Residential Market Review 2018 Q3 by remagazines

S E P T E M B E R

2 0 1 8

MARKET REVIEW

Q U A R T E R

RESIDENTIAL

RPM REAL ESTATE GROUP IS VICTORIAâ&#x20AC;&#x2122;S MOST SUCCESSFUL RESIDENTIAL DEVELOPMENT SALES, MARKETING AND ADVISORY AGENCY. WE SPECIALISE IN SALES WITHIN MASTER-

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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.

INSIDE

4 6 10

FROM OUR CEO

LEAD INDICATORS DEVELOPMENT SITES

FEATURE STORY: GOVERNMENT MEASURES TO KICKSTART BUILD-TO-RENT SECTOR IN VICTORIA

COMMUNITIES

FEATURE STORY: THE EMERGENCE OF MEDIUM DENSITY IN THE GREENFIELDS

APARTMENTS / TOWNHOUSES

FEATURE STORY: REIMAGINING THE AUSTRALIAN DREAM

INTERNATIONAL

RESIDENTIAL INVESTMENT

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

FROM OUR CEO

Welcome to RPM Real Estate Group’s Q3 Residential

In Melbourne’s greenfields, supply has begun to

our data-driven insights on the performance, drivers

lot sales over the quarter. For the first time in three

Q3 MARKET OVERVIEW

Market Review. Once again we’re pleased to provide and impacts of Melbourne and Geelong’s new housing property market.

years, the median lot price also declined, albeit marginally by 1.4% to $320,500.

The market downturn accelerated throughout the

In the apartment and townhouse market, despite a

buyer sentiment, investor disincentives and

price growth, a strong pipeline of projects in the

September quarter, underscored by deteriorating tighter credit conditions for both developers and homebuyers. KEVIN BROWN CHIEF EXECUTIVE OFFICER RPM REAL ESTATE GROUP

outstrip demand, evidenced by a 15% fall in total

Notwithstanding, developers continue to seek high

12% fall in approvals for the quarter and sluggish

planning or approval stages is being underpinned by population growth, particularly overseas migration, as Melbourne continues to densify.

quality, strategic landholdings in preparation for

Melbourne has many sub-markets, and it’s

becoming more prominent.

land market compared to the established inner and

the next upswing, with second tier funding channels

important to highlight the resilience of the vacant

middle housing market, which is the subject of much commentary in terms of falling house values.

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

MICHAEL STAEDLER

RESEARCH MANAGER

m.staedler@rpmrealestate.com.au

Q3 MARKET OVERVIEW

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.

+61 434 619 280

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.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

ECONOMIC ACTIVITY GROSS DOMESTIC PRODUCT (GDP)

VIC POPULATION

STATE FINAL DEMAND (SFD) - VIC

2.95% 2.55% 4.97% 3.55% 12 month change to June qtr 2018

5 year average

CONSUMER PRICE INDEX (CPI)

LE AD INDICATORS

1.89% 1.83%

Sep-18

Source: ABS

Same month year earlier

12 month change to June qtr 2018

5 year average

RETAIL TURNOVER - VIC

5.77% 4.95% Sep-18

Same month year earlier

NATURAL INCREASE

10,683 Mar-18

10,692

Same qtr. year earlier

% change - same qtr. last year

0.1%

% change - 12 months earlier

1.7%

OVERSEAS MIGRATION

30,968 Mar-18

31,795

Same qtr. year earlier

CASH RATE

1.5% Sep-18

1.5% Jun-18

1.5% Sep-17

Source: RBA

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

VARIABLE RATE

% change - 12 months earlier

6.9%

3,947

5.30% Sep-18

5.20% Jun-18

5.20% Sep-17

3 YEAR FIXED RATE

4.55% 4.10% Sep-18

Sep-18

4.50% 4.15% Jun-18

Jun-18

4.45% 4.10% Sep-17

Sep-17

12 months to Mar-18 2.6%

Mar-18

DISCOUNTED RATE

83,703

% change - same qtr. last year

NET INTERSTATE MIGRATION

BORROWING RATES

38,593

12 months to Mar-18

5,234

Same qtr. year earlier

15,099

12 months to Mar-18

% change - same qtr. last year

24.6%

% change - 12 months earlier

22.9%

NATIONAL TOTAL CHANGE

VIC TOTAL CHANGE

380,722

137,395

1.55%

2.18%

change from Mar-17 to Mar-18 % change - same qtr. last year VIC share

36%

■ Negative change ■ Positive change

TOTAL POPULATION

AUS 24,899,077 VIC 6,429,979

Source: ABS

VIC EMPLOYMENT EMPLOYMENT GROWTH (JOBS CREATED) Jobs (‘000s) TOTAL Jun-18 to Sep-18 Last 12 months

Jun-18 to Sep-18 Last 12 months PART TIME Jun-18 to Sep-18 Last 12 months

47.04 94.11 2.16 -10.76

1.5% 2.6% 2.1% 4.3% 0.2% 1.0%

110% 29.1% 105% 33% 5% 4%

$1,607 $1,581 $1,563 Nov-17

1.6% Source: ABS

4.5% 5.6% 5.9% Sep-18

Source: ABS

Jun-18

Same time last year

CONSUMER SENTIMENT

100.5 Sep-18

97.9 Sep-17

Source: Westpac-Melb institute

BUSINESS SENTIMENT

12.9 Sep-18

Source: RBA/NAB

13.4 Sep-17

The Westpac-Melbourne Institute Consumer

WAGES

May-18

UNEMPLOYMENT RATE

LE AD INDICATORS

FULL TIME

49.20 83.35

% Change

Vic contribution to AUS

May-17

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

2.8%

business confidence levels for more than two decades. Businesses are approached quarterly, with two smaller monthly surveys conducted in the intervening months

to capture changes on a more regular basis. The panel now exceeds 2,700 businesses.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

VIC FINANCE NO. OF FHBS FINANCED

8,601

8,783

Sep-18

Same qtr. year earlier

NO. OF NON-FHBS FINANCED

37,352 40,419 Sep-18

Same qtr. year earlier

FINANCE FOR NEW DWELLINGS

LE AD INDICATORS

7,739 Sep-18

8,531

Same qtr. year earlier

VALUE OF LOANS - OWNER OCCUPIERS

$18.78B $18.66B Sep-18

Same qtr. year earlier

2% 8% 9% 1%

AVERAGE LOAN SIZE (FHBS)

$363,533 $329,933 Sep-18

Same qtr. year earlier

AVERAGE LOAN SIZE (NON-FHBS)

$418,367 $390,133 Sep-18

Same qtr. year earlier

FINANCE FOR ESTABLISHED DWELLINGS

38,214 Sep-18

40,671

Same qtr. year earlier

VALUE OF LOANS - INVESTORS

$8.48B Sep-18

$9.89B

Same qtr. year earlier

10% SHARE OF FHB LOANS

7% 6% 14%

18.7% 17.9%

Sep-18

Same qtr. year earlier

Source: ABS

MELBOURNE PROPERTY MEDIAN HOUSE PRICE

$834,000 Previous qtr.

