Melbourne market is hot

It is a bit strange because I’m getting more engagement in the inner North/West from agents than I ever have. It looks from the data like there will be a spike for sure but I do think there’s a combination of seasonal low stock which at the intersection of buyers coming back to the market without lockdown. I’m trying to buy at the moment but I’m ok with it taking a few months.

 

''One of the concerns arising from the coming of the coronavirus is the impact the contagion and its management has had on the central business districts of our largest cities, and especially Melbourne given the extent of the lockdown in Victoria.

The theory is that office workers may have become conditioned to working from home, and that employers will be only too willing to support a permanent work-from-home arrangement to relinquish some of the cost of accommodation in commercial office buildings.

And that’s just for starters. There’s also the issue that Australia’s hard border closures have halted international visitor arrivals, which affects the demand for city hotel accommodation.

And unless a solution is found to admit foreign students before the beginning of the 2021 academic year, there’s the possibility that yet another tranche (year) of the international student market will be lost.

Indeed, one of the great new additions to the CBD in recent years has been the rise of the student accommodation industry, which has injected youth, life and energy into the city centre and its fringe.

The question city planners, commercial office building owners, investors and others must be asking right now is this: what will be the long-term effects of the pandemic on the vibrancy, the value and the role of the CBD?

Let’s look at the numbers, starting with Melbourne.

I have defined the CBD as comprising the city’s central grid plus all abutting suburbs within a 3km radius of the Bourke Street Mall. This area captures the CBD and its many support functions located in Docklands, Southbank and St Kilda Road as well as suburbs such as Parkville, Carlton, Fitzroy and Collingwood.

This extended CBD contained 448,000 jobs at the time of the 2016 census, up 81,000 on the number five years earlier. If this growth rate was maintained, then by the time the pandemic arrived this year the area probably would have contained 520,000 jobs or thereabouts. The census also shows that 3 per cent of Melbourne’s workforce regularly worked from home.

There is no definitive estimate of the proportion of the workforce that worked from home during Melbourne’s extended lockdown, but I think it was about 45 per cent and possibly much higher for CBD (and fringe) office workers.

The question for city office tower owners and investors (including your and my superannuation funds) is whether my estimate of 45 per cent will revert to 3 per cent in the post-lockdown world next year, thus upholding demand for (and the value of) city office towers, or whether it settles back to a fundamentally higher figure.

What if this proportion reverts to, say, 10 per cent, which is seven percentage points above the long-term average? This equates to 36,000 workers or to about 360,000sq m of office space (at a rough industry average of 10sq m per worker) that no longer would be required.

NoCookies | The Australian

 

planning permit would have lapsed ages ago and haven't seen any movement there so I would say unlikely to be selling anytime soon. If any new planning applications go in it will be all over the local newspaper and developing 7 hectares is going to get political. Complicating issues is the zoning with part of it General residential and majority of it Special Use Zoning.

yeah because some will go to Sydney and Brisbane as well

The thing about WFH is with Covid Normal they will have to spend at least 2 or 3 days in CBD. With the way things are going Melbourne CBD will look a lot like what Sydney is now in a few months

The rental market is a lot better for landlords 10km east of the City. Both places had more interest and better rent than pre-covid.. The $600-800 a week for a house is very strong.

https://www.realestate.com.au/property/75-coppin-st-malvern-east-vic-3145

Under 2.8M September 2016 then 700K reno and sold last weekend for 5M. This is not a reflection of the whole of Melbourne but yeah parts of Market is HOT!

 

Are you seeing any parts that are not hot? excluding high rise ofcourse.

The auctions I checked out went bonkers. Rich definitely getting richer.

 

Best time of the year for sellers, low-interest rates, low stock for almost 6 months, what would you expect? Let`s see if in 6 months the momentum is still there. In the meantime, I gave up buying my PPOR and I`ll keep rentivesting ;-)

 

I can unequivocally guarantee that a greater proportion of migrants will settle in the regions...and thus shun all of the capitals...when international borders are eventually reopened.

Moreover, the NSW/VIC border opened last night...and the QLD/VIC border will most probably open within the next couple of weeks too.

So expect Melbourne's population to dwindle further over the coming months...

 

Not as hot would be
1. land to build PPOR, due to lockdown a lot of people wants more space now and not in a years time (3 month settlement and then 9 months to build) so in premium areas and building properly will need to push it to be done by Christmas 21.

