What types of properties will feel the price softening first in Melb?

Discussion in 'Property Market Economics' started by Nina00, 15th May, 2022.

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  1. Nina00

    Nina00 Well-Known Member

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    Firstly this is really doing my head in. All I hear about is that the housing bubble is about burst and that the property market is slowing down etc. I’m not sure I’ve yet noticed anything where I’m looking as there’s barely any stock besides the lemons.

    I’m in the market to buy a PPOR in Melbourne and my price range is under $950k for a 3br townhouse or subdivided place in Melb outer east. I’m wondering what areas and property types might feel the slow down first (if there even is a slow down or correction!). Crystal ball question I know.

    Interested in your thoughts.
     
  2. Jim G

    Jim G Well-Known Member

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    If you buy in an established suburbs of east or south east melbourne, you can just ignore the media and rest assured that in long term you will have substantial capital gains. Price never goes down - what can go up or down is rate of price growth. So, price is just a one way track - Upwards.
     
  3. 10khours

    10khours Well-Known Member

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    The problem is that when you heard the "Australian property market is in a downturn" it's averaging out every suburb in Australia. But as a home buyer you are just looking at a fraction of suburbs/properties.

    Media might be saying there is a downturn, meanwhile the properties you are looking at might be flat or still increasing in value.

    E.g. Adelaide and Brisbane are still rising while Sydney is falling.

    But as someone buying a PPOR, as long as you are buying within your budget and planning to live there for 7+ years, I would not recommend trying to time the market. A PPOR is primarily a place to live. If you find a property that you want to live in and is within your budget you should buy it, regardless of what the market is doing.

    The only time a PPOR buyer should time the market is if they need to buy a place and then sell it within a short time frame of say 3 years. But in that scenario you shouldn't be buying a property at all, you should be renting.

    Recently in Melbourne I believe the majority of the downturn has been in the high end. Low and medium price properties (less than 1.1 million) are not really in a downturn, they are just flat.

    Media lives on fear, they have been writing articles about a housing bubble in Australia since 2005. If you avoid buying a property while the media talks of an incoming housing crash you will never buy a property.
     
    Last edited: 22nd May, 2022
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  4. Nina00

    Nina00 Well-Known Member

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    I’m not trying to time the market. I have pre approval and have needed to extend it a couple of times already.

    I’m ready to buy right now when I find the right property that doesn’t look like a housing commission house but one that’s pushing a million dollars! So much overpriced rubbish out there at the moment.
    It’s like everyone decided to try and sell their lemons at the same time in Melbourne’s outer east.
     
  5. Dmash

    Dmash Well-Known Member

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    Inner-middle east hasn’t gone up in value since 2017
     
  6. 10khours

    10khours Well-Known Member

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    What area of the outer east in particular? If you are talking about area's like Ferntree Gully...most of the stock in areas like that are older properties on large blocks of land. For e.g. a typical property in the outer east might be a 1950's house on 800sqm. These properties in the outer east are worth 1 million because of the land value, not because of the house. Often the land will be worth 950k and the house will be worth 50k. If you want a nicer building have you considered a recently built town house? Or looking in suburbs from Narre Warren to Pakenham (properties are more modern in that area, and less of your money is being spent on the land so you will end up with a much nicer building).
     
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  7. Nina00

    Nina00 Well-Known Member

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    i’ looking at townhouses or subdivided half blocks, about 300m2 max but don’t mind if it’s smaller. 3 br but I don’t mind if there’s only one bathroom.
    Areas I’m considering are Ringwood, Mitcham, Vermont, Heathmont & Croydon. Many I’ve seen look like complete dumps especially when they’re asking low 900’s. I mean some look like housing commission or special accom.
     
  8. Zyzz

    Zyzz Well-Known Member

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    what suburb
     
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  9. Scott No Mates

    Scott No Mates Well-Known Member

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    :rolleyes:
     
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  10. supersam80

    supersam80 Well-Known Member

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    Inner is up about 10% give or take

    Terrible returns compared to elsewhere but up is still up.
     
