residential market review - rpm real estate group · the data contained within this report was...
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R E S I D E N T I A L M A R K E T R E V I E W
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RPM REAL ESTATE GROUP IS VICTORIA’S MOST SUCCESSFUL RESIDENTIAL DEVELOPMENT
SALES, MARKETING AND ADVISORY AGENCY. WE SPECIALISE IN SALES WITHIN MASTER-
PLANNED COMMUNITIES, MEDIUM AND HIGH-DENSITY DEVELOPMENTS, GREENFIELD AND INFILL
DEVELOPMENT SITES AND INTERNATIONAL INVESTMENT SALES. WE ADVISE OUR CLIENTS ON
ALL ASPECTS OF THE SALES PROCESS FROM SITE DUE DILIGENCE, ACQUISITION, PLANNING AND
RISK MITIGATION THROUGH TO PRODUCT MIX, PRICING, LAUNCH, SALES AND SETTLEMENT. OUR
RESEARCH-BACKED STRATEGIES DELIVER HIGHER REVENUES AND SALES RATES, AND BETTER
RETURNS FOR OUR CLIENTS.
3
INSIDE
FROM OUR CEO
DEVELOPMENT SITES
COMMUNITIES
12FEATURE STORY:
GOVERNMENT MEASURES TO KICKSTART BUILD-TO-RENT SECTOR IN VICTORIA
42FEATURE STORY:
THE EMERGENCE OF MEDIUM DENSITY IN THE GREENFIELDS
52FEATURE STORY: REIMAGINING THE AUSTRALIAN DREAM
LEAD INDICATORS APARTMENTS /
TOWNHOUSES
INTERNATIONAL
RESIDENTIAL INVESTMENT
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46
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3Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
FROM OUR CEO
KEVIN BROWNCHIEF EXECUTIVE OFFICERRPM REAL ESTATE GROUP
Welcome to RPM Real Estate Group’s Q3 Residential
Market Review. Once again we’re pleased to provide
our data-driven insights on the performance, drivers
and impacts of Melbourne and Geelong’s new
housing property market.
The market downturn accelerated throughout the
September quarter, underscored by deteriorating
buyer sentiment, investor disincentives and
tighter credit conditions for both developers and
homebuyers.
Notwithstanding, developers continue to seek high
quality, strategic landholdings in preparation for
the next upswing, with second tier funding channels
becoming more prominent.
In Melbourne’s greenfields, supply has begun to
outstrip demand, evidenced by a 15% fall in total
lot sales over the quarter. For the first time in three
years, the median lot price also declined, albeit
marginally by 1.4% to $320,500.
In the apartment and townhouse market, despite a
12% fall in approvals for the quarter and sluggish
price growth, a strong pipeline of projects in the
planning or approval stages is being underpinned by
population growth, particularly overseas migration,
as Melbourne continues to densify.
Melbourne has many sub-markets, and it’s
important to highlight the resilience of the vacant
land market compared to the established inner and
middle housing market, which is the subject of much
commentary in terms of falling house values.
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The data contained within this report was prepared
by RPM’s research team consisting of economists,
property experts and GIS analysts.
Research underpins the core strategic decision
making capability at RPM, providing in-depth
analysis on current economic and housing
conditions, sales rates and pricing, future
supply and demand assessments, and buyer
demographics. This rich intelligence enables clients
to make informed decisions that underscore the
success of their developments. RPM’s research
is also highly valued in assisting clients to secure
capital funding and enhance their ongoing
marketing and ROI strategies.
MICHAEL STAEDLER
RESEARCH MANAGER
+61 434 619 280
IMPORTANTLY, UNDERLYING DEMAND IN THE GREENFIELDS REMAINS ROBUST. EQUALLY, ECONOMIC CONDITIONS IN AUSTRALIA AND PARTICULARLY VICTORIA ARE STRONG. POPULATION GROWTH, A 10-YEAR LOW UNEMPLOYMENT RATE, LOW INTEREST RATES AND RECORD PUBLIC INFRASTRUCTURE SPENDING PROGRAMS SHOULD SUPPORT AN ORDERLY CORRECTION AND MORE SUSTAINABLE SALES VOLUMES.
5Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
Q3
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ECONOMIC ACTIVITY VIC POPULATIONGROSS DOMESTIC PRODUCT (GDP)
CONSUMER PRICE INDEX (CPI)
STATE FINAL DEMAND (SFD) - VIC
RETAIL TURNOVER - VIC
2.95%
1.89%
4.97%
5.77%
2.55%
1.83%
3.55%
4.95%
12 month change to June qtr 2018
Sep-18
12 month change to June qtr 2018
Sep-18
5 year average
Same month year earlier
5 year average
Same month year earlier
Source: ABS
Source: ABS
Source: RBA
BORROWING RATESCASH RATE VARIABLE RATE
1.5%Sep-18
Jun-18
Sep-17
Sep-18
Jun-18
Sep-17
Sep-18
Jun-18
Sep-17
Sep-18
Jun-18
Sep-17
DISCOUNTED RATE
4.55% 4.10%
4.50% 4.15%
4.45% 4.10%
3 YEAR FIXED RATE
1.5%
1.5%
5.30%
5.20%
5.20%AUS 24,899,077 VIC 6,429,979 TOTAL POPULATION
NATURAL INCREASE
10,683 10,692 38,593Mar-18 Same qtr.
year earlier12 months to Mar-18
0.1%% change - same qtr. last year
1.7%% change - 12 months earlier
OVERSEAS MIGRATION
83,70331,79530,968 Mar-18 Same qtr.
year earlier12 months to Mar-18
% change - same qtr. last year
% change - 12 months earlier
2.6%
6.9%
NET INTERSTATE MIGRATION
15,0995,2343,947 Mar-18 Same qtr.
year earlier12 months to Mar-18
% change - same qtr. last year
% change - 12 months earlier
24.6%
22.9%
change from Mar-17 to Mar-18
% change - same qtr. last year
380,722 137,395
2.18%1.55%
NATIONAL TOTAL CHANGE VIC TOTAL CHANGE
VIC share 36%
■ Negative change ■ Positive change
6 R P M R E A L E S TAT E G R O U P
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VIC EMPLOYMENTEMPLOYMENT GROWTH (JOBS CREATED)
CONSUMER SENTIMENT
BUSINESS SENTIMENT
Sep-18
Sep-18
Sep-17
Sep-17
100.5
12.9
97.9
13.4
Source: Westpac-Melb institute
Source: RBA/NAB
The Westpac-Melbourne Institute Consumer Sentiment 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 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.
Vic contribution to AUSJobs (‘000s) % Change
4.5% 5.6% 5.9%
UNEMPLOYMENT RATE
Sep-18 Jun-18 Same time last yearSource: ABS
Source: ABS
May-18 Nov-17 May-17
$1,607 $1,581 $1,563WAGES
FULL TIME
47.0494.11
2.1%
4.3%
105%
33%
Jun-18 to Sep-18
Last 12 months
49.2083.35
1.5%
2.6%
110%
29.1%
Jun-18 to Sep-18
Last 12 months
TOTAL
PART TIME
2.16-10.76
0.2%
1.0% 4%
5%Jun-18 to Sep-18
Last 12 months
1.6% 2.8%
7Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
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MELBOURNE PROPERTY
VIC FINANCE
MEDIAN HOUSE PRICE AUCTIONS HELD CLEARANCE
3,398
3,558
4,119
Sep-18
Jun-18
Same month year earlier
MEDIAN UNIT PRICE
$604,000
$587,500
Sep-18
Same qtr. year earlier
MEDIAN LAND PRICE
$320,500
$288,000
Sep-18
Same qtr. year earlier
Source: ABS
Source: REIV
SHARE OF FHB LOANS
18.7% 17.9%
Sep-18Same qtr.
year earlier
$834,000
$834,000 $602,500 $325,000
$812,000
Sep-18
Previous qtr. Previous qtr. Previous qtr.
