Is there a rush for property in Melbourne’s inner and middle ring Suburbs?

by Antony Bucello & Catherine Cashmore

A 71 Per cent clearance rate was recorded this weekend, and whilst the outer suburban locations in Melbourne remain relatively stable, increases in the inner and middle ring locations are noticeable.

Activity has improved throughout the year, and the competitive atmosphere which started in the first quarter of 2013 is continuing to produce clearance figures comfortably in the 70’s – even after revised.

Only a few days now remain until the first home buyer grant for established property will cease to be replaced with a 40 per cent cut in stamp duty. The current $7000 grant with a 30 per cent cut to stamp duty is preferable to those currently in the market, as for most purchases, it provides a greater discount than a 40 per cent cut alone.

However, it’s doubtful we’ll see a huge rush from new buyers – albeit, it may spur those already looking to make a speedy commitment and therefore we could see a spike in turnover as we approach the end of the financial year.

As a proportion of the buying market, first home buyers are still dragging their feet. It’s not quite as bad as New South Wales and Queensland, where first home buyers shamefully make up less than 5 per cent of the buying demographic – albeit, in Victoria many are finding themselves crowded out by investor activity – the proportion of which now exceeds 40 per cent, and is concentrated overwhelmingly in the established apartment sector.

As noted from a recent QBE LMI survey – and certainly shared by my own anecdotal evidence – first home buyers perceive prices ‘too high.’ Their budget is typically around $300,000 which will barely purchase a one bedroom inner city apartment in either Sydney or Melbourne, and is less than the average ‘new’ house price on the fringe ($400,000.)

They also recognise they will need to hold their properties for a longer period of time to advantage from an increase in equity. In other words – it will take longer, before an ‘upgrade’ is possible.

In this respect, our environment has changed considerably. From an atmosphere where a job was for life and family units were formed early, to a set of differing cultural conditions with fairly fluid fluctuation between periods of ownership and tenancy as buyers and renters migrate through various stages of their ’employment’ career.

Therefore, it’s no surprise to see many considering staying in the family home longer, and entering the market initially as an investor, prior to being an owner occupier.

R P Data released their ‘pain and gain’ report last week, showing more than three quarters of all properties re-sold in Australia over the first quarter of 2013, achieved a gross ‘re-sale profit’ totalling $9.6 billion.

The data was taken from 58,677 residential property sales nationally, and the ‘gross profit’ recorded, from the 87.3 percent proportion, was relative to the nominal purchase price (not accounting for inflation or seasonal fluctuations.)

Significantly, the sales recording a loss on purchase price had an average length of ownership of just 4.8 years. Whereas, those recording a profit were held for an average of 9.7 years, and homes that recorded a gross profit of more than 100 per cent were owned for an average of 15.4 years.

The lesson is abundantly clear – and never more so as approach the headwinds facing us in the years to come. To create a profit from property requires a long term mindset – preferably in yearly terms made of double digits.

We’re finding challenges in locating quality stock in the inner and middle ring suburbs. The change is in part seasonal as the colder months typically reduce vendor activity. When we do locate ‘good’ stock – either off market or openly advertised – there is usually competition. The key to purchasing well in this atmosphere is all down to negotiation – for which we possess a vast amount of experience.

Therefore, the months ahead will provide an interesting landscape of challenges

Weekend Clearance Rate Figures

Week Ending Sunday 23rd June 2013

Clearance Rate:	71%
Total Auctions:	681 (58 unreported)
Sold:	484	Passed in:	183
At auction:	398	Vendor Bid:	92
Before auction:	86	Real bid:	91
After auction:	0
Total Private Sales:	561
Weekly Turnover:	1045
Source: www.reiv.com.au

The NPB clearance rate is representative of the results evidenced in the ‘quality’ end of the marketplace. We take the results from a range of suburbs; however please note we are not ‘suburb specific’. NPB Melbourne, negotiate on hundreds of properties for their clients each year throughout all areas of Melbourne and the Bellarine Peninsula. The properties we highlight are taken from a selection which we carefully analyse for quality assessment and revise daily.

NPB’s clearance rate is moving in line with REIV data – however it should be noted, the quality and quantity of ‘good’ listings are slowly reducing as we approach winter and it’s expected this could increase competition.

Weekend Clearance Rate Figures

Week Ending Sunday 23rd June 2013

NPB Clearance Rate:	82%
Total Auctions Reviewed:	62
Sold:	51	Passed in:	11
Under $600k:	19		2
$600k-$1m:	17		4
$1m+:	15		5

Why is the NPB Clearance Rate always higher than the REIV Clearance Rate?

The NPB clearance rate is a snapshot of ‘investment grade’ or ‘cream of the crop’ properties representing only those we recommend to clients. These are properties that hold the best potential for a long term capital growth and rental demand. Whilst the Real Estate Institute of Victoria include all properties scheduled for auction (as reported by their members) – including those that are poorly located and unlikely to attract demand even in a robust climate; our clearance rate is far more representative of the market that represents our client’s best interests. It’s an important part of how we assess the best negotiation strategy for your needs.