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  11. Whitecat

    Whitecat Well-Known Member

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    My guess would be cookie cutter new estates on outskirts with no trees between houses, small blocks, no train.
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    Any property which is difficult to sell in boom times, will be much harder to sell once the markets go off the boil.

    Think - near powerlines, main roads, intersections, easements, flood/fire zones, close to noxious industries, overlooked by adjoining properties, low side of the road, under flight paths, next to train lines or other infrastructure etc.
     
  13. JL1

    JL1 Well-Known Member

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    I suspect it will be very features-based in what falls in price. For example having a study room in addition to 3 bedrooms will command a significant premium over what it would have pre-covid, and i dont expect that to change.

    The properties i am seeing falling is inner ring newer townhoues that lack one or two key features. Richmond for example; plenty of selection among 3x2 with garage going for $1.2M or less. they're 3 level with no separate study or courtyard, so livability for a family is actually not amazing. Certainly many could make it work, but its not the post-covid ideal.

    The other big change that isnt spoken about is that gen-Y, which is by a long shot the largest age group (more gen-y than gen-Z) are now all in family age, which only stokes the fire for family homes.

    upload_2022-5-26_11-18-12.png

    So my assumption is that outer ring suburban houses will only start to feel it once interest rates have actually risen and people are striking mortgages at higher rates and stress tests. But right now, its city DINK properties that are showing early signs of opportunity as that's the market which is being abandoned.
     
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  14. Triton

    Triton Well-Known Member

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    Probably box Hill only
     
  15. Jacko

    Jacko Well-Known Member

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    I've been trying to reconcile the two items below for a long time...
    1) I've been told blue chip suburbs don't go down during downturns
    2) I've also been shown graphs that show top-end properties fall the most during downturns (although they also go up the most during the upswings)

    Your help is much appreciated.
     
  16. Redom

    Redom Mortgage Broker Business Plus Member

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    People associate 'blue-chip' way to broadly IMO.

    In Sydney, blue chip would likely be eastern suburbs/inner north/beaches etc.

    Yes, they have incredibly high medians and are sought after locations. They are also leading the price falls.

    Nonetheless, not all properties within them are blue chip. Theres hundreds of dated old homes built in the 50's-80s that are in need of a lot of TLCs. There are not always 100s of buyers out there looking for a project. There are very few near new family homes that require no work and largely tick all family boxes (e.g. 5 bedrooms, pools, yards, layouts, etc). But there are 100s of buyers looking for this product, regularly, across most markets.

    Similarly for investment type product, it is rare to get 15m+ frontages in some locations with clear building access, corner blocks, perfect R3 pockets, near railways, etc etc. These can turn 'ugly' suburbs into 'blue chip' very quickly given Sydney is a city that is undergoing rapid change this century and this type of stock will change or is already changing in land use. Meanwhile, if buying in a brand new land estate, that corner block that'll have no change in land productivity will likely be the cheapest block on the street.

    Summary; broad brush rules rarely make sense without context and a deeper look.
     
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  17. Jacko

    Jacko Well-Known Member

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    That makes sense, cheers
     
  18. The Y-man

    The Y-man Moderator Staff Member

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    Fake news :D


    The Y-man
     
  19. Sackie

    Sackie Well-Known Member

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    Been hearing similar for over 20 years.

    I suspect I'll keep hearing similar for another 20.
     
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  20. craigc

    craigc Well-Known Member

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    1) Sounds like a comment from MY. Stated as fact but never backed up despite evidence stats (ie core logic price changes) showing opposite. Suits his narrative and what he’s selling ie only Inner suburb, “blue-chip”, “Investment Grade” BA services.

    To be fair although more volatile, price rises also generally start in inner ‘blue-chip’ areas as well as falls.

    They certainly do not ‘never go down’ as any suburb can.

    2) Shown facts supported by evidence. Hmm I think you know which one to believe.
    Assuming these are reasonably accurate data.


    Note however price gains and falls are usually quoted as the change in the suburb median price.
    By definition this is the just middle price of sales recorded so will also vary the result depending on the type of stock being sold / transacted which then can distort results.
    ThIs could be another whole discussion / thread as not all sale stock is identical unlike 1 share in a company for example.
     
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