Same qtr. year earlier
0.0% 0.2%
VALUE OF LOANS - OWNER OCCUPIERS VALUE OF LOANS - INVESTORS
$18.78B $8.48B $9.89B$18.66BSep-18 Sep-18Same qtr. year earlier Same qtr. year earlier
1% 14%
NO. OF FHBS FINANCED AVERAGE LOAN SIZE (FHBS)
8,601 $363,533 $329,9338,783Sep-18 Sep-18Same qtr. year earlier Same qtr. year earlier
2% 10%
NO. OF NON-FHBS FINANCED AVERAGE LOAN SIZE (NON-FHBS)
37,352 $418,367 $390,13340,419Sep-18 Sep-18Same qtr. year earlier Same qtr. year earlier
8% 7%
FINANCE FOR NEW DWELLINGS FINANCE FOR ESTABLISHED DWELLINGS
7,739 38,214 40,6718,531Sep-18 Sep-18Same qtr. year earlier Same qtr. year earlier
9% 6%
2.7% 2.8%
1.4% 61%
58%
73%11.3%
8 R P M R E A L E S TAT E G R O U P
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MELBOURNE PROPERTY
VIC BUILDING
VACANCY RATE - MELB MEDIAN METRO HOUSE RENT MEDIAN METRO OTHER DWELLING RENTAVERAGE DAYS ON MARKET - METRO MELB
DETACHED HOUSE APPROVALS
HOUSE COMMENCEMENTS
HOUSE COMPLETIONS
TOTAL DWELLING APPROVALS
TOTAL COMMENCEMENTS
TOTAL COMPLETIONS
2.0% 2.1%Sep-18 Sep-18Sep-17 Sep-17
Source: ABS
Source: REIV
Sep-18
Jun-18
Jun-18
Last 12 months
Last 12 months
Last 12 months
Same qtr. year earlier
Same qtr. year earlier
Same qtr. year earlier
Sep-189,901
Jun-189,881
Jun-1810,359
16,141
18,643
18,703
16,951
15,518
16,817
74,771
75,674
65,599
Same qtr. year earlier1.3%10,027
Same qtr. year earlier2.5%9,642
Same qtr. year earlier16.0%8,930
OTHER DWELLING APPROVALS
OTHER COMMENCEMENTS
OTHER COMPLETIONS
Sep-186,240
Jun-188,762
Jun-188,344
Same qtr. year earlier9.9%6,924
Same qtr. year earlier49.1%5,876
Same qtr. year earlier5.8%7,887
Last 12 months27.5%35,317
Last 12 months32.3%37,287
Last 12 months9.1%29,107
4.8%
20.1%
11.2%
17.1%
18.4%
0.7%
Last 12 months9.1%39,454
Last 12 months7.35%38,387
Last 12 months10.1%36,492
$460 $420
$430 $415Sep-18 Sep-18
Sep-17 Sep-17
7.0% 1.2%36 33
Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018 9
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AS THE MARKET CORRECTION FOR NEW HOUSING
CONTINUES, DEVELOPERS ARE TAKING A MORE
CONSERVATIVE - BUT STILL CONFIDENT – APPROACH TO
BUILDING THEIR PROJECT PIPELINES FOR THE FUTURE.
While demand for retail land lots has contracted,
developers are still eager to acquire high quality sites
including large scale, well located, strategic landholdings
on which to capitalise in a few years’ time.
Despite continued strong economic fundamentals
including population and employment growth, a key
driver underpinning softening retail demand is tighter
bank lending criteria including new credit reporting rules
and restricting high loan-to-income lending. ANZ recently
reported that tighter credit conditions has reduced
the maximum amount banks would lend to an average
household by around 20% in the last three years. Hence,
affordability is still a prominent factor among homebuyers.
R P M R E A L E S TAT E G R O U P
DEVELOPMENTSITES
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As the market adjusts to the new parameters and the
buyer pool contracts, developers are sharpening their
retail strategies and being very selective about the
type of product they’re putting to market. Many land
developers are increasingly incorporating smaller
medium density stock into their master plans while
apartment and townhouse developers are delivering
more affordable product to a growing owner occupier
buyer cohort.
There is strong demand for quality leased assets (e.g.
commercial assets) particularly those with long term
upside potential.
In a restrictive bank lending environment, a wave of
private capital is providing alternative development
funding, which is more nimble, flexible and can move
more quickly.
These second tier channels including family offices,
investment houses and funds, which have been set up
specifically to meet this new demand, means developers
are negotiating different deal structures and remodeling
deposit and settlement criteria to secure funding.
Despite media reports, there is also still a significant
amount of offshore capital flowing into development
site activity. Many large-scale developers committed
to long term investment strategies in Melbourne remain
confident in Victoria’s property outlook.
Notwithstanding, given current market conditions, these
developers are shifting capital from apartments into
land, from high rise residential to managed investments,
and ‘recycling’ capital as each project is realised.
Speculative property investors who have over
capitalised will likely result in more caveat sales.
By and large developers remain confident in
Melbourne’s long term property outlook. As the market
correction continues, we will likely see some small
shifts in supply and demand but should equalise in the
short to medium term.
Vendors who are unwilling to adapt to the change in
values might result in a small or short term restriction of
supply of new sites.
The VPA recently released its work program of priority
projects for the coming year that guides Victoria’s land
use planning. The VPA will maintain Victoria’s 15 year
supply of zoned land in Melbourne’s greenfields but
shift focus to urban renewal sites and regional planning.
Not forgetting the rampant price growth experienced
over the last few years, the market will reset and adjust
to a new norm of consistent price growth - albeit more
conservative – to achieve sustainable longevity.
OUTLOOK
11Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
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A VIABLE BUILD-TO-RENT MODEL COULD SOON
BECOME A REALITY IN VICTORIA FOLLOWING
A SUITE OF MEASURES ANNOUNCED BY THE
VICTORIAN GOVERNMENT TO SUPPORT THE
EMERGING SECTOR.
The government will clarify tax arrangements,
facilitate planning assessment, financially support
build-to-rent in community housing, and establish
an industry working group. It is also set to fast-track
permit applications for build-to-rent projects.
Tax changes are also planned, including amending
guidelines for the foreign investor stamp duty
surcharge and the vacancy tax rate so that build-to-
rent developments qualify for an exemption.
Other recent reforms to the Residential Tenancies
Act which aim to shift mindsets about renting as a
secure, long term lifestyle choice and an attractive
alternative to buying will also stimulate interest in
build-to-rent projects.
Build-to-rent is a response to evolving housing
needs where more people are either needing or
wanting to rent and are doing so for longer. Despite
moderating home values, housing affordability
is still a major issue in Australia, especially in the
two strongest markets, Sydney and Melbourne.
Currently, a quarter of Victorians rent their homes
and 20% have been renting for more than five years.
In the US, build-to-rent’s financial success is made
possible partly because of the financial system,
particularly its banking and debt systems. The
financial market is primarily driven by private capital.
The US build-to-rent market has delivered projects
aimed at tenants across all income levels given more
flexible private funding options and longer term
return hurdles.
In the UK, build-to-rent started to take off in 2013.
Taxation laws were adjusted to incentivise the
market. These tax changes are shaping the market
and preparing it for growth.
Comparatively, in Australia, current market
conditions mean that a large-scale build-to-rent
model will only work if it caters primarily to high-end
rentals. Our stringent and highly regulated banking
sector also does not have the evidence base to
support funding this type of asset. Moreover,
Australia hasn’t had the level of low rental
supply that has underpinned its success in
overseas markets.
Up until the recently announced changes, the
taxation landscape for build-to-rent assets was
unfavourable to institutional investors looking
to invest in this asset class, creating a lack of
patient, low-cost capital for developers. This meant
investing in build-to-rent assets would be taxed at
the company rate between 27.5% and 30% instead
of 15% under a Managed Investment Trust (MIT)
ownership structure.
FEATURE STORY:
GOVERNMENT MEASURES TO KICKSTART BUILD -TO-RENT SECTOR IN VICTORIA
12 R P M R E A L E S TAT E G R O U P
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In July this year then-Treasurer Scott Morrison
announced reforms to the legislative framework that
govern how build-to-rent projects are treated by the
Federal Government from a MIT perspective.
This has enabled significant opportunity for
developers to develop out and retain these assets
which provide not only a recurring income but
longer term annualised return on capital with much
lower risk.
Not having to sell completed product eliminates
investment risk – particularly in a political
environment where sudden and unplanned
legislative decisions, such as removing offshore
investment in Australia and APRA’s lending changes,
have had significant negative impacts on the
development market.
Information for this article was sourced from original stories published in The Urban Developer on 14 August and 2 October 2018.
The first build-to-rent approval in Victoria is for a
60-level apartment block on City Road, Southbank,
which is being developed by Grocon. The developer
is actively looking for more opportunities across
Melbourne and Sydney.
CHRISTIAN RANIERIGENERAL MANAGER, TRANSACTIONS & [email protected]+61 416 445 078
OF VICTORIANS RENT THEIR HOMES
AND 20% HAVE BEEN RENTING
FOR MORE THAN FIVE YEARS.
13Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
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THE DOWNWARD TREND CHARACTERISING
MELBOURNE AND GEELONG’S LAND MARKET
THROUGHOUT THE FIRST HALF OF 2018
STEEPENED IN THE SEPTEMBER QUARTER 2018
AMID WEAKENING BUYER SENTIMENT.
Total lot sales declined 15.3% to 3,588 for the
quarter – the lowest recorded total in three and a
half years – and 41% down from the same period
12 months ago.
Median lot price growth has also eased, falling
1.4% to $320,500 – the first fall on the previous
quarter’s median price since June quarter 2015.
The downturn in activity has resulted in annual
median lot price growth slowing sharply from
29% in the March quarter to a still robust 11% in
the September quarter.
Melbourne’s growth corridors added 11 new estates
in the September quarter, lifting total active estate
numbers to 140. While this was 23 more than for
the same period last year, new lot supply has fallen
by 28%.
OVERVIEW
COMMUNITIES
14 R P M R E A L E S TAT E G R O U P
Despite lot releases outpacing lot sales, the
majority of developers are willing to accept slower
sales rates to reduce valuation risk given the 18
month delay in title timeframes. They are also
maintaining their pricing margins but introducing a
number of value-add incentives.
Many developers are also incorporating an
increasing mix of townhouses into their estates,
providing a ‘safeguard’ in the current climate of
affordable product for first home buyers whose
borrowing capacity has reduced from tighter
lending criteria.
The key driver underpinning the market slowdown
is softening buyer sentiment and restrictive credit
conditions, which is impacting demand. Walk-
in buyer enquiries on new estates has fallen as
potential purchasers appear to be adopting a ‘wait
and see’ approach to assess whether prices will
moderate further.
It’s worth noting the vast majority of media reporting
which is contributing to negative buyer sentiment
relates to declining values across Melbourne’s
established housing market.
It is useful to distinguish Melbourne’s many sub-
markets, in particular the established inner and
middle housing market – which is the focus of much
attention – and the established and new housing
market in outer Melbourne.
