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R E S I D E N T I A L M A R K E T R E V I E W
MA
RC
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QU
AR
TE
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20
20
RPM REAL ESTATE GROUP IS VICTORIA’S MOST SUCCESSFUL
RESIDENTIAL DEVELOPMENT SALES, MARKETING AND
ADVISORY AGENCY. WE SPECIALISE IN SALES WITHIN
MASTER-PLANNED COMMUNITIES, MEDIUM AND HIGH-DENSITY
DEVELOPMENTS, GREENFIELD AND INFILL DEVELOPMENT
SITES AND INTERNATIONAL INVESTMENT SALES.
WE ADVISE OUR CLIENTS ON ALL ASPECTS OF THE SALES
PROCESS FROM SITE DUE DILIGENCE, ACQUISITION, PLANNING
AND RISK MITIGATION THROUGH TO PRODUCT MIX, PRICING,
LAUNCH, SALES AND SETTLEMENT. OUR RESEARCH-BACKED
STRATEGIES DELIVER HIGHER REVENUES AND SALES RATES,
AND BETTER RETURNS FOR OUR CLIENTS.
INSIDE
APARTMENTS /TOWNHOUSES
LEAD INDICATORS 6
10
FROM OUR CEO 4
48
INTERNATIONAL56
RESIDENTIAL INVESTMENT60DEVELOPMENT
SITES 12
COMMUNITIES16
INDUSTRY LEADER
INSIGHTS
3Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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FROM OUR CEO
KEVIN BROWN
CHIEF EXECUTIVE OFFICER
RPM REAL ESTATE GROUP
WELCOME TO RPM REAL ESTATE GROUP’S Q1 2020
RESIDENTIAL MARKET REVIEW. WE ARE PLEASED
TO SHARE THIS COMPREHENSIVE UPDATE
AND OUTLOOK FOR VICTORIA’S HOUSING AND
INVESTMENT MARKETS.
This quarter is undoubtedly one for the history
books. We saw a seismic shift in our way of life as
social distancing measures were implemented in
response to COVID-19 in March. The housing market
unsurprisingly – and rapidly – reflected growing
caution in consumer behaviour, with an immediate
drop in listings and prices from the moment the state
of emergency was declared.
Before that point, Q1 2020 results were favourable,
with the Australian market operating in seeming
isolation from the rest of the world. Lower interest
rates, decreasing unemployment and strong
population growth continued to bolster the housing
market; indeed, buyers at the time were able to
secure homes in growth corridors on mortgages
requiring no greater monthly outlay than average
middle- or inner-city rental expenses.
Gross lot sales reached an 18-month high in
February, with sales across Melbourne and Geelong
for the quarter increasing by 2.1% from the previous
period. The quarter’s sales results were promising
before the impact of COVID-19 hit the market, with
house prices until that point 12.5% higher than a
year ago, and unit prices up 9.29%.
However, from mid-March the change was abrupt.
With under-employment and unemployment levels
rising sharply (the latter expected to climb towards
the 10% mark), buyers were suddenly met with
income uncertainty and enquiry levels in land sales
reflected that. With migration such an integral
part of population growth and our local property
story, Australia’s closed borders in response to
the COVID-19 pandemic will no doubt have broad
economic impacts. Fewer migrants over the
coming months means we are likely to see a major
impact on supply and demand in the housing
sector, and consequently, downward pressure on
property prices.
4 R P M R E A L E S TAT E G R O U P
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MICHAEL STAEDLER
RESEARCH MANAGER
+61 434 619 280
While we cannot forecast the final toll of the current
circumstances with any certainty, we do anticipate
a broad-reaching slowdown across the property
industry. Purchasers, whether impacted by travel
restrictions, employment prospects or economic
uncertainty, will adjust their behaviour. However, there
will be groups for whom these market conditions,
including potentially lower prices, will be favourable.