2. Also Chinese demand is not there as much (not due to COVID as this was already the case precovid). This group of new migrants liked to live in new house as well so also affects land market

Sold 7 Parkdale Avenue, Balwyn VIC 3103 on 07 Nov 2020 - 2016535127 | Domain

good example as easily 2.2-2.4M as peak couple of years ago. Sold for over 2M but wouldn't say it is hot but the finished product will be worth 3.5M plus.

an example in a lower priced area would be

https://www.realestate.com.au/sold/property-house-vic-vermont-134805442

840K is quite cheap as at peak could be closer to 1M

These two places 10-20% below the peak but not really COVID related

 

Anyone get a load of the budget announcements? Its a whopper.

Stamp duty waivers, infra projects, gov expecting PT usage to get back to pre-cov next year. Looks like they will be forcing people back into the city at this rate.

 

'To stimulate the property market, the Government will waive up to 50 per cent of stamp duty on newly built or off-the-plan homes valued at up to $1 million until June 30 next year.

Existing homes will be eligible for a 25 per cent waiver.

A $500 million Victorian Homebuyer Fund will be launched to help people who do not have a 20 per cent deposit buy homes. The fund will contribute to the purchase price in exchange for equity in the property.

The Government hopes a 50 per cent land tax discount to be introduced from 2022 will attract new investment in build-to-rent developments and boost housing supply by about 5,000 homes.'


...I can't understand why a 25% waiver on stamp duty for existing homes is being proposed. The housing market is as healthy as ever based on recent auction results. They sure want to keep the property train going.

 

Screw it. I just put in an offer for an inner city pad. Wish me luck.

 

I hope that is contract signing and not settlement date of 30 June.

 

Not to sound too negative on this but savings are not that great. Saving a maximum of 12.5K maximum on a 1 million dollar existing property is not much. It's like one bid at auction potentially

Also with OTP stamp duty is very low anyway as only paying stamps on land value for your typical House and Land 500-700K, would save less than 10K (closer to 5K) and with all the FHB exemptions anyway there is often no stamp duty to pay for this segment

It all helps but these savings will have minimal effect but on top of everything else it does help but lets not get ahead of ourselves

 

Govco need to do something to prop up/recover/justify the amount of land tax they will still be wanting to charge inner city properties !!!

For years it has been all about raising duty/revenue to force older people out of the very long term family home to enable DEVELOPMENT resulting in development and subdivision = more funds into state coffers.....

Considering inner city and highrise workplaces look like going the way of the dinosaur/Taxi's, whats the next excuse to raise dollars ?

 

It depends on what dataset you use.

If you were to include EVERY residential property transaction in Victoria in the first 9 months of this year and apply a statistical median to it, you will find prices are down 14 percent. Yes, this is what valuer general data shows on settlement data.

On the otherhand you have Corelogic Hedenic indexes massaging numbers based on characteristic and using incomplete data (i.e. real estate agents only reporting properties that go up). This index shows prices are booming.

I think the Victorian government is using the complete, unmodified dataset from property settlement data.

 

Any insights into where the medians have dropped the most? Or is it a matter of more cheaper homes being transacted vs expensive homes.

I am definitely not seeing any 14% drops in Melbourne.

I recall looking in that pocket in Vermont during the peak in 2017 and prices wernt much higher for larger blocks. This Graeme st one looks in pretty bad condition with some constraints on development so could be an outlier.

2/8 Phyllis Court, Vermont, Vic 3133 https://www.realestate.com.au/sold/property-townhouse-vic-vermont-133441782.
This is a pretty strong result?

For the $2m+ dev market in Balwyn you are probably right as Chinese are struggling to get their dosh out.

 

Could be anything mate. A potential WFH tax? just like the prehistoric tax theyve slapped on EVs.

I guess if you are worried about higher rates, you can always move into an apartment, my mates tell me their rates this year are 10% lower than last.

 

There is SO much vacancy. Even inner city houses. I see that as a headwind and potentially a cause of more sales stock coming online next year.

 

And the rest. I've had a good trouble free run so far, but one of my Docklands tenants has given notice. My PM says that if I want a quick re-let I need think about $300 - the old rent was $440. I've yet to respond: one bit of me thinks this is way too cheap, but the reality is that Domain shows ~150 properties to rent in Docklands at $350 or less.

 

Would you still be positively geared at $300-350 pw?