To this end, in inner and middle Melbourne, the
median house price has fallen annually by 4.5%
and 2.3% respectively, while in outer Melbourne,
the median house price has increased 3.7% and
the land market 11.3%.
Relatively speaking, Melbourne’s vacant land market
and established outer housing market is showing
more resilience compared to the more expensive
established inner housing market.
It’s also pertinent to acknowledge Victoria’s still
strong economic conditions including population
growth, the lowest unemployment rate in 10 years,
low interest rates and record public infrastructure
spending programs.
At 400 sqm, the median lot size in the September
quarter 2018 remained unchanged from the
previous quarter, resulting in a decline in the per
sqm median lot price.
LUKE KELLYDIRECTOR, [email protected]+61 400 688 520
15Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
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OVERVIEW
MELBOURNE GROWTH CORRIDORS
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
440
430
420
410
400
390
380
MED
IAN
LO
T SI
ZE �S
QM
�
Median Lot Size Median Lot Price
MED
IAN
LO
T PR
ICE
�$�
Source: RPM
0% 10% 20% 30% 40% 50% 60% 70% 80%
% O
F TO
TAL
GRO
SS L
OT
SALE
S
Sep Qtr 2018 Sep Qtr 2017 Sep Qtr 2016
325K>
301K-
325K
275K-
300K
251K-
275K
<250K
47%28%
5%
15%14%
4%
14%17%
8%
12%14%14%
12%28%69%
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
160
140
120
100
80
60
40
20
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
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Casey 12%
Cardinia 3%
Hume 11%
Mitchell 3%
Whittlesea 8%
Melton 22%
Wyndham 21%
Moorabool 3%
Greater Geelong 17%
12 MONTHS TO SEPTEMBER
2018
THE KEY DRIVER UNDERPINNING THE MARKET SLOWDOWN IS SOFTENING BUYER SENTIMENT AND RESTRICTIVE CREDIT CONDITIONS, WHICH IS IMPACTING DEMAND.
PERCENTAGE CONTRIBUTION TO TOTAL GROSS LOT SALES
17Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
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MELBOURNE & GEELONG GROWTH CORRIDORS
MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
6.0
5.0
4.0
3.0
2.0
1.0
0.0
QUA
RTER
LY S
UPPL
Y �M
ON
THS�
South East Northern Western Geelong
WHAT HAPPENS AFTER THE PEAK? A SUPPLY-SIDE VIEW
Source: RPM
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Further underscoring weakening buyer sentiment,
during the six months to September 2018 there has
been an increase in the number of months it takes
for gross lot sales to absorb the total number of lots
on the market.
In the March quarter 2018, gross lot sales absorbed
around half of the total lots on the market on
average in each of the four growth corridors.
As a result, total lot supply was sufficient to
accommodate only 2 months’ worth of lot sales.
However, lots sales have since further declined,
while total lots on the market has steadily risen.
Consequently, the average time for lot sales to
absorb lot supply has increased to 4.7 months in
the South East growth corridor, 3.8 months in the
Northern growth corridor, 2.9 months in the Geelong
growth corridor, and 2.7 months in the Western
growth corridor.
18 R P M R E A L E S TAT E G R O U P
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Source: RPM
BUYER DEMAND CONTINUES FOR MORE AFFORDABLE LOCATIONS OFFERING PLENTY OF STOCK SUCH AS MELTON, MOORABOOL AND THE BELLARINE PENINSULA
WESTERN NORTHERN SOUTH EAST GREATER GEELONG
Sept quarter ‘18 median lot price $308,000 $320,000 $355,000 $272,450
Change from Sept quarter ‘17 $35,000 $25,000 $10,000 $64,450
% Change from Sept quarter ‘17 12.8% 8.5% 2.9% 31.0%
Sept quarter ‘18 median lot size 400.0 400.0 400.0 448.0
Change from Sept quarter ‘17 -5.0 -20.0 -48.0 0.0
% Change from Sept quarter ‘17 -1.2% -4.8% -10.7% 0.0%
Sept quarter ‘18 gross lot sales 2,090 878 620 602
Change from Sept quarter ‘17 -1,298 -821 -371 -400
% Change from Sept quarter ‘17 -138.3% -148.3% -137.4% -139.9%
Sept quarter ‘18 sales contribution 49.9% 21.0% 14.8% 14.4%
Sept quarter ‘17 sales contribution 47.9% 24.0% 14.0% 14.2%
Sept quarter ‘18 active estates 64 39 37 26
Change from Sept quarter ‘17 6 6 11 -2
Sept quarter ‘18 lot releases 2,390 1,000 814 656
Change from Sept quarter ‘17 -936 -598 -71 -45
% Change from Sept quarter ‘17 -28.1% -37.4% -8.0% -6.4%
Sept quarter ‘18 no. of trading days 55 92 122 65
Change from Sept quarter ‘17 43 83 109 46
% Change from Sept quarter ‘17 358.3% 922.2% 838.5% 242.1%
19Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
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PORT PHILLIP BAY
WYNDHAM
MELTON
MOORABOOL
The Western growth corridor accounted for 50%
of total gross lot sales in September quarter 2018,
recording 2,090 lot sales. This proportion is more
than double the share of total lot sales in each of
the other growth corridors, underpinned by 64
active estates. Nevertheless, gross lot sales in the
September quarter was still 38% lower relative to
the same quarter in 2017.
Weaker new house demand is attributed to
heightened affordability concerns across the
Western growth corridor. This is illustrated by the
median lot price in the relatively affordable regions
of Melton and Moorabool contracting $5,000 and
$4,500 respectively in the September quarter from
the previous quarter.
Lot sales activity in the Western growth corridor
will continue to outperform other regions as higher
lot supply and a greater variety of lot size, price and
location offers a mix of new housing choices for first
home buyers and upgraders. Prospects for lot price
growth have deteriorated, with median lot prices
likely to remain steady.
WESTERN GROWTH CORRIDOR
20 R P M R E A L E S TAT E G R O U P
CO
MM
UN
ITIE
S
PORT PHILLIP BAY
WYNDHAM
MELTON
MOORABOOL
WYNDHAM
Wyndham experienced a 43% annual reduction
in quarterly lot sales, falling to 994 lots in the
September quarter - the first time since March
quarter 2015 in which the region failed to reach
1,000 lot sales. Lot sales contracted by 5% from the
previous quarter.
Lot supply remains healthy, with the number of
active estates rising by 3 to 31, leading to an
increase in new stock releases totaling 1,157 lots.
This suggests demand side factors, in particular
constrained affordability, are having a greater
impact on weakening lot sales given Wyndham is
the most expensive land market in the Western
growth corridor. Wyndham’s median lot price
edged higher by 1.5% from the previous quarter to
$330,000, while the median lot size was steady at
just above 400sqm.
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
2,500
2,000
1,500
1,000
500
0
40
35
30
25
20
15
10
5
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
406
405
404
403
402
401
400
399
398
397
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price
PETER GRANTDIRECTOR, [email protected]+61 411 494 499
Source: RPM
21Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
CO
MM
UN
ITIE
S
MELTON
Melton recorded 1,013 lot sales in the September
quarter, which was the highest among all growth
corridors. Notwithstanding, sales volumes were
down 9.3% from the previous quarter, and 31%
from a record 1,468 lot sales in the September
quarter 2017.
New lot releases declined 8% from the last quarter
and 28% to 1,120 lots compared to the same period
a year ago despite 12 more active estates on the
market. This indicates lot sales has been impeded
by diminishing new lot supply.
Melton’s median lot price contracted by 1.7% to
$295,000 in the September quarter from the June
quarter. With the median lot size remaining static at
400sqm, lot prices per sqm also marginally declined.
WESTERN GROWTH CORRIDOR
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
1,600
1,400
1,200
1,000
800
600
400
200
0
35
30
25
20
15
10
5
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
480
460
440
420
400
380
360
340
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price Source: RPM
22 R P M R E A L E S TAT E G R O U P
CO
MM
UN
ITIE
S
MOORABOOL
Moorabool contained 1 less active estate in the
September quarter 2018 compared to the same
period a year ago. With overall weaker sentiment
across the new housing market, both new lot
releases and gross lot sales declined by 49%
annually, falling to 113 lots and 83 lots respectively
in the September quarter.
The median lot price in Moorabool fell by 2% from
the previous quarter to $225,500, making it the
most affordable median lot price across all growth
corridors. This price correction can be explained
by the larger median lot size shrinking by 7%
to 448sqm. As a result, lot prices per sqm still
increased.
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
200
180
160
140
120
100
80
60
40
20
0
9
8
7
6
5
4
3
2
1
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
530
510
490
470
450
430
410
390
370
350
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price
ROD ANDERSONDIRECTOR, [email protected]+61 417 595 859
Source: RPM
23Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
CO
MM
UN
ITIE
S
NORTHERN GROWTH CORRIDOR
The Northern growth corridor recorded 878 gross
lot sales in September quarter 2018, which was a
substantial 48% below sales volumes achieved in the
corresponding quarter in 2017. Consequently, the
proportion of total lot sales across all growth corridors
eased from 24% to 21%.
While the number of active estates increased by 6 over
the 12 months to September 2018, fewer and smaller
lot releases has resulted in new lot supply contracting
by 37% annually,
As predicted, lot sales activity has shifted from Hume
to Whittlesea, with Whittlesea recording more lot
sales in the September quarter 2018 compared to
Hume - the first time this has occurred in more than
a year. Significantly, both new lot releases and gross
lot sales in Hume tumbled to four year lows during the
September quarter. Conversely, both new supply and
absorption of lots in Whittlesea were higher than just
six months earlier.