The full list of the 62 properties reviewed by NPB this weekend:

< $600k

Suburb	Type	Beds	Quote	Result
Albert Park	Apartment	1	$340-380k	SOLD $360,000
Carnegie	Apartment	2	$360-390k	SOLD $461,000
Reservoir	House	3	$420-460k	SOLD $467,500
Reservoir	House	3	$390-450k	SOLD $470,000
Heidelberg	Apartment	2	$460-480k	SOLD $475,000
Glenroy	House	4	$430-470k	SOLD $490,000
Box Hill	Unit	2	$410-450k	SOLD $490,500
Elwood	Apartment	2	$420-460k	SOLD $507,000
Kew	Apartment	2	$440-480k	SOLD $524,500
Northcote	House	2	$500k+	SOLD $539,500
Murrumbeena	Unit	2	$460-510k	SOLD $540,000
Hawthorn	Apartment	2	$470-520k	SOLD $545,500
Prahran	Apartment	2	$440-480k	SOLD $558,000
Doncaster East	Unit	3	$500-550k	PASSED IN
Camberwell	Unit	2	$500-550k	SOLD $562,000
Mitcham	House	3	$510k+	SOLD $565,000
Thornbury	Townhouse	3	$510-560k	PASSED IN
Templestowe Lwr	Unit	3	$550k+	SOLD $582,000
Hawthorn East	Apartment	2	$520-550k	SOLD $585,000
Camberwell	Unit	2	$480-520k	SOLD $591,000
Hawthorn East	Apartment	2	$530k+	SOLD $593,000
Sold	19
Passed In	2	NPB Clearance Rate 90%
Total	21

$600k – $1m

Suburb	Type	Beds	Quote	Result
North Melbourne	Apartment	2	$520-550k	SOLD $609,000
Surrey Hills	Unit	2	$570-620k	SOLD $621,000
Abbotsford	House	2	$600-650k	SOLD $642,500
Brunswick	Apartment	2	$540-580k	SOLD $645,000
Mont Albert	Unit	2	$550-600k	SOLD $650,500
Reservoir	Townhouse	3	$500-550k	SOLD $654,500
Preston	House	3	$580-620k	SOLD $680,500
South Yarra	Apartment	2	$650-690k	SOLD $715,000
Northcote	Townhouse	3	$580-620k	SOLD $735,000
Northcote	Unit	3	$580-630k	SOLD $745,000
Northcote	Townhouse	3	$640-695k	SOLD $767,000
Northcote	House	3	$680-730k	PASSED IN
Elsternwick	Unit	2	$690-750k	PASSED IN
Clifton Hill	Townhouse	3	$700k+	SOLD $846,000
Balwyn North	House	4	$700-770k	SOLD $947,500
Prahran	Apartment	2	$750k+	PASSED IN
Heidelberg	House	3	$750-820k	SOLD $960,000
Blackburn South	House	4	$800k+	SOLD $962,000
Thornbury	House	4	$800-880k	SOLD $965,000
Northcote	House	3	$800-850k	SOLD $985,000
Balwyn	House	3	$900k+	PASSED IN
Sold	17
Passed In	4	NPB Clearance Rate 80%
Total	21

$1m+

Suburb	Type	Beds	Quote	Result
Balwyn	House	3	$900k+	SOLD $1,120,000
Clifton Hill	House	3	$960-1050k	SOLD $1,135,000
Brighton	House	3	$1.1m+	PASSED IN
South Yarra	House	3	$1.1m+	SOLD $1,546,000
Camberwell	House	3	$1.3m+	PASSED IN
Brighton	Townhouse	3	$1.65m+	PASSED IN
Brighton	House	3	$1.7m+	SOLD $1,786,000
Canterbury	House	4	$1.7m+	SOLD $1,815,000
Brighton East	House	4	$1.7m+	SOLD $1,900,000
Canterbury	House	4	$1.7m+	SOLD $1,905,000
Kew	House	4	$1.44-1.55m+	SOLD $1,960,000
Kew	House	4	$1.8m+	SOLD $1,975,000
Glen Iris	House	4	$1.4m+	SOLD $2,000,000
Carlton North	House	4	$2-2.25m	SOLD $2,609,000
East Melbourne	House	4	$2.3m+	SOLD $2,720,000
Brighton	House	4	$2.7m+	PASSED IN
Albert Park	House	3	$2.7m+	PASSED IN
Hawthorn	House	4	$2.8-3m	SOLD $3,060,000
Kew	House	4	$3m+	SOLD $3,120,000
Brighton	House	5	$4m+	SOLD $4,235,000
Sold	15
Passed In	5	NPB Clearance Rate 75%
Total	20

Overall

Sold	51
Passed In	11	NPB Clearance Rate 82%
Total	62

AUCTIONS IN THE SPOTLIGHT

 

CONTACT US

If you need any assistance with searching, assessing or negotiating your next property purchase or simply wish to discuss your property buying needs, please don’t hesitate to contact us. Alternatively, you can complete our online Help Us Help You form and we will contact you.

Regards

Antony Bucello and Catherine Cashmore

Email Antony
Email Catherine