One group is those employed in sectors that will
be unaffected, or in fact grow, as a result of the
pandemic. These potential purchasers, including
first home buyers, may have increased access to
the land market aided by more affordable product,
developer promotions, Government stimulus and
long-term employment confidence. Another group
who may benefit is englobo developers, given the
nature of greenfield projects spanning multiple
economic lifecycles, and being well-backed by
many years of previous lucrative growth to invest
in future opportunities.
Developers have an opportunity to respond to the
market, with diversity and agility more important
than ever. While we will undoubtedly face a tough few
months ahead, developers who continue to tailor
product to the wants, needs and price-points of
potential buyers will have a competitive advantage in
this market.
The reality is, we’re living through unprecedented
times. We simply can’t know all the answers. But
overly grim forecasts are premature as we can
already see innovation and opportunities burgeoning
across numerous industries. We believe it’s still a
great time to buy, and with Australia’s response to the
COVID-19 pandemic more swift and effective than
most other countries, we hope the impact of reduced
immigration is quickly negated as borders reopen and
internationals once again turn their minds to starting
a new life on our shores. Home ownership is still the
Australian dream, and Victoria will always be a great –
and very desirable – place to live.
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.
5Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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ECONOMIC ACTIVITY VIC POPULATIONGROSS DOMESTIC PRODUCT (GDP)
CONSUMER PRICE INDEX (CPI)
STATE FINAL DEMAND (SFD) - VIC
RETAIL TURNOVER - VIC
1.85%
2.19%
2.01%
6.01%
2.42%
1.33%
4.08%
4.89%
12 month change to Dec qtr. 2019
Mar-20
12 month change to Dec qtr. 2019
Mar-20
5 year average
Same month year earlier
5 year average
Same month year earlier
Source: ABS
Source: RBA
BORROWING RATESCASH RATE VARIABLE RATE
0.25 %Mar-20
Dec-19
Mar-19
Mar-20
Dec-19
Mar-19
Mar-20
Dec-19
Mar-19
Mar-20
Dec-19
Mar-19
DISCOUNTED RATE
3.91% 2.54%
4.15% 3.10%
4.68% 4.05%
3 YEAR FIXED RATE
0.75%
1.50%
4.52%
4.80%
5.37%AUS 25,464,116 VIC 6,629,870TOTAL POPULATION
NATURAL INCREASE
8,593 10,087 35,849Sep-19 Same qtr.
year earlier12 months to Sep-19
14.8%% change - same qtr. last year
12.4%% change - 12 months earlier
OVERSEAS MIGRATION
82,11324,33923,208Sep-19 Same qtr.
year earlier12 months to Sep-19
% change - same qtr. last year
% change - 12 months earlier
4.6%
3.6%
NET INTERSTATE MIGRATION
11,6292,5992,030Sep-19 Same qtr.
year earlier12 months to Sep-19
% change - same qtr. last year
% change - 12 months earlier
21.9%
16.8%
change from Sep-18 to Sep-19
% change - same qtr. last year
373,733 132,369
2.04%1.49%
NATIONAL TOTAL CHANGE VIC TOTAL CHANGE
VIC share 35%
■ Negative change ■ Positive change
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VIC EMPLOYMENTEMPLOYMENT GROWTH (JOBS CREATED)
CONSUMER SENTIMENT
BUSINESS SENTIMENT
Mar-20
Mar-20
Mar-19
Mar-19
91.9
-23.1
98.8
7.9
Source: Westpac-Melb institute
Source: RBA/NAB
The Westpac-Melbourne Institute Consumer Sentiment Index is the most widely quoted barometer of consumer sentiment in Australia. A score of greater than 100 means that optimists outnumber pessimists, with readings of below 100 indicating that pessimistic consumers are in the majority.
NAB’s Business Survey has been tracking Australian business confidence levels for more than two decades. Businesses are approached quarterly, with two smaller monthly surveys conducted in the intervening months to capture changes on a more regular basis. The panel now exceeds 2,700 businesses.