The correction in median lot prices has also been more
apparent within the Northern region compared to other
growth corridors, with median lot values declining 4%
in Hume and 3% in Whittlesea from their respective
peaks in the last 2 quarters.24 R P M R E A L E S TAT E G R O U P
CO
MM
UN
ITIE
S
HUME
The weakening sales trend in Hume intensified in the
September quarter 2018, with the municipality’s 385
total lot sales 23% below lot sales in the previous
quarter. It was also the lowest quarterly total in over
four years, and a substantial 62% below the peak in
lot sales during September quarter 2017.
Exacerbating this decline has been the deterioration
in new supply, with 383 new lot releases in September
quarter 2018 equating to a 38% fall from the previous
quarter and 60% below the same quarter in 2017.
While receding supply applied upward pressures
on lot prices in previous quarters, this has now
eased, with affordability concerns more apparent,
augmented by Hume still being the second most
expensive land market in the region.
Consequently, in the September quarter Hume’s
median lot price declined by 4% to $336,000 from the
June quarter. However, over these two periods, the
median lot size diminished by 8% to 413sqm, resulting
in the median per sqm lot price still improving.
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
1,200
1,000
800
600
400
200
0
25
20
15
10
5
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
460
450
440
430
420
410
400
390
380
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price Source: RPM
LUKE KELLYDIRECTOR, [email protected]+61 400 688 520
25Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
CO
MM
UN
ITIE
S
MITCHELL
The addition of 2 new estates in Mitchell in the
September quarter was significant given it is a
relatively smaller market and represented a one
third increase in total active estates. However, sales
activity declined by 42% from the previous quarter
down to 91 lots.
Mitchell’s median lot price increased by $12,500
(or 4.5%) to $290,000 in the current quarter. This
was the largest increase in both absolute and
percentage terms within Greater Melbourne’s
growth corridors, even though the median lot size
decreased slightly to 448sqm.
NORTHERN GROWTH CORRIDOR
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
250
200
150
100
50
0
7
6
5
4
3
2
1
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
550
530
510
490
470
450
430
410
390
370
350
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price Source: RPM
26 R P M R E A L E S TAT E G R O U P
CO
MM
UN
ITIE
S
WHITTLESEA
The turnaround in lot sales activity in Whittlesea in
the June quarter 2018 fell away in the September
quarter. Lot sales generally receive a boost when
new estates come to market, however Whittlesea
added only 1 new estate in the September quarter,
compared to 4 new estates in the previous quarter.
As a result, sales declined by 14% in the September
quarter to a total of 402 lots, reflecting a fall of 31%
from the same period a year earlier.
This was greater than the 10% contraction in
new supply from June quarter 2018, with 516 lots
released in September quarter 2018.
The median lot price declined 2% to $318,000 from
the previous quarter, but still reflected an 11%
increase from the September quarter last year.
The moderation in lot prices is attributed to new
lot supply outpacing lot absorption, and a 2% fall in
the median lot size to 392sqm. This is the smallest
median lot size amongst all growth corridors.
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
900
800
700
600
500
400
300
200
100
0
20
18
16
14
12
10
8
6
4
2
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
430
420
410
400
390
380
370
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price Source: RPM
PETER GRANTDIRECTOR, [email protected]+61 411 494 499
27Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
CO
MM
UN
ITIE
S
NEW LOT RELEASES IN CASEY DECREASED BY 26%, LEADING TO A 46% FALL IN LOT SALES
R P M R E A L E S TAT E G R O U P
CO
MM
UN
ITIE
S
28
ROD ANDERSONDIRECTOR, [email protected]+61 417 595 859
CASEY
CARDINIAPORT PHILLIP BAY
Overall sales activity across the South East growth
corridor has weakened. The region recorded 620
lot sales in September quarter 2018 derived from
37 active estates, equating to only 15% of lot sales
across all growth corridors.
From the June to September quarter 2018, new
lot releases in Casey declined by 27%, leading to
a 39% fall in lot sales to 428 lots, which was the
lowest quarterly total since December quarter 2013.
However, restricted new lot supply applied upward
pressure on lot prices in Casey, which increased a
marginal 0.8% from an already expensive base.
Conversely, new lot releases in Cardinia doubled in
the September quarter from the previous quarter,
resulting in lot sales increasing to 192 - the highest
level in over a year. The median lot price decreased
slightly in response to higher supply.
SOUTH EAST GROWTH CORRIDOR
29Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
CO
MM
UN
ITIE
S
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
1,200
1,000
800
600
400
200
0
30
25
20
15
10
5
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
460
450
440
430
420
410
400
390
380
370
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price Source: RPM
CASEY
An increase of 8 active estates in Casey in September
2018 compared to the same period 12 months ago has
not translated to an increase in new lot releases and
lot sales.
Over this period, new releases have fallen by 26% to
539 lots, while gross sales experienced a larger decline
of 46% to 428 lots. With new supply outpacing lot
absorption, this suggests ongoing affordability concerns
is the primary reason for weakening sales volumes.
Indeed, Casey contains the most expensive median
lot price amongst all growth corridors, increasing
0.8% to $360,000 in the September quarter 2018. This
represents a new peak throughout Melbourne’s growth
corridors. This high median lot price is likely a result
of the composition of lot sales, with the proportion of
total lot sales in Casey improving in the more expensive
areas of Cranbourne, Botanic Ridge and Lyndhurst, at
the expense of activity in more affordable areas such as
Clyde and Clyde North.
The median lot size remained static at 400sqm.
SOUTH EAST GROWTH CORRIDOR
30 R P M R E A L E S TAT E G R O U P
CO
MM
UN
ITIE
S
CARDINIA
Cardinia was the only growth corridor to achieve a
quarterly increase in gross lot sales, which grew by
77 lots to a total of 192 in September quarter 2018.
This was attributed to the addition of 2 new estates,
Mt Pleasant and Pakenham Rise, which together
accounted for 60% of lot sales in Cardinia. New
releases also doubled to 275 lots in the September
quarter from the June quarter.
The increase in new lot supply, above that of
lot sales, resulted in Cardinia’s median lot price
decreasing by 3.5% to $330,000 in the September
quarter. A 6.1% reduction in the median lot size to
448sqm has also contributed to falling lot prices.
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
500
450
400
350
300
250
200
150
100
50
0
25
20
15
10
5
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
550
500
450
400
350
300
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price Source: RPM
LUKE KELLYDIRECTOR, [email protected]+61 400 688 520
31Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
CO
MM
UN
ITIE
S
GREATER GEELONG
PORT PHILLIP BAY
The Greater Geelong growth corridor contributed
14% of total lot sales in September quarter 2018,
equating to 602 lots. Despite less prominent
affordability concerns given lot prices are relatively
more affordable in this growth corridor, lot sales
contracted by 40% relative to the same quarter
in 2017.
The fall in new lot releases by a more moderate 6.4%
suggests the decline in sales was driven more so by
subdued demand.
Notably, sales activity in the second half of 2017 was
likely underpinned by the doubling of the Regional
First Home Owners Grant to $20,000 for new
dwellings. With a finite number of first home buyers,
the ‘pull forward’ effect of this demand has most
likely lost momentum.
Nevertheless, all five sub–markets within the
Greater Geelong growth corridor still experienced
growth in median lot prices from June to September
quarter 2018.
GREATER GEELONG GROWTH CORRIDOR
32 R P M R E A L E S TAT E G R O U P
CO
MM
UN
ITIE
S
ARMSTRONG CREEK
Sales of 259 lots in Armstrong Creek in September
quarter 2018 was the highest amongst all regions
within the Greater Geelong growth corridor.
Nevertheless, sales rates were considerably lower
than the previous quarter (down 19%) and the same
quarter in 2017 (down 40%).
Purchaser demand still supported quarterly price
growth of 5% and annual price growth of 36%, lifting
the median lot price in Armstrong Creek to $271,900
in the September quarter. The region also contains
the smallest median lot size of 400sqm, which
decreased by 5.9% from the previous quarter.
GREATER GEELONG
PORT PHILLIP BAY
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
600
500
400
300
200
100
0
12
10
8
6
4
2
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
460
450
440
430
420
410
400
390
380
370
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price
PETER GRANTDIRECTOR, [email protected]+61 411 494 499
Source: RPM
33Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
CO
MM
UN
ITIE
S
GREATER GEELONG GROWTH CORRIDOR
BELLARINE PENINSULA
Bellarine Peninsula contained 2 more active estates
in September quarter 2018 compared to the
previous quarter, although new lot releases almost
halved and gross sales declined by 34.8% to a total
of 180 lot sales.
An 11.5% increase in the median lot price from June
to September 2018 to $262,000 was the highest –
but still most affordable - within the Greater Geelong
growth corridor.
The median lot size edged higher to 453sqm.
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
450
400
350
300
250
200
150
100
50
0
18
16
14
12
10
8
6
4
2
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
550
530
510
490
470
450
430
410
390
370
350
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price Source: RPM
34 R P M R E A L E S TAT E G R O U P
CO
MM
UN
ITIE
S
GEELONG
Active estates in Geelong remained steady at 4,
however sales volumes contracted by 33 lots – or
33% - during the September quarter, falling to a total
of 67 lots. The absolute decline in new lot releases
was identical, which slowed to 84 lots.