$812,000

Same qtr. year earlier Source: REIV

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

MEDIAN LAND PRICE

Sep-18

$604,000

Sep-18

$834,000

MEDIAN UNIT PRICE

0.0% 2.7%

$602,500 Previous qtr.

$587,500

Same qtr. year earlier

AUCTIONS HELD

$320,500

0.2% 2.8%

$325,000 Previous qtr.

$288,000

Same qtr. year earlier

3,398

CLEARANCE

Sep-18 1.4% 11.3%

3,558 Jun-18

4,119

Same month year earlier

58% 61% 73%

VIC BUILDING DETACHED HOUSE APPROVALS 9,901 Sep-18 10,027 Same qtr. year earlier 39,454 Last 12 months

1.3% 9.1%

HOUSE COMMENCEMENTS

2.5% 7.35%

27.5%

10.1%

Sep-18

16,951 4.8%

Same qtr. year earlier

74,771 17.1%

Last 12 months

TOTAL COMMENCEMENTS

8,762 Jun-18 5,876 Same qtr. year earlier 37,287 Last 12 months

49.1% 32.3%

18,643 Jun-18

15,518 20.1%

Same qtr. year earlier

75,674 18.4%

Last 12 months

TOTAL COMPLETIONS

OTHER COMPLETIONS

16.0%

16,141

9.9%

OTHER COMMENCEMENTS

HOUSE COMPLETIONS 10,359 Jun-18 8,930 Same qtr. year earlier 36,492 Last 12 months

6,240 Sep-18 6,924 Same qtr. year earlier 35,317 Last 12 months

LE AD INDICATORS

9,881 Jun-18 9,642 Same qtr. year earlier 38,387 Last 12 months

TOTAL DWELLING APPROVALS

OTHER DWELLING APPROVALS

8,344 Jun-18 7,887 Same qtr. year earlier 29,107 Last 12 months

5.8% 9.1%

18,703 Jun-18

16,817 11.2%

Same qtr. year earlier

65,599 0.7%

Last 12 months

Source: ABS

MELBOURNE PROPERTY VACANCY RATE - MELB

2.0% 2.1% Sep-18

Sep-17

AVERAGE DAYS ON MARKET - METRO MELB

Sep-18

Sep-17

MEDIAN METRO HOUSE RENT

$460 Sep-18

$430 Sep-17

7.0%

MEDIAN METRO OTHER DWELLING RENT

$420 Sep-18

$415 Sep-17

1.2%

Source: REIV

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

DEVELOPMENT SITES

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

OUTLOOK These second tier channels including family offices,

By and large developers remain confident in

retail strategies and being very selective about the

specifically to meet this new demand, means developers

correction continues, we will likely see some small

buyer pool contracts, developers are sharpening their type of product they’re putting to market. Many land developers are increasingly incorporating smaller

medium density stock into their master plans while

investment houses and funds, which have been set up

are negotiating different deal structures and remodeling deposit and settlement criteria to secure funding.

Melbourne’s long term property outlook. As the market shifts in supply and demand but should equalise in the short to medium term.

apartment and townhouse developers are delivering

Despite media reports, there is also still a significant

Vendors who are unwilling to adapt to the change in

buyer cohort.

site activity. Many large-scale developers committed

supply of new sites.

more affordable product to a growing owner occupier

There is strong demand for quality leased assets (e.g.

amount of offshore capital flowing into development

to long term investment strategies in Melbourne remain

values might result in a small or short term restriction of

confident in Victoria’s property outlook.

The VPA recently released its work program of priority

upside potential.

Notwithstanding, given current market conditions, these

use planning. The VPA will maintain Victoria’s 15 year

In a restrictive bank lending environment, a wave of

land, from high rise residential to managed investments,

commercial assets) particularly those with long term

private capital is providing alternative development

funding, which is more nimble, flexible and can move more quickly.

developers are shifting capital from apartments into and ‘recycling’ capital as each project is realised. Speculative property investors who have over

capitalised will likely result in more caveat sales.

DEVELOPMENT SITES

As the market adjusts to the new parameters and the

projects for the coming year that guides Victoria’s land 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.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

FEATURE STORY:

GOVERNMENT MEASURES TO KICKSTART BUILD -TO-RENT SECTOR IN VICTORIA A VIABLE BUILD-TO-RENT MODEL COULD SOON

Build-to-rent is a response to evolving housing

Comparatively, in Australia, current market

A SUITE OF MEASURES ANNOUNCED BY THE

wanting to rent and are doing so for longer. Despite

model will only work if it caters primarily to high-end

DEVELOPMENT SITES

BECOME A REALITY IN VICTORIA FOLLOWING 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-torent developments qualify for an exemption.

Other recent reforms to the Residential Tenancies

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-rentâ&#x20AC;&#x2122;s financial success is made

sector also does not have the evidence base to support funding this type of asset. Moreover, Australia hasnâ&#x20AC;&#x2122;t had the level of low rental

supply that has underpinned its success in overseas markets.

financial market is primarily driven by private capital.

unfavourable to institutional investors looking

particularly its banking and debt systems. The

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.

alternative to buying will also stimulate interest in

market. These tax changes are shaping the market

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

rentals. Our stringent and highly regulated banking

Up until the recently announced changes, the

In the UK, build-to-rent started to take off in 2013.

build-to-rent projects.

conditions mean that a large-scale build-to-rent

possible partly because of the financial system,

Act which aim to shift mindsets about renting as a

secure, long term lifestyle choice and an attractive

needs where more people are either needing or

Taxation laws were adjusted to incentivise the and preparing it for growth.

taxation landscape for build-to-rent assets was 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.

CHRISTIAN RANIERI

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

In July this year then-Treasurer Scott Morrison

The first build-to-rent approval in Victoria is for a

govern how build-to-rent projects are treated by the

which is being developed by Grocon. The developer

announced reforms to the legislative framework that

This has enabled significant opportunity for

DEVELOPMENT SITES

Federal Government from a MIT perspective.

60-level apartment block on City Road, Southbank, is actively looking for more opportunities across Melbourne and Sydney.

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 â&#x20AC;&#x201C; particularly in a political

environment where sudden and unplanned

legislative decisions, such as removing offshore

investment in Australia and APRAâ&#x20AC;&#x2122;s lending changes, have had significant negative impacts on the development market.

OF VICTORIANS RENT THEIR HOMES AND 20% HAVE BEEN RENTING FOR MORE THAN FIVE YEARS.

Information for this article was sourced from original stories published in The Urban Developer on 14 August and 2 October 2018.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

OVERVIEW

THE DOWNWARD TREND CHARACTERISING

MELBOURNE AND GEELONG’S LAND MARKET THROUGHOUT THE FIRST HALF OF 2018

COMMUNITIES

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 14

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

by 28%.

