle, with a share of 26% in the December quarter 2019 – up from 19% in the corresponding period. Less prominent in the latest
quarter at 17% were family and friend referrals, down from of 22% in December quarter 2018.
December Quarter 2018
COMBINED AGE
35-49
18-24
1%
18-24
25-34
25-34
2%
Group/Friends
Couple
7%
Couple
Family
12% 79%
Australia
1% 3% 3% 4% 4% 4% 6% 9% 18% 46%
Townhouse
12%
Kuwait
South Africa
Sri Lanka
Philippines
Egypt
PURCHASE TYPE
28%
35-49
Group/Friends
United Kingdom
COUNTRY OF PERSON 1&2 TOP 10
60> 50-59
Single
HOUSEHOLD TYPE
3%
15% 54%
50-59
Bangladesh
China India
House & Land Land Only
17% 71%
Single
Family
2%
10% 55%
33% 1%
0%
14%
36%
50%
Australia
2% 2% 2% 2% 3% 3% 4% 17% 33% 33%
Townhouse
22%
Macedonia
Indonesia Vietnam Turkey Nepal
Italy
Nigeria China India
House & Land Land Only
R E QS 4I DME A N RT K I AE LT IONVVEERSVTI M EE WN T
60>
December Quarter 2019
33% 45% Q 4 R E S I D E N T I A L M A R K E T R E V I E W | D E C E M B E R Q U A R T E R 2 019
61
RESIDENTIAL INVESTMENT BUYER SURVEY DATA
December Quarter 2018 R E QS 4I DME A N RT K I AE LT IONVVEERSVTI M EE WN T
Other Builder Referral Family or Friend Herald Sun Newspaper: Metro Newspaper: Local TV
ADVERTISEMENT SOURCE
Direct Mail Signage Radio Website: Other Mypackage.com Google Realestate.com Project Website
December Quarter 2019 11%
16%
22% 0%
Other Builder Referral Family or Friend Herald Sun
0%
Newspaper: Metro
0%
TV
0%
Newspaper: Local
0%
Direct Mail
19% 0% 0%
Signage Radio Website: Other
3%
Mypackage.com
3%
Project Website
14% 14%
Google Realestate.com
4%
42% 17% 0%
0% 0% 0% 0%
26%
0% 0% 0%
2% 6% 4%
RPM surveys every buyer on its clients’ estates in the greenfield market. In December quarter 2019, 37% of all buyers indicated they were investors. The following illustrates demographic and purchase intent changes amongst this cohort based on surveys from the December quarter 2019 compared to the same quarter in 2018.
62
R P M R E A L E S TAT E G R O U P
Source: RPM
OUR TEAM
ERIC DICK
KEVIN BROWN
eric@rpmrealestate.com.au
kevin@rpmrealestate.com.au
EXECUTIVE CHAIRMAN +61 418 349 267
+61 418 397 577
LUKE KELLY
PETER GRANT
luke@rpmrealestate.com.au
peterg@rpmrealestate.com.au
DIRECTOR
+61 400 688 520
64
CHIEF EXECUTIVE OFFICER
R P M R E A L E S TAT E G R O U P
DIRECTOR, COMMUNITIES +61 411 494 499
ROD ANDERSON
JINYIN ZHANG
rod@rpmrealestate.com.au
jinyin@rpmrealestate.com.au
DIRECTOR, COMMUNITIES +61 417 595 859
DIRECTOR, RPM INTERNATIONAL +61 451 898 886
CHRISTIAN RANIERI
MICHAEL STAEDLER
christian@rpmrealestate.com.au
m.staedler@rpmrealestate.com.au
DIRECTOR, TRANSACTIONS & ADVISORY +61 416 445 078
RESEARCH MANAGER +61 434 619 280
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.
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