Conversely, the median lot price increased by 9%
over the September quarter and 25% from the
previous corresponding period to $310,000. Much
of this growth is attributed to the increase in the
median lot size to 572sqm.
ROD ANDERSONDIRECTOR, [email protected]+61 417 595 859
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
140
120
100
80
60
40
20
0
10
9
8
7
6
5
4
3
2
1
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
750
700
650
600
550
500
450
400
350
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price Source: RPM
35Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
CO
MM
UN
ITIE
S
LARA
The addition of Austin estate in Lara underpinned a
17% increase in new lot supply and 18% in lot sales
during the September quarter, lifting releases to 104
lots and sales to 85 lots.
Increased competition slowed median lot price
growth to 1.5% from the previous quarter, reaching
a median lot value of $264,000 in the September
quarter. The median lot size of 448sqm remained
unchanged.
GREATER GEELONG GROWTH CORRIDOR
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
120
100
80
60
40
20
0
5
4
3
2
1
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
550
530
510
490
470
450
430
410
390
370
350
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
T PR
ICE
�$�
Median Lot Size Median Lot Price Source: RPM
36 R P M R E A L E S TAT E G R O U P
CO
MM
UN
ITIE
S
TORQUAY
Sales activity remained negligible at just 11 lots
in Torquay during the September quarter 2018.
Subsequently, quarterly and annual changes to both
the median lot price and size need to be viewed
with some caution as values are based off a small
number of sales.
Torquay’s median lot price of $435,000 was the
most expensive, up 1.8% from the previous quarter
and 45.5% from the September quarter last year,
which is not surprising given the region’s attractive
lifestyle opportunities.
LUKE KELLYDIRECTOR, [email protected]+61 400 688 520
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
160
140
120
100
80
60
40
20
0
5
4
3
2
1
0
GRO
SS L
OT
SALE
S
NUM
BER
OF
ESTA
TES
Active Estates New Estates Gross Lot Sales
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
600
500
400
300
200
100
0
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
MED
IAN
LO
T SI
ZE �S
QM
�
MED
IAN
LO
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ICE
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Median Lot Size Median Lot Price Source: RPM
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OUTLOOK Following the remarkable sales and price growth
over the last 3 years, the September quarter data
indicates Melbourne’s land market is coming
back to the historical long term sales average of
approximately 15,000 lots per annum.
Given the recent highs, the market is rebalancing
as supply begins to outstrip demand. The market
is ‘taking a breather’, enabling the industry to
catch up on lot construction and reduce title
timeframe delays.
While demand will likely continue to soften
over the coming 2 quarters, particularly given
the seasonal Christmas slowdown, we don’t
believe there will be huge price reductions.
Rather, developers will continue to rollout buyer
incentives and produce more townhouse stock
on smaller lots with lower price tags to meet still
strong first home buyer appetites.
38 R P M R E A L E S TAT E G R O U P
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Source: RPM
WHAT DOES A 400 SQM LOT COST?3 months to September 2018
Aintree$315kWeir Views
$264k
Bacchus Marsh$208k Melton
South$255k Rockbank
$317k
Mambourin$293k
Manor Lakes$288k
Thornhill Park
$307k
Wyndham Vale
$318k
Tarneit$324k
Truganina$338k
Werribee$316k
Lara$259k
Armstrong Creek$275k
Point Cook$489k
Deanside$377k
Frasers Rise$348k
Craigieburn$384k Wollert
$330k
Cranbourne South$360k
Cranbourne East
$362k
Pakenham$305k
Botanic Ridge$365k
Clyde North$360k
Clyde $345k
Donnybrook$298kDiggers Rest
$298k
Wallan$240k
Strathtulloh$267k
Kalkallo$331k
Mickleham$337k
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CHANGING OWNER OCCUPIER BUYER DEMOGRAPHICS
Despite housing affordability levels continuing
to deteriorate due to tighter lending practices
and land prices moderating, first home buyers
accounted for close to two thirds (63%) of overall
buyers in the September quarter 2018 – up from a
share of 56% in the same quarter a year earlier.
The higher proportion of first home buyers is a
result of strong competition among new housing
estates to attract buyers, along with developers
offering more ‘suitable’ products in the form of
townhouses on smaller lots.
With more affordable entry prices available in the
land market compared to the established housing
market, couples without children is an emerging
buyer cohort. In addition, the land market is seen
as a solid long term investment option. As a result,
an increasing share of single first home buyers
have entered the market.
A GROWING NUMBER OF WEALTHIER HOUSEHOLDS ARE ALSO FINDING THEIR WAY INTO THE GREENFIELDS. OVER THE SEPTEMBER QUARTER 2018, 39% OF OWNER OCCUPIERS WHO PURCHASED A LAND LOT INDICATED A HOUSEHOLD INCOME ABOVE $100,000, AN INCREASE OF 5% FROM THE SAME PERIOD A YEAR EARLIER. IN ADDITION, 53% OF BUYERS INDICATED THEY WERE IN A MIDDLE HOUSEHOLD INCOME BRACKET ($60,000-$100,000), UP FROM A SHARE OF 47% IN SEPTEMBER 2017.
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Source: RPM
OWNER-OCCUPIER TYPE
HOUSEHOLD NUMBER OF PEOPLE
HOUSEHOLD INCOME
Other 5%
4th Home 1%
3rd Home 6%
2nd Home 32%
1st Home 56%
+
8%25%22%35%10%
September 2017
>$120K
$100K-$120K
$80K-$100K
$60K-$80K
$40K-$60K
<$40K
16%
18%
25%
22%
17%
2%
Other 4%
4th Home 2%
3rd Home 4%
2nd Home 27%
1st Home 63%
+
7%20%19%39%15%
September 2018
>$120K
$100K-$120K
$80K-$100K
$60K-$80K
$40K-$60K
<$40K
21%
18%
28%
25%
7%
1%
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DESPITE THE RATE OF PRICE GROWTH IN
MELBOURNE’S GREENFIELD MARKET CONTINUING
TO MODERATE OVER THE LAST SIX MONTHS, FOR
MANY FIRST HOME BUYERS, HOUSE AND LAND
PACKAGES REMAIN UNAFFORDABLE.
RPM buyer analysis reveals the average first home
buyer household income in Melbourne’s new estates
is $85,000, and, with tighter lending conditions,
many would-be purchasers are unable to buy a
detached home on a 400 square metre block for
approximately $550,000.
In most new estates in Melbourne’s growth
corridors, the emergence of medium density
product is changing the development landscape.
Increasingly developers are introducing innovative,
attractive townhomes into their product mix to
cater to price-sensitive buyers priced out of
detached housing options who still want a product
configuration comprising three bedrooms, two
bathrooms and a double garage, albeit on a
smaller block.
The evolution of medium density product in the
greenfields is a growing market trend that buyers
are embracing. In fact, 2016 Census data revealed
a 117% increase in semi-detached, terrace or
townhouse product in the growth corridors in the
last five years. RPM estimates there is up to 10%
of medium density housing throughout greenfield
estates in the growth corridors, which will continue
to rise.
FEATURE STORY:
THE EMERGENCE OF MEDIUM DENSITY IN THE GREENFIELDS
117% INCREASE IN SEMI-DETACHED, TERRACE OR TOWN-HOUSE PRODUCTS IN THE GROWTH CORRIDORS IN THE LAST FIVE YEARS
Increasingly developers are introducing innovative,
attractive townhomes into their product mix
42 R P M R E A L E S TAT E G R O U P
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Medium density stock also enables developers to
utilise the land better and control the built form
solution to achieve a high quality product, which is
critical not just from a buyer perspective but also to
maintain the aesthetic integrity of the estate.
A well-designed, well-priced master plan with
product diversity allows developers to cater
to a broader mix of buyers, which is critical to
maintaining sales velocity.
Such is the confidence of developers in the growth
of this type of housing stock, estates are now
featuring townhouse display homes. For example,
RPM worked with Sienna Homes to build and open a
4 bedroom townhouse as a display at the Tulliallan
estate so buyers were able to experience the quality
and feel of the townhouse product.
The Tulliallan masterplan included 969 lots plus 81
townhouses in the sold out estate. Five medium
density sites included a mix of townhouse product
with 3 and 4 bedroom doubles and singles. Built
by Homebuyers Centre and Sienna Homes, the
townhouses maximised space and light offering
practical and versatile floorplans.
The Tulliallan townhouses have
earned Sienna Homes the
HIA Victorian Affordable Housing
Award 2018.
THERE’S A GROWING APPRECIATION AMONG BUYERS THAT TOWNHOUSES NO LONGER MEAN SMALL AND CHEAP, BUT HIGH QUALITY, WELL DESIGNED HOMES THAT TICK ALL THE LIFESTYLE BOXES
FEATURE STORY: THE EMERGENCE OF MEDIUM DENSITY IN THE GREENFIELDS
The Tulliallan masterplan included 969 lots plus 81 townhouses in the sold out estate.
Townhouses pictured by Sienna Homes at Tulliallan estate in Cranbourne North.
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TIGHTER CREDIT CONDITIONS – FOR BOTH
DEVELOPERS AND PURCHASERS - AND NEGATIVE
BUYER SENTIMENT CONTINUES TO IMPACT THE
TOWNHOUSE AND APARTMENT MARKET. THE
DOWNWARD TREND – PARTICULARLY IN THE
APARTMENT MARKET - IS ALSO DUE TO INVESTOR
DISINCENTIVES.