LUKE KELLY

DIRECTOR, COMMUNITIES

luke@rpmrealestate.com.au +61 400 688 520

Despite lot releases outpacing lot sales, the

It’s worth noting the vast majority of media reporting

It’s also pertinent to acknowledge Victoria’s still

sales rates to reduce valuation risk given the 18

relates to declining values across Melbourne’s

growth, the lowest unemployment rate in 10 years,

majority of developers are willing to accept slower

maintaining their pricing margins but introducing a

established housing market.

low interest rates and record public infrastructure

number of value-add incentives.

It is useful to distinguish Melbourne’s many sub-

Many developers are also incorporating an

middle housing market – which is the focus of much

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-

At 400 sqm, the median lot size in the September

attention – and the established and new housing

previous quarter, resulting in a decline in the per

market in outer Melbourne.

quarter 2018 remained unchanged from the sqm median lot price.

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 see’ approach to assess whether prices will

more resilience compared to the more expensive

moderate further.

spending programs.

markets, in particular the established inner and

in buyer enquiries on new estates has fallen as

potential purchasers appear to be adopting a ‘wait

strong economic conditions including population

COMMUNITIES

month delay in title timeframes. They are also

which is contributing to negative buyer sentiment

and established outer housing market is showing established inner housing market.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

OVERVIEW

6,500

140

6,000

120

5,500

100

5,000

4,500

4,000

DEC 15

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

3,000

SEP 18

Gross Lot Sales

New Estates

350,000

440

300,000

MEDIAN LOT PRICE �$�

430

250,000

420

200,000

410

150,000

400

100,000

390

50,000 0

SEP 15

Median Lot Size

DEC 15

MAR 16

Median Lot Price

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

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

380

Source: RPM

% OF TOTAL GROSS LOT SALES

SEP 15

Active Estates

47%

28%

325K>

3,500

20 0

GROSS LOT SALES

160

MEDIAN LOT SIZE �SQM�

COMMUNITIES

NUMBER OF ESTATES

MELBOURNE GROWTH CORRIDORS

15%

301K 325K

14% 4%

14%

275K 300K

17% 8%

12%

251K 275K

14% 14%

12%

28%

<250K

69% 0% 10%

20%

Sep Qtr 2018

30%

40%

Sep Qtr 2017

50%

60%

70%

Sep Qtr 2016

80%

PERCENTAGE CONTRIBUTION TO TOTAL GROSS LOT SALES

Moorabool 3%

Casey 12%

Cardinia 3% Wyndham 21%

12 MONTHS TO SEPTEMBER 2018

THE KEY DRIVER UNDERPINNING THE MARKET SLOWDOWN IS SOFTENING BUYER SENTIMENT AND RESTRICTIVE CREDIT CONDITIONS, WHICH IS IMPACTING DEMAND.

COMMUNITIES

Greater Geelong 17%

Hume 11%

Mitchell 3% Whittlesea 8% Melton 22%

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

MELBOURNE & GEELONG GROWTH CORRIDORS

WHAT HAPPENS AFTER THE PEAK? A SUPPLY-SIDE VIEW Further underscoring weakening buyer sentiment, COMMUNITIES

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.

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

QUARTERLY SUPPLY �MONTHS�

during the six months to September 2018 there has

6.0 5.0 4.0 3.0 2.0 1.0 0.0

MAR 16 South East

Source: RPM

JUN 16 Northern

SEP 16

DEC 16 Western

MAR 17 Geelong

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

WESTERN

Sept quarter ‘18 median lot price

SOUTH EAST

GREATER GEELONG

$308,000

$320,000

$355,000

$272,450

$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

448.0

-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

-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%

-2

Sept quarter ‘18 lot releases

2,390

1,000

814

656

Change from Sept quarter ‘17

-936

-598

-71

-45

-28.1%

-37.4%

-8.0%

-6.4%

Sept quarter ‘18 no. of trading days

122

Change from Sept quarter ‘17

109

358.3%

922.2%

838.5%

242.1%

Change from Sept quarter ‘17

% Change from Sept quarter ‘17

Sept quarter ‘18 active estates Change from Sept quarter ‘17

% Change from Sept quarter ‘17

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

COMMUNITIES

BUYER DEMAND CONTINUES FOR MORE AFFORDABLE LOCATIONS OFFERING PLENTY OF STOCK SUCH AS MELTON, MOORABOOL AND THE BELLARINE PENINSULA

NORTHERN

WESTERN GROWTH CORRIDOR

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

MOORABOOL

COMMUNITIES

active estates. Nevertheless, gross lot sales in the September quarter was still 38% lower relative to the same quarter in 2017.

MELTON

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.

WYNDHAM

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 PORT PHILLIP BAY

home buyers and upgraders. Prospects for lot price growth have deteriorated, with median lot prices likely to remain steady.

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

PETER GRANT

DIRECTOR, COMMUNITIES

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

1,000 lot sales. Lot sales contracted by 5% from the previous quarter.

increase in new stock releases totaling 1,157 lots.

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.

Active Estates

500

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

Gross Lot Sales

406

350,000

405

300,000

MEDIAN LOT PRICE �$�

impact on weakening lot sales given Wyndham is

1,000

This suggests demand side factors, in particular constrained affordability, are having a greater

1,500

Lot supply remains healthy, with the number of active estates rising by 3 to 31, leading to an

404

250,000

403

200,000

402

150,000

401 400

100,000

399

50,000 0

Median Lot Size

GROSS LOT SALES

quarter 2015 in which the region failed to reach

2,000

COMMUNITIES

September quarter - the first time since March

NUMBER OF ESTATES

Wyndham experienced a 43% annual reduction in quarterly lot sales, falling to 994 lots in the

2,500

MEDIAN LOT SIZE �SQM�

WYNDHAM

398

SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

397

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

COMMUNITIES

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.

NUMBER OF ESTATES

Melton recorded 1,013 lot sales in the September

a year ago despite 12 more active estates on the

400sqm, lot prices per sqm also marginally declined.

MEDIAN LOT PRICE �$�

quarter. With the median lot size remaining static at

1,400

800

600

400 200

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

Gross Lot Sales

350,000

480

300,000

460

250,000

440

200,000

420

150,000

400

100,000

380

50,000

360

Median Lot Size

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

1,000

1,200

Active Estates

by diminishing new lot supply.

$295,000 in the September quarter from the June

market. This indicates lot sales has been impeded

Melton’s median lot price contracted by 1.7% to

1,600

New lot releases declined 8% from the last quarter

and 28% to 1,120 lots compared to the same period

SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

MEDIAN LOT SIZE �SQM�

MELTON

GROSS LOT SALES

WESTERN GROWTH CORRIDOR

340

Source: RPM

ROD ANDERSON

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

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

120

100

Active Estates

40 20 SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

Gross Lot Sales

530

250,000

510 200,000

MEDIAN LOT PRICE �$�

increased.

