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Inner Melbourne’s residential property market could risk a period of oversupply as new apartment development soars in the wake of easing population growth, rising vacancy rates and a drop in first home buyers.
Opteon Research Manager, Richard Jenkins said there are currently 7,700 apartments under construction and forecast to be completed by the end of 2014 within the Inner Melbourne precinct which comprises of suburbs up to 4km from the CBD). The pipeline of construction work under way sits at record levels, well above the long term annual average of 2,300 per annum. He added that a further 6,100 apartments are being marketed mooted to be completed also by the end of 2014 which, if these proceed, will add a total of 13,800 over the three year period.
Mr Jenkins said market conditions have changed significantly in recent times which may lead to a state of oversupply in a couple of years. “
Opteon residential director, Chris Knight, said that over the medium term, a slowing in Victoria’s rate of population growth and the recent surge of new supply may take some of the heat out of the state’s housing construction.
“ With fewer first-home buyers, lower migration rates competition for housing stock is likely to diminish leading to house prices on average to stagnate over the next two years,“ he said.
“In contrast to the broader residential market, values for new apartments in better quality developments offering good views are holding up since the initial off the plan purchase price. However we have seen some softening in prices from the initial purchase price for off the plan apartments compared to the valuation at the settlement, within inferior developments for apartments where there is limited natural light or the apartment is badly configured,” he said.
According to Mr Jenkins, population growth in Victoria has fallen by 26% from its peaks of 2007. Housing finance in Victoria is still high against the rest of Australia and historical state averages, but is down from the 2007 peak. And while there has been a welcomed drop in interest rates, consumer confidence remains weak and is now 16.9% below its level 12 months ago with more consumers indicating that it is a buyers’ market.”
Mr Jenkins said first home buyer finance levels are almost 50% below levels recorded in late 2009 while the residential vacancy rate is currently at 2.4%, one of its highest levels since April 2006.
Mr Knight said that buyer sentiment has weakened with factors including Australia’s uneven economic recovery, falling clearance rates and deteriorating housing affordability. \
“Further, housing finance to owner occupiers remains subdued, with owner occupier finance levels falling by 5% in September, remaining near 11-year lows, he said.
Mr Jenkins added that new home sales dropped by 14% in the September 2011 quarter, and posted their lowest monthly level since December 2000. “Overall dwelling approvals fell in September due to “lumpy” large scale apartment projects. Victoria’s housing construction levels continue to fall from their peaks but also outpace other Australian states. As at July 2011, Victoria accounted for more than a third of all homes being built in Australia.”
According to the ABS measure of house prices, established capital city dwellings fell by 1.2% in Q3 2011, to be 2.2% lower over the year. House prices have now fallen over the past 12 months in all capital cities. Within Melbourne, house prices fell by 1.7% in the third quarter of 2011 to be now 2.1% lower over the year.
Over the past decade, average housing costs for households with a mortgage increased by $120 per week or 42% (CPI adjusted), according to the Australian Bureau of Statistics (ABS).
Between 1999-2000 and 2009-10, average weekly housing costs for private renters increased by $78 per week or 34% (CPI adjusted) and average weekly housing cost for owners without a mortgage increased by $5 per week or 17% (CPI adjusted).
Over the same period, the proportion of households that owned their home without a mortgage fell from 39% to 33%. The proportion of households with a mortgage increased from 32% to 36% and the proportion of private renter households increased from 20% to 24%.
In 2009-10, households with a mortgage had the highest housing costs, averaging $408 per week or 18% of their gross household income. Over the past decade the proportion of gross income that households with a mortgage spend on housing costs has been stable, at about 18%.
Private renters spent an average of $305 per week on rent payments in 2009–10, or 20% of their gross household income. The proportion that private renters spend on housing costs has also remained stable over the past decade, representing about 19% of gross income.
More information can be found in Housing Occupancy and Costs, Australia, 2009–10, available free from the ABS website www.abs.gov.au.
Opteon Investment Advisory have finalised their latest deal and investment opportunities within the Mitcham residential development have sold out.
Obviously an outcome of this nature is a direct reflection of the quality service offerings and property advice provided by Opteon and confirms our commitment to the gathering and dissemination of premium property information.
Our team’s skills in identify development syndication opportunities throughout the Melbourne CBD and well regarded suburbs have ensured that our latest clients can expect a healthy return.
If you are interested in receiving more information about the projects we are currently assessing or if you wish to register your interest in our future projects please give Stuart Biggs a call on 0411 173 841, or email email@example.com
As one of Australia’s largest teams of Certified Practising Valuers and Advisors who are trained in providing due diligence and risk management, we can help provide greater certainty for investors making decisions to invest in property.
We also help investors identify development syndication opportunities throughout the Melbourne CBD and well regarded suburbs. There are a range of different opportunities that will suit investors with a range of risk profiles and objectives.
Adesso – Mentone (Melbourne)
5 Apartments left with 72 pre-sold
Construction complete March 2012
Targeted 5% Rental Return, $440- $520 per week
|Asking Price||“ Bank Valuation”||Wholesale Price|
Projects typically return between 15 – 25% per annum with many of the development risks mitigated through strong due diligence.
If you are interested in receiving more information about the projects we are currently assessing or if you wish to register your interest in our future projects please give me a call on
If you are interested in receiving more information about the projects we are currently assessing or if you wish to register your interest in our future projects please give me a call on 0411 173 841, or email firstname.lastname@example.org.
Yesterday we held our breakfast seminar at the Frankston Arts Centre on Peninsula Link- driving South East Property & Infrastructure.
The presentations from Mark Holland- Manager of Specialised Valuations & Advisory Services and Richard Jenkins- Research Manager at Opteon were both informative and revealing, providing a ‘bigger picture’ view of the effect Peninsula Link will have on the South East.
Thank you to our clients who joined us giving us the opportunity to demonstrate high level research capabilities that exist within Opteon and the depth of data that is held within our organisation.
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There are plenty of research resources to help work out how much a house is worth.
The latest property values in Australian capital cities make headlines that are discussed around dinner tables and barbecues around the nation.
But the average price of a house in Melbourne or Sydney may be a poor guide to the market value of that little terrace you’ve got your eye on.
When you decide to buy or sell a house or apartment there is often a large gap between what you think or hope it is worth and the price it sells for. The bigger the gap between expectation and reality, the more chance there is of paying too much or turning down a reasonable offer and having to settle for a lower price months later.
If you discount gut feeling, the most common ways to value a property are real estate agents, professional property valuers and online sales data.
The RBA decided to leave the official cash rate at 4.75% in October for the tenth consecutive meeting, making it the longest period of stability in five years.
The RBA has now modified its tone, indicating that it may lower interest rates, reflecting the softening labour conditions, neutral inflation level and the increased domestic impact by the recent deteriorating global financial system.
While the interest rate outlook is mixed, most economists now predict an easing of rates late this year to offset the higher cost of funding as a result of global financial disruptions.