Over the past three years, banks have increased
scrutiny on customers’ living costs while requiring
larger deposits. Property investors have also faced
higher interest rates.
A recent ANZ presentation noted an average
household with an income of $110,000 could borrow
a maximum of $440,000 in the current lending
environment compared to $550,000 three years ago
– a 20% reduction in borrowing capacity.
While Victoria’s economic fundamentals remain
robust, stagnant price growth and declining sales
volumes underscore a slowing residential market.
OVERVIEW
APARTMENTS /TOWNHOUSES
46 R P M R E A L E S TAT E G R O U P
For the September quarter 2018, total other dwelling
approvals (apartments and townhouses) were down
12% to 6,240 approvals from the previous quarter.
Approvals were also down 10% from the September
quarter 2017.
However, as quarterly approval numbers tend to
be lumpy, a more meaningful comparison on a
rolling 12 month basis shows the non-detached
housing market has shown resilience, with approvals
reflecting an overall gain of 28% to 35,317 dwellings
when compared to the previous 12 months to
September 2017.
Specifically, townhouses improved by 5% while
apartments increased by a significant 46% - albeit
coming off an extremely low base over the last
two years. This pickup signals that developers
are still buoyed by key market fundamentals
including strong population growth, a 10-year low
unemployment rate, low vacancy rates and robust
rental yields.
Overall, solid approval activity has translated into
strong commencement numbers, with an increase
of 32% over the 12 months to June quarter 2018.
However, completions have fallen by 9% over the
same 12-month period which reflects the high level
of activity over the past couple of years.
LUKE KELLYDIRECTOR, PROJECT [email protected]+61 400 688 520
12 mths 12 mths 12 mths 12 mths 12 mths to Sep-14 to Sep-15 to Sep-16 to Sep-17 to Sep-18
28,00026,00024,00022,00020,00018,00016,00014,00012,00010,000
8,0006,0004,0002,000
0
APA
RTM
ENT
APP
ROVA
LS
12 mths 12 mths 12 mths 12 mths 12 mths to Sep-14 to Sep-15 to Sep-16 to Sep-17 to Sep-18
14,00013,00012,00011,00010,000
9,0008,0007,0006,0005,0004,0003,0002,0001,000
0
TOW
NH
OU
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PPRO
VALS
Source: ABS
20%17% 60%7% 46%5% 20%16% 26%15%
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KEY MEDIUM DENSITY BUILDING DATA
APPROVALS TOTAL TOWNHOUSES TOTAL APARTMENTS TOTAL
Sep qtr 2018 2,952 3,288 6,240 change from previous qtr -14.0% -10.4% -12.1%
change from previous yr -19.9% 1.5% -9.9%
12 months to Sep qtr 2018 13,046 22,271 35,317
% change 12 months earlier 4.9% 46.0% 27.5%
COMMENCEMENTS OTHER DWELLINGS COMPLETIONS OTHER DWELLINGS
Jun qtr 2018 8,762 Jun qtr 2018 8,344 change from previous qtr -31% change from previous qtr 74%
change from previous yr 49% change from previous yr 6%
12 months to Jun qtr 2018 37,287 12 months to Jun qtr 2018 29,107
% change 12 months earlier 32.32% % change 12 months earlier -9%
TOTAL APARTMENT & UNIT PRICES MEDIAN PRICE CHANGE FROM QTR CHANGE FROM PREV. YR
Sep qtr 2018 $604,000Jun qtr 2018 $602,500
Sep qtr 2017 $587,5000.2% 2.8%
Source: ABS, REIV
OVERIEW
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48 R P M R E A L E S TAT E G R O U P
LUKE KELLYDIRECTOR, PROJECT [email protected]+61 400 688 520
METRO MELBOURNE MEDIUM DENSITY PIPELINE ACTIVITY
Planning activity in medium density projects remains
strong as indicated in the number of projects
identified in the planning and approval stages.
In the apartment market, it indicates a view among
developers the strong level of buyer activity in
recent years will continue to absorb the additional
supply recently created and more so, the stock that
is in the pipeline.
With investors still in the shadows (both locally and
overseas), first home buyers and downsizers have
underpinned demand levels in the market.
The modest level of activity in the inner ring has
not dampened overall activity. In fact, boutique
developments (whether apartments or townhouses)
located in well-positioned mid ring suburbs have
been well received by buyers.
In addition, these smaller developments have until
recent months been more conducive to small-
scale developers. However, with further tightening
of finance, along with purchase acquisitions at
premiums, these developers have found it more
difficult to get projects off the ground.
Mid to large developers (who are financially secured)
are seeing the benefit of boutique projects where
the process of sales to development is a lot shorter
and they are not as financially exposed for an
extended period.
Taking a snapshot at the end of September 2018, the
townhouse pipeline reflects 1,806 projects or 81% of
the total pipeline in the planned or approval stage. If
all these projects come on line in their current plans,
the market will realise more than 11,600 dwellings.
This level of activity would augment a further 425
projects that are planned to yield 3,473 dwellings
that have already commenced.
TOWNHOUSE PIPELINE - SEP 2018
Stage Count of Developments
% of total Count of Townhouses
% of total
Planning 847 38% 4,887 32%
Approved 959 43% 6,758 45%
Commenced 425 19% 3,473 23%
Total 2,231 100% 15,118 100%
APARTMENT PIPELINE - SEP 2018
Stage Count of Developments
% of total Count of Apartments
% of total
Planning 291 20% 23,636 23%
Approved 801 56% 49,654 49%
Commenced 344 24% 28,901 28%
Total 1,436 100% 102,191 100%
Source: Cordell Connect, RPM
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The apartment pipeline follows a similar path, with
1,092 projects or 76% of the total pipeline in the
planned or approval stages. When combined, these
projects could yield 73,290 apartments.
These numbers are substantial, particularly given
muted apartment price growth in recent quarters
due to tighter banking lending and reduced investor
activity.
It is worth noting that while a project is in the
pipeline, particularly in the earlier stages, it could
always be shelved if developers believe buyer
appetite and overall profit margins don’t stack up.
Anecdotally this has already occurred. Overall, the
market continues to self-regulate.
Nevertheless, as the approval numbers show, the
development sector remains relatively positive over
the near term, particularly in Melbourne’s middle
ring as highlighted in the pie chart.
METRO MELBOURNE MEDIUM DENSITY PIPELINE ACTIVITY
Source: Cordell Connect, RPM
Inner Ring 4%
Outer Ring 27%
Middle Ring 69%
APARTMENT & TOWNHOUSE
DEVELOPMENT SPLIT BY LOCATION
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LUKE KELLYDIRECTOR, PROJECT [email protected]+61 400 688 520
OUTLOOK
Our outlook remains largely unchanged from the
previous two quarters. The apartment market is
cooling as opposed to crashing. The key underlying
component for all dwelling types is population
growth – particularly overseas migration.
The apartment market is still working its way
through some excess stock in some suburbs and
through the inner ring, however it is incorrect to
say there is an overall market oversupply. Areas of
excess supply should be absorbed over the next 12
to 18 months. If credit was more freely available it
would be a lot shorter.
Tighter credit and prospective changes to negative
gearing and capital gains tax for property investors
under a federal Labor government has sparked
revisions on how much further the market
may fall.
The consensus among most commentators is the
apartment market will remain soft for a couple
of years in terms of price. While the market has
‘normalised’ after a five-year residential boom,
a low growth environment will persist until after
the federal election and lending criteria either
moderates, regulators step into stimulate demand
by reducing dutiable levels or developers adapt their
expectations.
Demand for townhouse product offering the
lifestyle and internal configurations of a traditional
house at a much more affordable price will remain
strong. This is reflected in several townhouse
developments in what would be considered non-
traditional townhouse suburbs including Altona
North where Development Victoria is selling 127
townhouses and Braybrook where Stockland is
selling a 422 townhouse development.
DEVELOPERS ACROSS THE BOARD ARE FACING MORE HURDLES TO ENSURE THEIR PROJECTS ARE SUCCESSFUL, SUCH AS SITE AVAILABILITY, SLOWING SALES RATES AND PRICE ADJUSTMENT AMID WEAKER BUYER SENTIMENT. NONETHELESS, THEY ARE INCREASINGLY INCORPORATING MEDIUM DENSITY PROJECTS INTO THEIR PORTFOLIOS AS DEMAND FOR AFFORDABLE, QUALITY HOMES REMAINS AS MELBOURNE CONTINUES TO DENSIFY.
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FEATURE STORY:
REIMAGINING THE AUSTRALIAN DREAM
AS MELBOURNE CONTINUES TO DENSIFY, THERE IS A GROWING FOCUS BY DEVELOPERS ON LARGER TOWNHOUSE PRODUCT TO CATER TO THE INCREASING OWNER OCCUPIER MARKET IN MIDDLE AND OUTER RING SUBURBS.
DESPITE A COOLING PROPERTY MARKET, HOUSE
PRICES STILL REMAIN OUT OF REACH FOR MANY,
PARTICULARLY FIRST HOME BUYERS SEARCHING
FOR THEIR DREAM HOME IN THEIR PREFERRED
LOCATION. HOWEVER, WELL-DESIGNED, HIGH
QUALITY TOWNHOUSES CONTINUE TO GROW IN
POPULARITY AS AN AFFORDABLE HOUSING OPTION
FOR A RANGE OF BUYERS.
Changing lifestyle and demographic trends is also
driving a shift towards townhouses. Downsizers
seeking a lower maintenance lifestyle, upgraders
seeking a home with a similar footprint to a house,
and first home buyers wanting to live in a good
location close to shops, transport and services are all
driving strong demand for this type of housing stock.