140

corridors. This price correction can be explained to 448sqm. As a result, lot prices per sqm still

160

most affordable median lot price across all growth by the larger median lot size shrinking by 7%

180

490 470

150,000

450 430

100,000

410 390

50,000

MEDIAN LOT SIZE �SQM�

period a year ago. With overall weaker sentiment

200

COMMUNITIES

September quarter 2018 compared to the same

NUMBER OF ESTATES

Moorabool contained 1 less active estate in the

GROSS LOT SALES

MOORABOOL

370 0

Median Lot Size

SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

350

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

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

COMMUNITIES

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 24

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

peaks in the last 2 quarters.

LUKE KELLY

DIRECTOR, COMMUNITIES

luke@rpmrealestate.com.au +61 400 688 520

HUME The weakening sales trend in Hume intensified in the 25

quarter. It was also the lowest quarterly total in over

Exacerbating this decline has been the deterioration

in new supply, with 383 new lot releases in September

NUMBER OF ESTATES

lot sales during September quarter 2017.

800

600 10

400

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

1,000

Active Estates

200

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

Gross Lot Sales

on lot prices in previous quarters, this has now

400,000

460

350,000

450

augmented by Hume still being the second most

300,000

440

250,000

430

200,000

420

150,000

410

100,000

400

50,000

390

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.

MEDIAN LOT PRICE �$�

eased, with affordability concerns more apparent,

Median Lot Size

COMMUNITIES

four years, and a substantial 62% below the peak in

1,200

GROSS LOT SALES

total lot sales 23% below lot sales in the previous

SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

MEDIAN LOT SIZE �SQM�

September quarter 2018, with the municipality’s 385

380

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

NORTHERN GROWTH CORRIDOR

third increase in total active estates. However, sales activity declined by 42% from the previous quarter down to 91 lots.

was the largest increase in both absolute and

100

Active Estates

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

growth corridors, even though the median lot size

550 530

MEDIAN LOT PRICE �$�

300,000

510

250,000

490 470

200,000

450

150,000

430 410

100,000

390

50,000 0

Median Lot Size

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

Gross Lot Sales

350,000

percentage terms within Greater Melbourne’s decreased slightly to 448sqm.

150

Mitchell’s median lot price increased by $12,500

(or 4.5%) to $290,000 in the current quarter. This

200

GROSS LOT SALES

COMMUNITIES

relatively smaller market and represented a one

NUMBER OF ESTATES

The addition of 2 new estates in Mitchell in the

September quarter was significant given it is a

250

MEDIAN LOT SIZE �SQM�

MITCHELL

370 SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

350

Source: RPM

PETER GRANT

DIRECTOR, COMMUNITIES

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

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%

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.

300

6 4

200

100

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

430 420

250,000

410

200,000

400

150,000

390

100,000

380

50,000 0

Median Lot Size

Gross Lot Sales

300,000

MEDIAN LOT PRICE �$�

The median lot price declined 2% to $318,000 from

400

350,000

new supply from June quarter 2018, with 516 lots released in September quarter 2018.

500

Active Estates

This was greater than the 10% contraction in

600

from the same period a year earlier.

700

GROSS LOT SALES

new estates come to market, however Whittlesea

800

COMMUNITIES

quarter. Lot sales generally receive a boost when

900

18 16

NUMBER OF ESTATES

the June quarter 2018 fell away in the September

SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

MEDIAN LOT SIZE �SQM�

The turnaround in lot sales activity in Whittlesea in

370

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

COMMUNITIES

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

SOUTH EAST GROWTH CORRIDOR

ROD ANDERSON

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

Overall sales activity across the South East growth corridor has weakened. The region recorded 620

lot sales in September quarter 2018 derived from

COMMUNITIES

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.

PORT PHILLIP BAY

CARDINIA

CASEY

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

SOUTH EAST GROWTH CORRIDOR

not translated to an increase in new lot releases and COMMUNITIES

lot sales.

Over this period, new releases have fallen by 26% to

539 lots, while gross sales experienced a larger decline

NUMBER OF ESTATES

2018 compared to the same period 12 months ago has

of 46% to 428 lots. With new supply outpacing lot

absorption, this suggests ongoing affordability concerns

1,200

1,000

800

600

400

200

is the primary reason for weakening sales volumes.

Active Estates

Indeed, Casey contains the most expensive median 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. R P M R E A L E S TAT E G R O U P

MEDIAN LOT PRICE �$�

lot price amongst all growth corridors, increasing

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

Gross Lot Sales

400,000

460

350,000

450 440

300,000

430

250,000

420

200,000

410

150,000

400

100,000

390

50,000 0

Median Lot Size

MEDIAN LOT SIZE �SQM�

An increase of 8 active estates in Casey in September

GROSS LOT SALES

CASEY

380

SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

370

Source: RPM

LUKE KELLY

DIRECTOR, COMMUNITIES

luke@rpmrealestate.com.au +61 400 688 520

CARDINIA

450

accounted for 60% of lot sales in Cardinia. New

250 10

200 150 100 50

quarter from the June quarter.

Active Estates

lot sales, resulted in Cardinia’s median lot price

400,000

quarter. A 6.1% reduction in the median lot size to

300,000

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

MEDIAN LOT PRICE �$�

Gross Lot Sales

550

350,000

decreasing by 3.5% to $330,000 in the September 448sqm has also contributed to falling lot prices.

300

releases also doubled to 275 lots in the September

The increase in new lot supply, above that of

350 15

500

250,000

450

200,000 400

150,000 100,000

350

50,000 0

Median Lot Size

SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

MEDIAN LOT SIZE �SQM�

Mt Pleasant and Pakenham Rise, which together

NUMBER OF ESTATES

This was attributed to the addition of 2 new estates,

400

COMMUNITIES

77 lots to a total of 192 in September quarter 2018.

GROSS LOT SALES

Cardinia was the only growth corridor to achieve a

quarterly increase in gross lot sales, which grew by

500

300

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

GREATER GEELONG GROWTH CORRIDOR

The Greater Geelong growth corridor contributed 14% of total lot sales in September quarter 2018, equating to 602 lots. Despite less prominent COMMUNITIES

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

GREATER GEELONG

likely lost momentum. PORT PHILLIP BAY

Nevertheless, all five sub–markets within the

Greater Geelong growth corridor still experienced

growth in median lot prices from June to September quarter 2018. 32

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

PETER GRANT

DIRECTOR, COMMUNITIES

peterg@rpmrealestate.com.au

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%).

the median lot price in Armstrong Creek to $271,900

500

400

300

200

100

Active Estates

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

the smallest median lot size of 400sqm, which

460 450

MEDIAN LOT PRICE �$�

250,000

440 430

200,000

420

150,000

410 400

100,000

390

50,000 0

Median Lot Size

Gross Lot Sales

300,000

in the September quarter. The region also contains decreased by 5.9% from the previous quarter.

Purchaser demand still supported quarterly price

growth of 5% and annual price growth of 36%, lifting

600

COMMUNITIES

quarter 2018 was the highest amongst all regions

NUMBER OF ESTATES

Sales of 259 lots in Armstrong Creek in September

MEDIAN LOT SIZE �SQM�

ARMSTRONG CREEK

GROSS LOT SALES

+61 411 494 499

380

SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

370

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

COMMUNITIES

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.

NUMBER OF ESTATES

Bellarine Peninsula contained 2 more active estates

An 11.5% increase in the median lot price from June

growth corridor.

450

400

350

300

250

200

150

100

to September 2018 to $262,000 was the highest –

but still most affordable - within the Greater Geelong

Active Estates

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

Gross Lot Sales

300,000

The median lot size edged higher to 453sqm.

550 530

MEDIAN LOT PRICE �$�

250,000

510 490

200,000

470

150,000

450 430

100,000

410 390

50,000 0

Median Lot Size

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

MEDIAN LOT SIZE �SQM�

BELLARINE PENINSULA

GROSS LOT SALES

GREATER GEELONG GROWTH CORRIDOR

370 SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

350

Source: RPM

ROD ANDERSON

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

was identical, which slowed to 84 lots.

NUMBER OF ESTATES

of 67 lots. The absolute decline in new lot releases

100

7 6

4 3

Conversely, the median lot price increased by 9% previous corresponding period to $310,000. Much of this growth is attributed to the increase in the

1 0

over the September quarter and 25% from the

Active Estates

MEDIAN LOT PRICE �$�

median lot size to 572sqm.

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

Gross Lot Sales

350,000

750

300,000

700 650

250,000

600

200,000

550

150,000

500

100,000

450

50,000 0

Median Lot Size

COMMUNITIES

33% - during the September quarter, falling to a total

120

GROSS LOT SALES

Active estates in Geelong remained steady at 4,

however sales volumes contracted by 33 lots – or

140

MEDIAN LOT SIZE �SQM�

GEELONG

400

SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

350

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

GREATER GEELONG GROWTH CORRIDOR

lots and sales to 85 lots.

Increased competition slowed median lot price

NUMBER OF ESTATES

COMMUNITIES

during the September quarter, lifting releases to 104

60 2

a median lot value of $264,000 in the September unchanged.

growth to 1.5% from the previous quarter, reaching quarter. The median lot size of 448sqm remained

100

Active Estates

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

550 530

MEDIAN LOT PRICE �$�

250,000

510 490

200,000

470

150,000

450 430

100,000

410 390

50,000

Median Lot Size

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

Gross Lot Sales

300,000

GROSS LOT SALES

The addition of Austin estate in Lara underpinned a 17% increase in new lot supply and 18% in lot sales

120

MEDIAN LOT SIZE �SQM�

LARA

370 SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

350

Source: RPM

LUKE KELLY

DIRECTOR, COMMUNITIES

luke@rpmrealestate.com.au +61 400 688 520

Sales activity remained negligible at just 11 lots

with some caution as values are based off a small number of sales.

and 45.5% from the September quarter last year,

100

80 2

60 40

20 0

Torquay’s median lot price of $435,000 was the

most expensive, up 1.8% from the previous quarter

120

Active Estates

SEP 15

DEC 15

New Estates

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

Gross Lot Sales

600

500,000

which is not surprising given the region’s attractive

450,000

lifestyle opportunities.

500

MEDIAN LOT PRICE �$�

400,000 350,000

400

300,000

300

250,000 200,000

200

150,000 100,000

100

50,000 0

Median Lot Size

SEP 15

DEC 15 Median Lot Price

MAR 16

JUN 16

SEP 16

DEC 16

MAR 17

JUN 17

SEP 17

DEC 17

MAR 18

JUN 18

SEP 18

MEDIAN LOT SIZE �SQM�

the median lot price and size need to be viewed

NUMBER OF ESTATES

Subsequently, quarterly and annual changes to both

140

COMMUNITIES

in Torquay during the September quarter 2018.

160

GROSS LOT SALES

TORQUAY

Source: RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

OUTLOOK Following the remarkable sales and price growth

over the last 3 years, the September quarter data indicates Melbourne’s land market is coming COMMUNITIES

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.

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

Wallan $240k

Mickleham

Diggers Rest

$337k

$298k

Kalkallo $331k

Craigieburn $384k

Bacchus

Thornhill

Marsh

$208k

Frasers Rise

Park

Weir Views $264k

South

Strathtulloh

$255k

$267k

$315k

Deanside $377k

Rockbank $317k

Wyndham

Wollert $330k

$324k

WHAT DOES A 400 SQM LOT COST?

3 months to September 2018

COMMUNITIES

Tarneit Manor

$298k

$348k

Aintree

$307k

Melton

Donnybrook

Truganina $338k

Vale

Lakes

$318k

$288k

Mambourin $293k

Lara

$259k

Point Cook Werribee

$489k

$316k

Cranbourne

Pakenham

East

$362k Armstrong Creek

$275k

Source: RPM

Cranbourne South

$360k

Botanic Ridge

$365k

$305k

Clyde North $360k

Clyde

$345k

CHANGING OWNER OCCUPIER BUYER DEMOGRAPHICS

Despite housing affordability levels continuing

With more affordable entry prices available in the

and land prices moderating, first home buyers

market, couples without children is an emerging

COMMUNITIES

to deteriorate due to tighter lending practices

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.

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

land market compared to the established housing 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.

September 2017

OWNER-OCCUPIER TYPE

Other

4th Home

3rd Home

2nd Home

32 %

2nd Home

27%

1st Home

56 %

1st Home

63%

>$120K

16 %

>$120K

21%

$100K-$120K

18 %

$100K-$120K

18 %

$80K-$100K

25 %

$80K-$100K

28 %

$60K-$80K

22 %

$60K-$80K

25 %

$40K-$60K

17%

$40K-$60K

<$40K

10% HOUSEHOLD NUMBER OF PEOPLE

Source: RPM

35%

22%

25%

15%

39%

19%

20%

COMMUNITIES

HOUSEHOLD INCOME

September 2018

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

FEATURE STORY:

THE EMERGENCE OF MEDIUM DENSITY IN THE GREENFIELDS DESPITE THE RATE OF PRICE GROWTH IN

Increasingly developers are introducing innovative,

TO MODERATE OVER THE LAST SIX MONTHS, FOR

cater to price-sensitive buyers priced out of

MELBOURNE’S GREENFIELD MARKET CONTINUING

COMMUNITIES

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

attractive townhomes into their product mix to

detached housing options who still want a product configuration comprising three bedrooms, two bathrooms and a double garage, albeit on a smaller block.

is $85,000, and, with tighter lending conditions,

The evolution of medium density product in the

detached home on a 400 square metre block for

are embracing. In fact, 2016 Census data revealed

many would-be purchasers are unable to buy a approximately $550,000.

In most new estates in Melbourne’s growth

corridors, the emergence of medium density

product is changing the development landscape.

greenfields is a growing market trend that buyers 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.