Townhouse approvals remained strong with a gain
of 5% over the 12 months to September 2018. As
Melbourne continues to densify, there is a growing
focus by developers on larger townhouse product
to cater to the increasing owner occupier market in
middle and outer ring suburbs.
Reflective of this trend, RPM recently launched
Ironwood, a development comprising 130 luxury
residences in Cranbourne North in Melbourne’s
South East by developer Lennium Group. Designed
by Finnis Architects and built by Sienna Homes,
Ironwood delivers townhomes with luxury finishes,
overlooking the Cranbourne Golf Course.
The architecturally designed residences comprise
three and four bedrooms, with single and double
storey options ranging between $575,000 and
$711,000 in the first stages. Key features include
timber floorboards, high ceilings, European stainless
steel appliances and stone bench tops.
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54 R P M R E A L E S TAT E G R O U P
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IRONWOOD IS LOCATED JUST 33 MINUTES FROM THE MELBOURNE CBD WITH EASY ACCESS TO SOUTH GIPPSLAND HIGHWAY AND MONASH M1 FREEWAY. MERINDA PARK RAILWAY STATION IS ALSO CLOSE BY, AND UPGRADES TO THE CRANBOURNE – PAKENHAM TRAIN LINE WILL INTRODUCE MELBOURNE’S FIRST HIGH-CAPACITY TRAINS BY 2019.
Head of Project Marketing at RPM, Luke Kelly,
said the luxury homes – aimed at owner occupiers
– provide an exclusive retreat and unparalleled
liveability right at the nexus of metropolitan
Melbourne, the Dandenong Ranges, and the
Mornington Peninsula.
“Ironwood offers luxury and lifestyle in one,” he said.
“It’s ideally located to existing amenity including
schools, cafes, restaurants and shopping centres as
well as parks and sports and recreation grounds.
“These residences offer affordability without
compromising on quality or space given the three
and four bedroom, two bathroom and double garage
configurations.”
Ironwood’s display suite is now open. RPM has
been appointed as the exclusive sales agent for
the project.
For enquiries contact Luke Kelly
on +61 400 688 520 or email
FEATURE STORY: REIMAGINING THE AUSTRALIAN DREAM
This and previous pages: Ironwood, a development comprising 130 spacious residences in Melbourne’s South East.
Offering luxury and lifestyle in one and meeting the needs of changing lifestyle and demographic trends.
LUKE KELLYDIRECTOR, PROJECT [email protected]+61 400 688 520
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THE PROPORTION OF NEW DWELLINGS BOUGHT
BY FOREIGN PURCHASERS ESCALATED TO 21% IN
JUNE QUARTER 2017, WHICH WAS ATTRIBUTED TO
FOREIGN INVESTORS BRINGING FORWARD THEIR
PURCHASE TO AVOID THE REMOVAL OF OFF-THE–
PLAN CONCESSIONS FOR NEW DWELLINGS FROM
1 JULY OF THAT YEAR.
Once this policy change was implemented, the
share of new dwellings bought by a foreign person
declined immediately, ranging between 12% and
14% in each of the last five quarterly periods to
September quarter 2018.
Overall, in Victoria, the proportion of established
dwellings purchased by a foreign person is
consistently lower than that for new dwellings.
Foreign buyers have comprised less than 10% of
total established dwelling purchases since March
quarter 2017, which has fallen further to 6% in the
June and September quarters this year - the lowest
level since the start of 2012.
OVERVIEW
INTERNATIONAL
56 R P M R E A L E S TAT E G R O U P
JINYIN ZHANGDIRECTOR, RPM [email protected]+61 451 898 886
THIS DOWNWARD TREND IS A DIRECT CONSEQUENCE OF TIGHTER RESTRICTIONS ON FOREIGN BUYERS IN AUSTRALIA AND POLICY CHANGES IN CHINA ON FOREIGN INVESTMENT OUTFLOWS.
24%
26%
22%
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
■ New 25% 16% 11% 22% 15% 19% 14% 21% 14% 14% 12% 12% 13%
■ Established 15% 9% 7% 10% 9% 11% 7% 9% 8% 9% 8% 6% 6%
Source: NAB Quarterly Residential Property Survey
% O
F FO
REIG
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RCH
ASES
BY
DW
ELLI
NG
TYPE
57Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018
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The Australian economy performed strongly over
financial year 2017/18, with increases in Gross
Domestic Product (GDP) and private consumption
from a year earlier. GDP growth is projected to
stabilise around the national long term average of
3% in 2018/19.
Strong public infrastructure spending and improving
private non–dwelling investment is anticipated to
see the unemployment rate fall to below the long
term average (5.50%) in the current financial year.
The subsequent tighter labour market is expected
to induce higher wage growth, resulting in an
anticipated increase in the cash rate during 2019.
AUSTRALIAN ECONOMY
Economic indicators
(% change)
2017/18 e 2018/19 f
GDP 2.90 2.90
Employment 3.00 2.10
Unemployment Rate 5.50 5.00
Average Earnings 1.40 1.90
Inflation 2.10 1.90
RBA Cash Rate 1.50 1.75
$A/US cents 0.74 0.73
Source: NAB. The Forward View
AUSTRALIAN ECONOMIC OUTLOOK
58 R P M R E A L E S TAT E G R O U P
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THE NATIONAL HOUSING MARKET IS ANTICIPATED TO CONTINUE TO WEAKEN, WITH NEW PRIVATE DWELLING INVESTMENT CONTRACTING. HOWEVER, RECORD LOT SALES AND SOLID APARTMENT PRE–SALES IN 2017 WILL SUPPORT CONTINUED APARTMENT AND DETACHED HOUSING CONSTRUCTION.
INT
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NA
TIO
NA
L
Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q UA R T E R 2 018 59
WITH CONTINUING ACUTE LOW VACANCY RATES,
THE RENTAL MARKET IN MELBOURNE AND
GEELONG REMAINS ON A LONG-TERM UPWARD
TREND. RENTS HAVE SHOWN POSITIVE GROWTH
OVER THE PAST TWO YEARS TO THE END OF
SEPTEMBER QUARTER 2018 IN BOTH DETACHED
HOUSES AND APARTMENTS.
The inner and middle rings of Melbourne recorded
the highest growth over the past two years, with
rates of between 3.8% and 8.0%. The exception
was four-bedroom houses in the middle ring, which
showed a modest gain of only 0.9% over this period.
The outer ring of Melbourne saw slightly lower
gains overall, though still remaining at or above
the inflation rate. Like the outer ring, Geelong has
recorded positive results across the board with
gains of between 1.5% and 3.4% over the past two
years.
OVERVIEW
RESIDENTIAL INVESTMENT
60 R P M R E A L E S TAT E G R O U P
Units and apartments underperformed when
compared to the growth recorded for detached
houses. Both the inner and middle rings of Melbourne,
and across all bedroom numbers, have seen average
rental gains of between 1.6% and 5.2% per annum.
The exception was three-bedroom dwellings in the
inner ring, which recorded a per annum loss of 2.7%
over the past two years. This can be attributed to
this dwelling type constituting low levels of rentals,
and therefore can fluctuate excessively. This is
highlighted by a $58 rental increase taking place over
the past 12 months but still showing an overall loss.
In the outer ring, other dwellings performed strongly
with average annual gains of between 1.6% and 3.8%
over the past two years. More robust gains have
been recorded in Geelong, which has seen strong
demand for rentals along the foreshore from both
professional couples and students attending nearby
universities. Overall, average gains across the two
years to September 2018 ranged between 2.6%
and 4.9%.
MEDIAN RENTS
House
Bedrooms Sep-17 Jun-18 Sep-18 Change from previous year
2 Year Average Annual Gain
INNER 2 $525 $565 $550 $25 4.9%
3 $645 $675 $700 $55 8.0%
4 $800 $800 $838 $38 5.7%
MIDDLE 2 $376 $378 $390 $14 5.4%
3 $423 $423 $430 $7 3.8%
4 $550 $570 $560 $10 0.9%
OUTER 2 $340 $340 $350 $10 4.6%
3 $370 $380 $380 $10 2.7%
4 $420 $430 $420 $0 1.2%
GEELONG 2 $290 $310 $310 $20 3.4%
3 $350 $350 $350 $0 1.5%
4 $410 $420 $420 $10 2.5%
Units & Apartments
Bedrooms Sep-17 Jun-18 Sep-18 Change from previous year
2 Year Average Annual Gain
INNER 1 $370 $380 $380 $10 2.7%
2 $480 $500 $500 $20 3.2%
3 $618 $675 $675 $58 -2.7%
MIDDLE 1 $320 $330 $330 $10 1.6%
2 $400 $400 $400 $0 2.6%
3 $500 $510 $510 $10 5.2%
OUTER 1 $263 $240 $240 -$23 2.0%
2 $335 $333 $333 -$3 3.8%
3 $385 $400 $400 $15 1.6%
GEELONG 1 $210 $220 $220 $10 4.9%
2 $290 $300 $300 $10 2.6%
3 $380 $380 $380 $0 3.0%
Source: REIV
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VACANCY RATE
Melbourne Sep-17 Jun-18 Sep-18 2 Year Average Gain
Inner Total 1.9 1.8 2.0 2.0Inner (0-4km) 2.0 1.7 1.4 2.2Inner (4-10km) 1.9 1.8 2.2 2.0Middle (10-20km) 3.1 2.4 2.6 2.9Outer Total 1.7 1.6 1.6 1.8Outer (20+km exc. Mornington Peninsula) 1.6 1.5 1.5 1.7Outer (Mornington Peninsula) 2.4 3.3 2.8 2.3Melbourne Total 2.1 1.9 2.0 2.2
Geelong 1.9 1.8 2.1 2.1Source: REIV
OVERVIEW
From the June quarter to the September quarter 2018,
most regions recorded slightly higher vacancy rates over
the period. Despite improving, they all remain below the
acceptable level of 3%, reinforcing the consensus there
is no oversupply of stock in the market.