Increasingly developers are introducing innovative, attractive townhomes into their product mix

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

117% INCREASE IN SEMI-DETACHED, TERRACE OR TOWNHOUSE PRODUCTS IN THE GROWTH CORRIDORS IN THE LAST FIVE YEARS

COMMUNITIES

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

COMMUNITIES 44

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

FEATURE STORY: THE EMERGENCE OF MEDIUM DENSITY IN THE GREENFIELDS

Medium density stock also enables developers to

The Tulliallan masterplan included 969 lots plus 81

solution to achieve a high quality product, which is

density sites included a mix of townhouse product

utilise the land better and control the built form

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

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.

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.

THEREâ&#x20AC;&#x2122;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

COMMUNITIES

critical not just from a buyer perspective but also to

townhouses in the sold out estate. Five medium

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. Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

OVERVIEW

TIGHTER CREDIT CONDITIONS – FOR BOTH

DEVELOPERS AND PURCHASERS - AND NEGATIVE

APARTMENTS / TOWNHOUSES

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. 46

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

LUKE KELLY

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

reflecting an overall gain of 28% to 35,317 dwellings

12% to 6,240 approvals from the previous quarter.

September 2017.

approvals (apartments and townhouses) were down

Approvals were also down 10% from the September

when compared to the previous 12 months to

quarter 2017.

Specifically, townhouses improved by 5% while

However, as quarterly approval numbers tend to

coming off an extremely low base over the last

be lumpy, a more meaningful comparison on a

rolling 12 month basis shows the non-detached

14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

two years. This pickup signals that developers

17% 12 mths to Sep-14

7% 12 mths to Sep-15

16%

including strong population growth, a 10-year low

12 mths to Sep-16

15% 12 mths to Sep-17

5% 12 mths to Sep-18

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

are still buoyed by key market fundamentals

28,000 26,000 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

rental yields.

Overall, solid approval activity has translated into

apartments increased by a significant 46% - albeit

APARTMENT APPROVALS

TOWNHOUSE APPROVALS

housing market has shown resilience, with approvals

unemployment rate, low vacancy rates and robust

APARTMENTS / TOWNHOUSES

For the September quarter 2018, total other dwelling

20% 12 mths to Sep-14

of activity over the past couple of years.

60% 12 mths to Sep-15

20% 12 mths to Sep-16

26% 12 mths to Sep-17

46% 12 mths to Sep-18

Source: ABS

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

OVERIEW

KEY MEDIUM DENSITY BUILDING DATA

APARTMENTS / TOWNHOUSES

APPROVALS Sep qtr 2018

2,952

TOTAL APARTMENTS 3,288

TOTAL 6,240

change from previous qtr

-14.0%

-10.4%

-12.1%

12 months to Sep qtr 2018

13,046

22,271

35,317

4.9%

46.0%

27.5%

OTHER DWELLINGS

COMPLETIONS

OTHER DWELLINGS

8,762

Jun qtr 2018

8,344

change from previous yr

% change 12 months earlier COMMENCEMENTS Jun qtr 2018

change from previous qtr change from previous yr

12 months to Jun qtr 2018

% change 12 months earlier TOTAL APARTMENT & UNIT PRICES

-19.9%

change from previous qtr

37,287

49%

74%

12 months to Jun qtr 2018

% change 12 months earlier

29,107

MEDIAN PRICE

CHANGE FROM QTR

CHANGE FROM PREV. YR

Sep qtr 2017

$587,500

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

-9.9%

32.32%

$604,000

Source: ABS, REIV

1.5%

-31%

Sep qtr 2018 Jun qtr 2018

TOTAL TOWNHOUSES

$602,500

0.2%

-9%

2.8%

METRO MELBOURNE MEDIUM DENSITY PIPELINE ACTIVITY

LUKE KELLY

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

The modest level of activity in the inner ring has

Mid to large developers (who are financially secured)

identified in the planning and approval stages.

developments (whether apartments or townhouses)

the process of sales to development is a lot shorter

strong as indicated in the number of projects

In the apartment market, it indicates a view among developers the strong level of buyer activity in

not dampened overall activity. In fact, boutique

are seeing the benefit of boutique projects where

located in well-positioned mid ring suburbs have

and they are not as financially exposed for an

been well received by buyers.

extended period.

recent years will continue to absorb the additional

In addition, these smaller developments have until

Taking a snapshot at the end of September 2018, the

is in the pipeline.

scale developers. However, with further tightening

the total pipeline in the planned or approval stage. If

supply recently created and more so, the stock that

With investors still in the shadows (both locally and overseas), first home buyers and downsizers have underpinned demand levels in the market.

TOWNHOUSE PIPELINE - SEP 2018 Stage

Planning

Count of Developments

% of total

959

43%

Approved

Commenced Total

847

38%

425

19%

2,231

100%

APARTMENTS / TOWNHOUSES

Planning activity in medium density projects remains

recent months been more conducive to small-

townhouse pipeline reflects 1,806 projects or 81% of

of finance, along with purchase acquisitions at

all these projects come on line in their current plans,

premiums, these developers have found it more

the market will realise more than 11,600 dwellings.

difficult to get projects off the ground.

This level of activity would augment a further 425 projects that are planned to yield 3,473 dwellings that have already commenced.

Count of Townhouses

% of total

6,758

45%

APARTMENT PIPELINE - SEP 2018 Stage

4,887

32%

Planning

3,473

23%

Commenced

15,118

100%

Approved Total

Count of Developments

% of total

801

56%

291

20%

344

24%

1,436

100%

Count of Apartments

% of total

49,654

49%

23,636

28,901

102,191

23%

28%

100%

Source: Cordell Connect, RPM

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

METRO MELBOURNE MEDIUM DENSITY PIPELINE ACTIVITY

APARTMENTS / TOWNHOUSES

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

Outer Ring 27%

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

Middle Ring 69%

APARTMENT & TOWNHOUSE DEVELOPMENT SPLIT BY LOCATION

always be shelved if developers believe buyer

appetite and overall profit margins donâ&#x20AC;&#x2122;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 Melbourneâ&#x20AC;&#x2122;s middle ring as highlighted in the pie chart.

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

Source: Cordell Connect, RPM

Inner Ring 4%

OUTLOOK

LUKE KELLY

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

The consensus among most commentators is the

cooling as opposed to crashing. The key underlying

of years in terms of price. While the market has

previous two quarters. The apartment market is 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

apartment market will remain soft for a couple

‘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.

excess supply should be absorbed over the next 12

Demand for townhouse product offering the

would be a lot shorter.

house at a much more affordable price will remain

to 18 months. If credit was more freely available it

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.

lifestyle and internal configurations of a traditional strong. This is reflected in several townhouse

developments in what would be considered nontraditional 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.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

APARTMENTS / TOWNHOUSES

Our outlook remains largely unchanged from the

APARTMENTS / TOWNHOUSES 52

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

FEATURE STORY:

REIMAGINING THE AUSTRALIAN DREAM Townhouse approvals remained strong with a gain

PARTICULARLY FIRST HOME BUYERS SEARCHING

Melbourne continues to densify, there is a growing

PRICES STILL REMAIN OUT OF REACH FOR MANY, FOR THEIR DREAM HOME IN THEIR PREFERRED LOCATION. HOWEVER, WELL-DESIGNED, HIGH

QUALITY TOWNHOUSES CONTINUE TO GROW IN

POPULARITY AS AN AFFORDABLE HOUSING OPTION

of 5% over the 12 months to September 2018. As

focus by developers on larger townhouse product

to cater to the increasing owner occupier market in middle and outer ring suburbs.

FOR A RANGE OF BUYERS.

Reflective of this trend, RPM recently launched

Changing lifestyle and demographic trends is also

residences in Cranbourne North in Melbourneâ&#x20AC;&#x2122;s

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.

Ironwood, a development comprising 130 luxury

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.

APARTMENTS / TOWNHOUSES

DESPITE A COOLING PROPERTY MARKET, HOUSE

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.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

APARTMENTS / TOWNHOUSES 54

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

LUKE KELLY

FEATURE STORY: REIMAGINING THE AUSTRALIAN DREAM

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

Head of Project Marketing at RPM, Luke Kelly,

Ironwood’s display suite is now open. RPM has

– provide an exclusive retreat and unparalleled

the project.

said the luxury homes – aimed at owner occupiers liveability right at the nexus of metropolitan

Melbourne, the Dandenong Ranges, and the

APARTMENTS / TOWNHOUSES

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 HIGHCAPACITY TRAINS BY 2019.

been appointed as the exclusive sales agent for

For enquiries contact Luke Kelly

Mornington Peninsula.

on +61 400 688 520 or email

“Ironwood offers luxury and lifestyle in one,” he said.

luke@rpmrealestate.com.au

“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.”

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. Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

OVERVIEW

THE PROPORTION OF NEW DWELLINGS BOUGHT

BY FOREIGN PURCHASERS ESCALATED TO 21% IN

JUNE QUARTER 2017, WHICH WAS ATTRIBUTED TO

INTERNATIONAL

FOREIGN INVESTORS BRINGING FORWARD THEIR

PURCHASE TO AVOID THE REMOVAL OF OFF-THEâ&#x20AC;&#x201C;

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. 56

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

JINYIN ZHANG

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

■ New

INTERNATIONAL

% OF FOREIGN PURCHASES BY DWELLING TYPE

THIS DOWNWARD TREND IS A DIRECT CONSEQUENCE OF TIGHTER RESTRICTIONS ON FOREIGN BUYERS IN AUSTRALIA AND POLICY CHANGES IN CHINA ON FOREIGN INVESTMENT OUTFLOWS. 26% 24% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

■ Established

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

25%

16%

11%

22%

15%

19%

14%

21%

14%

12%

13%

15%

10%

11%

Source: NAB Quarterly Residential Property Survey

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

AUSTRALIAN ECONOMIC OUTLOOK

The Australian economy performed strongly over

Strong public infrastructure spending and improving

Domestic Product (GDP) and private consumption

see the unemployment rate fall to below the long

financial year 2017/18, with increases in Gross

INTERNATIONAL

from a year earlier. GDP growth is projected to

stabilise around the national long term average of 3% in 2018/19.

private nonâ&#x20AC;&#x201C;dwelling investment is anticipated to

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

2017/18 e

2018/19 f

GDP

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

(% change)

Source: NAB. The Forward View

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

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

INTERNATIONAL

THE NATIONAL HOUSING MARKET IS ANTICIPATED TO CONTINUE TO WEAKEN, WITH NEW PRIVATE DWELLING INVESTMENT CONTRACTING. HOWEVER, RECORD LOT SALES AND SOLID APARTMENT PREâ&#x20AC;&#x201C;SALES IN 2017 WILL SUPPORT CONTINUED APARTMENT AND DETACHED HOUSING CONSTRUCTION.

OVERVIEW

WITH CONTINUING ACUTE LOW VACANCY RATES, THE RENTAL MARKET IN MELBOURNE AND

RESIDENTIAL INVESTMENT

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.

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

MEDIAN RENTS House Bedrooms

Sep-17

Jun-18

Sep-18

$525

$565

$550

$800

$838

$38

$423

$430

3.8%

$340

$350

$10

4.6%

INNER

MIDDLE Units and apartments underperformed when

OUTER

and across all bedroom numbers, have seen average rental gains of between 1.6% and 5.2% per annum.

inner ring, which recorded a per annum loss of 2.7% over the past two years. This can be attributed to

highlighted by a $58 rental increase taking place over

INNER

MIDDLE

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

OUTER

GEELONG

$10

0.9%

$290

$310

$20

3.4%

$410

$420

$430

$420

1.2%

$350

$350 $420

$10

2.5%

Sep-17

Jun-18

Sep-18

$370

$380

Change from previous year

2 Year Average Annual Gain

$20

3.2%

$420

2.7%

$350

$480

$320

$618

$500 $675

$330

$500

$10

1.5%

$58

-2.7%

2.6%

$10

$400

$263

$240

-$23 $15

$500 $335

$510

$333

$510

$333 $220

$10

4.9%

$380

3.0%

$400

$290

$300

$380

$220

$380

5.2%

2.0%

3.8%

$385 $210

$10

1.6%

-$3

3 1

2.7%

$675

$330

years to September 2018 ranged between 2.6% and 4.9%.

$560

5.4%

Bedrooms

the past 12 months but still showing an overall loss.

In the outer ring, other dwellings performed strongly

$14

5.7%

Units & Apartments

this dwelling type constituting low levels of rentals, and therefore can fluctuate excessively. This is

8.0%

$380

The exception was three-bedroom dwellings in the

$570

$390

$55

4.9%

$380

GEELONG

$550

$340

$378

$700

$25

$370

houses. Both the inner and middle rings of Melbourne,

$376

$675

2 Year Average Annual Gain

RESIDENTIAL INVESTMENT

compared to the growth recorded for detached

$645

Change from previous year

$10

1.6%

2.6%

Source: REIV

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

OVERVIEW

From the June quarter to the September quarter 2018,

value appreciation tends to be the driving force in

the level seen in capital gains. Nevertheless, with

the period. Despite improving, they all remain below the

acute levels, rental yields for detached houses for

â&#x20AC;&#x201C; rental yields have picked up over the September

RESIDENTIAL INVESTMENT

most regions recorded slightly higher vacancy rates over 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

the earlier stages. However, with vacancy rates at outer and regional areas tops the list.