This being the case, rental growth has been sustained,
providing appealing yields for investors. For those
investing in the outer and regional areas, in general land
YIELDS
Houses Sep-17 Jun-18 Sep-18Inner 2.08% 2.30% 2.54%Middle 2.11% 2.13% 2.29%Outer 2.88% 2.83% 2.93%Metro 3.45% 2.49% 2.65%Regional 4.04% 3.72% 4.00%
Units Sep-17 Jun-18 Sep-18Inner 4.03% 4.15% 4.26%Middle 3.11% 3.11% 3.17%Outer 3.50% 2.56% 2.70%Metro 3.54% 3.71% 3.70%Regional 4.22% 4.26% 4.44%
Source: REIV, RPM
value appreciation tends to be the driving force in
the earlier stages. However, with vacancy rates at
acute levels, rental yields for detached houses for
outer and regional areas tops the list.
Due to significant capital gains seen in both
detached houses and other dwellings over the last
five years, rental yields have been below long term
levels. Rental growth has not kept up anywhere near
the level seen in capital gains. Nevertheless, with
prices moderating – particularly in other dwellings
– rental yields have picked up over the September
quarter 2018, and more so from this time last year.
Regional areas of Victoria continue to achieve the
highest yields due to lower purchase prices, coupled
with robust rental prices given regional areas are
traditionally tightly held.
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OUTLOOK MEGAN TAYLORMANAGER, PROPERTY [email protected]+61 428 575 149
While the number of first home buyers have
increased, tighter lending criteria has made it
increasingly difficult to enter the market and
therefore many remain renting. Coupled with
continuing high population growth, vacancy rates
have remained at acute levels.
With supply generally sitting well below demand
levels, rents have continued to increase. These
positives provide key incentives for investors to
enter the market, albeit in the face of increasing
lending headwinds.
Renters will be in a more favourable position come
the 1st July 2020 with new rental regulations
coming into play (see next section). The changes,
however, could discourage some investors when
these changes become enforceable, as property
investors may feel they have less control over their
investment.
IN ADDITION, WITH A LIKELY CHANGE OF GOVERNMENT AT THE FEDERAL LEVEL AND INDICATIONS THAT A LABOR GOVERNMENT WILL OVERHAUL NEGATIVE GEARING AND CAPITAL GAINS, SOME INVESTORS WILL ATTEMPT TO GET INTO THE MARKET SOONER RATHER THAN LATER. THIS COULD CAUSE A SHORT TERM SPIKE IN BOTH PRICES AND ACTIVITY AS SEEN WHEN CASH INCENTIVES WERE OFFERED TO FIRST HOME BUYERS IN THE LAND MARKET.
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LAND MARKET INVESTOR INSIGHTS
RPM surveys every buyer on our clients’ estates
in the greenfield market. The following illustrates
demographic and purchase intent changes amongst
this cohort based on surveys from the September
quarter 2018 compared to the same quarter in 2017.
Both local and overseas investors remain a
prominent part of the greenfield market, with one
third of all land sales being bought by an investor—
up from a quarter the same period a year earlier.
This highlights the attractiveness of the land market
to investors from both a capital growth and rental
yield perspective.
While the widely regarded view that high income
family households prefer to invest in detached
houses still holds, the above average yields
achieved in the land market over the past couple of
years has made the greenfields a more accessible
option for couples, and to a lesser extent singles.
These two cohorts have traditionally invested in
one and two bedroom apartments in the inner and
middle rings given the lower entry price. However,
positive gains in the land market coupled with well-
priced entry level house and land packages has
resulted in the share of couples increasing from 13%
in the September quarter last year to 29% for the
same period this year.
THE LARGER FAMILY UNIT STILL REMAINS THE MOST PROMINENT COHORT AT 63%, DESPITE FALLING FROM 79% THIS TIME LAST YEAR.
The increasing share of professional couples buying
in the land market underpin the fundamentals of the
sector. It not only reflects steady short to medium
term gains, but more importantly, stable long term
gains. This is important, as this generation is more
likely to invest personally or through a self-managed
super fund (SMSF) as opposed to redirecting
additional income or savings into their traditional
superannuation.
In recent years the country of origin of investors
has predominantly been Australia and India, which
combined comprised 76% of all investors in the
September quarter last year. This fell to 67% this
quarter, due to the decline in the share of Indian
buyers, down from 46% in the September quarter
2017 to 29% this quarter. A higher presence of
Chinese investors (10%) was also recorded.
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SEPTEMBER 2018
Group/Friends 0%
60+ 3%
Italy 3%
Croatia 3%
Single 8%
50-59 10%
Iraq 3%
Bangladesh 5%
Couple 29%
35-49 52%
Fiji 3%
China 10%
Family 63%
25-34 33%
Sri Lanka 3%
India 29%
18-24 2%
Nepal 3%
Australia 38 %
Investor Owner-Occupier
33% 67%
7%
33%
18%
29%
13%
+
Cambodia 1%
Philippines 4%
60+ 2%
Group/Friends 0%
Pakistan 2%
China 5%
50-59 10%
Single 7%
Malaysia 2%
Sri Lanka 6%
35-49 51%
Couple 13%
Iraq 2%
Australia 30%
25-34 33%
Nepal 2%
India 46%
18-24 4%
Family 79%
Investor Owner-Occupier
SEPTEMBER 2017
+ 7%
46%
23%
19%
4%
23% 77%
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A GROWING PROPORTION OF VICTORIANS ARE PRICED OUT OF HOME OWNERSHIP, MAKING THEM LIKELY TO RENT FOR LONGER PERIODS OF TIME.
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R P M R E A L E S TAT E G R O U P66
Victorians are renting more now than at any stage
in the state’s history, and for longer. In an attempt
to rebalance the market, the Victorian Government
has undertaken a comprehensive review of the
Residential Tenancies Amendment Bill 1997. The
review sought to ensure that the Act still meets
the needs of Victoria’s renters. In August this year,
the Victorian Parliament passed the Residential
Tenancies Amendment Bill 2018.
The reforms are largely based on the reality that
a growing proportion of Victorians are priced out
of home ownership, making them likely to rent for
longer periods of time. The Bill includes more than
130 reforms designed to improve protections for a
diverse population of renters, while ensuring those
who provide rental housing can still effectively
manage their properties.
A sample of these reforms are:
• Allowing animals to be kept in any
rented premises
• Allowing renters to make minor modifications
to a rental property without prior consent
• Bolstering security of tenure and ending ‘no
fault’ evictions by removing the ‘no specified
reason’ notice to vacate, and restricting the use
of ‘end of the fixed-term’ notices to vacate to the
end of an initial fixed term agreement
• Establishing a non-compliance register to
‘blacklist’ residential rental providers and agents
who fail to meet their obligations
• Providing for the early release of bonds
with the consent of both parties to the
tenancy agreement
• Restricting solicitation of rental bids by
residential rental providers and agents
• Providing for annual, instead of bi-annual,
rent increases
• Providing for faster reimbursement where
renters have paid for urgent repairs
• Increasing the number of properties to which the
statutory maximum cap of four weeks for bond
and rent in advance applies
• Enabling automatic bond repayments, which will
be available to a renter within 14 days where the
parties are not in dispute
• Requiring mandatory pre-contractual disclosure
of material facts, such as an intention to sell
the rental property, or the known presence of
asbestos
• Prohibiting misleading or deceptive conduct
inducing a person into renting a property.
The new regulations will not take effect until the
1st July 2020.
This information has been sourced from
https://engage.vic.gov.au/fairersaferhousing
A full list of reforms can be found on the Engage Vic website.
NEW RENTAL LAWS PASS
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OUR TEAM
LUKE [email protected]+61 400 688 520
ERIC DICKEXECUTIVE [email protected]+61 418 349 267
KEVIN BROWNCHIEF EXECUTIVE [email protected]+61 418 397 577
JINYIN ZHANGDIRECTOR, RPM [email protected]+61 451 898 886
CHRISTIAN RANIERIGENERAL MANAGER, TRANSACTIONS & [email protected]+61 416 445 078
MEGAN TAYLORMANAGER, PROPERTY [email protected]+61 428 575 149
DELENA BAJADA-GARDNERASSOCIATE DIRECTOR, [email protected]+61 487 888 556
MICHAEL STAEDLERRESEARCH [email protected]+61 434 619 280
PETER GRANTDIRECTOR, [email protected]+61 411 494 499
ROD ANDERSONDIRECTOR, [email protected]+61 417 595 859
68 R P M R E A L E S TAT E G R O U P
DISCLAIMER
Although all reasonable care has been taken in the preparation of this document, RPM Real Estate Group Pty Ltd takes no responsibility for the accuracy of the information
contained herein. It is recommended that all the information be verified if it is to be used for commercial purposes.
T +61 3 9862 9555Level 5, 52 York Street
South Melbourne VIC 3205
rpmrealestate.com.au