Inner Total

Regional areas of Victoria continue to achieve the

five years, rental yields have been below long term

with robust rental prices given regional areas are

detached houses and other dwellings over the last levels. Rental growth has not kept up anywhere near

Jun-18

Sep-18

1.9

1.8

2.0

Middle (10-20km)

3.1

2.4

1.6

1.5

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

Source: REIV

Sep-17 2.0

Outer Total

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

highest yields due to lower purchase prices, coupled traditionally tightly held. YIELDS

Inner (0-4km)

Inner (4-10km)

quarter 2018, and more so from this time last year.

Due to significant capital gains seen in both

VACANCY RATE Melbourne

prices moderating â&#x20AC;&#x201C; particularly in other dwellings

1.9 1.7

2.4 2.1

1.9

1.7

1.8 1.6

3.3 1.9

1.8

2 Year Average Gain 2.0

1.4

2.2

2.6

2.9

1.5

1.7

2.2 1.6

2.8 2.0 2.1

2.0 1.8

2.3 2.2 2.1

Houses

Inner

Middle

Outer

Metro

Regional Units

Inner

Middle

Outer

Metro

Regional

Source: REIV, RPM

Sep-17

2.08%

2.11%

2.88%

3.45%

4.04% Sep-17

4.03%

3.11%

3.50%

3.54%

4.22%

Jun-18

2.30%

2.13%

2.83%

2.49%

3.72%

Jun-18

4.15%

3.11%

2.56%

3.71%

4.26%

Sep-18

2.54%

2.29%

2.93%

2.65%

4.00% Sep-18

4.26%

3.17%

2.70%

3.70%

4.44%

OUTLOOK

MEGAN TAYLOR

MANAGER, PROPERTY MANAGEMENT megan@rpmrealestate.com.au +61 428 575 149

While the number of first home buyers have

RESIDENTIAL INVESTMENT

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

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.

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.

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

LAND MARKET INVESTOR INSIGHTS

RPM surveys every buyer on our clientsâ&#x20AC;&#x2122; estates

These two cohorts have traditionally invested in

The increasing share of professional couples buying

demographic and purchase intent changes amongst

middle rings given the lower entry price. However,

sector. It not only reflects steady short to medium

RESIDENTIAL INVESTMENT

in the greenfield market. The following illustrates

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 investorâ&#x20AC;&#x201D;

one and two bedroom apartments in the inner and positive gains in the land market coupled with wellpriced 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.

up from a quarter the same period a year earlier.

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.

This highlights the attractiveness of the land market

In recent years the country of origin of investors

yield perspective.

combined comprised 76% of all investors in the

to investors from both a capital growth and rental

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.

in the land market underpin the fundamentals of the

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

has predominantly been Australia and India, which

THE LARGER FAMILY UNIT STILL REMAINS THE MOST PROMINENT COHORT AT 63%, DESPITE FALLING FROM 79% THIS TIME LAST YEAR.

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.

Single

Investor

Owner-Occupier

23%

77%

33%

67%

13%

60+

35-49 25-34

18-24

Pakistan

Malaysia Iraq

Nepal Philippines

China

Sri Lanka Australia

India

79%

19%

50-59

Single

23%

Couple

29%

Family

63%

46%

33%

18%

29%

13% 60+

10%

51%

33%

50-59

25-34

Italy Iraq Fiji

Sri Lanka

Nepal Croatia

Bangladesh

30%

China

46%

35-49 18-24

1% 2% 2% 2% 4% 5% 6%

Group/Friends

Family

HOUSEHOLD NUMBER OF PEOPLE COMBINED AGE

Owner-Occupier

Couple

Cambodia

COUNTRY OF PERSON 1 & 2 TOP 10

Investor

Group/Friends

SEPTEMBER 2018

India

Australia

10%

52%

33%

RESIDENTIAL INVESTMENT

CURRENT HOUSEHOLD TYPE

OWNER OCCUPIER VS INVESTOR

SEPTEMBER 2017

3% 3% 3% 3% 3%

3% 5%

10%

29%

38 %

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

NEW RENTAL LAWS PASS Victorians are renting more now than at any stage

A sample of these reforms are:

to rebalance the market, the Victorian Government

•

in the state’s history, and for longer. In an attempt has undertaken a comprehensive review of the

Residential Tenancies Amendment Bill 1997. The RESIDENTIAL INVESTMENT

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

diverse population of renters, while ensuring those

Allowing renters to make minor modifications

•

Increasing the number of properties to which the

rented premises

to a rental property without prior consent

Bolstering security of tenure and ending ‘no

fault’ evictions by removing the ‘no specified

end of an initial fixed term agreement •

who provide rental housing can still effectively manage their properties.

Providing for faster reimbursement where

Establishing a non-compliance register to

Providing for the early release of bonds

with the consent of both parties to the

•

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

Restricting solicitation of rental bids by residential rental providers and agents

Providing for annual, instead of bi-annual, rent increases

statutory maximum cap of four weeks for bond

Enabling automatic bond repayments, which will be available to a renter within 14 days where the parties are not in dispute

•

‘blacklist’ residential rental providers and agents

tenancy agreement

•

Requiring mandatory pre-contractual disclosure of material facts, such as an intention to sell

the rental property, or the known presence of

who fail to meet their obligations •

renters have paid for urgent repairs

and rent in advance applies

of ‘end of the fixed-term’ notices to vacate to the

of home ownership, making them likely to rent for

130 reforms designed to improve protections for a

•

reason’ notice to vacate, and restricting the use

a growing proportion of Victorians are priced out

longer periods of time. The Bill includes more than

Allowing animals to be kept in any

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.

RESIDENTIAL INVESTMENT

Q 3 R E S I D E N T I A L M A R K E T R E V I E W | S E P T E M B E R Q U A R T E R 2 018

OUR TEAM ERIC DICK

JINYIN ZHANG

eric@rpmrealestate.com.au

jinyin@rpmrealestate.com.au

EXECUTIVE CHAIRMAN +61 418 349 267

+61 451 898 886

KEVIN BROWN

CHRISTIAN RANIERI

kevin@rpmrealestate.com.au

christian@rpmrealestate.com.au

CHIEF EXECUTIVE OFFICER +61 418 397 577

GENERAL MANAGER, TRANSACTIONS & ADVISORY +61 416 445 078

LUKE KELLY

MICHAEL STAEDLER

luke@rpmrealestate.com.au

m.staedler@rpmrealestate.com.au

DIRECTOR

+61 400 688 520

RESEARCH MANAGER +61 434 619 280

PETER GRANT

MEGAN TAYLOR

peterg@rpmrealestate.com.au

megan@rpmrealestate.com.au

DIRECTOR, COMMUNITIES +61 411 494 499

ROD ANDERSON

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

DELENA BAJADA-GARDNER

ASSOCIATE DIRECTOR, COMMUNITIES delenag@rpmrealestate.com.au +61 487 888 556 68

DIRECTOR, RPM INTERNATIONAL

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

MANAGER, PROPERTY MANAGEMENT +61 428 575 149

DISCLAIMER

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

T +61 3 9862 9555

Level 5, 52 York Street

South Melbourne VIC 3205 rpmrealestate.com.au