Vic contribution to AUSJobs (‘000s) % Change
5.2% 4.9% 4.6%
UNEMPLOYMENT RATE
Mar-20 Dec-19 Same time last yearSource: ABS
Source: ABS
Nov-19 May-19 Nov-18
$1,707 $1,666 $1,625WAGES
FULL TIME
12.8419.14
0.6%
0.8%
25.2%
20.3%
Dec-19 to Mar-20
Last 12 months
7.0672.67
0.2%
2.1%
15.9%
30.8%
Dec-19 to Mar-20
Last 12 months
TOTAL
PART TIME
-5.7955.53
0.5%
4.9% 37.9%
87.5%Dec-19 to Mar-20
Last 12 months
2.5% 5.1%
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7Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
MELBOURNE PROPERTY
VIC FINANCE
MEDIAN HOUSE PRICE AUCTIONS HELD CLEARANCE
3,107
2,753
3,318
Mar-20
Dec-19
Same month year earlier
MEDIAN UNIT PRICE
$641,000
$586,500
Mar-20
Same qtr. year earlier
MEDIAN LAND PRICE
$311,000
$325,500
Mar-20
Same qtr. year earlier
Source: ABS
Source: REIV
SHARE OF FHB LOANS
34.1% 28.2%Mar-20 Same qtr.
year earlier
$893,000
$861,500 $637,000 $307,000
$794,000
Mar-20
Previous qtr. Previous qtr. Previous qtr.
Same qtr. year earlier
0.6%
VALUE OF LOANS - OWNER OCCUPIERS VALUE OF LOANS - INVESTORS
$12.00B $4.44B $3.84B$9.63BMar-20 Mar-20Same qtr. year earlier Same qtr. year earlier
25% 15%
NO. OF FHBS FINANCED AVERAGE LOAN SIZE (FHBS)
8,624 $437,871 $384,1056,933Mar-20 Mar-20Same qtr. year earlier Same qtr. year earlier
24% 14%
NO. OF NON-FHBS FINANCED AVERAGE LOAN SIZE (NON-FHBS)
16,658 $493,673 $394,94917,640Mar-20 Mar-20Same qtr. year earlier Same qtr. year earlier
6% 25%
FINANCE FOR NEW DWELLINGS FINANCE FOR ESTABLISHED DWELLINGS
6,212 15,184 15,2685,244Mar-20 Mar-20Same qtr. year earlier Same qtr. year earlier
18% 1%
12.5%
3.7%
9.3%
74%
73%
56%4.5%
1.3%
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MELBOURNE PROPERTY
VIC BUILDING
VACANCY RATE - MELB MEDIAN METRO HOUSE RENT MEDIAN METRO OTHER DWELLING RENTAVERAGE DAYS ON MARKET - METRO MELB
DETACHED HOUSE APPROVALS
HOUSE COMMENCEMENTS
HOUSE COMPLETIONS
TOTAL DWELLING APPROVALS
TOTAL COMMENCEMENTS
TOTAL COMPLETIONS
2.3% 2.2%Mar-20 Mar-20Mar-19 Mar-19
Source: ABS
Source: REIV
Mar-20
Dec-19
Dec-19
Last 12 months
Last 12 months
Last 12 months
Same qtr. year earlier
Same qtr. year earlier
Same qtr. year earlier
Mar-208,705
Dec-199,195
Dec-199,579
15,604
13,316
19,241
14,610
15,496
16,309
58,609
57,446
65,291
Same qtr. year earlier3.1%8,444
Same qtr. year earlier5.4%9,718
Same qtr. year earlier2.0%9,774
OTHER DWELLING APPROVALS
OTHER COMMENCEMENTS
OTHER COMPLETIONS
Mar-206,899
Dec-194,121
Dec-199,662
Same qtr. year earlier11.9%6,166
Same qtr. year earlier28.7%5,778
Same qtr. year earlier47.9%6,535
Last 12 months8.0%23,458
Last 12 months33.8%22,077
Last 12 months9.0%28,053
6.8%
14.1%
18.0%
8.2%
19.9%
1.1%
Last 12 months8.3%35,151
Last 12 months7.8%35,369
Last 12 months4.1%37,328
$470 $430
$450 $430Mar-20 Mar-20
Mar-19 Mar-19
0.0%33 42 4.4%
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9Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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WITH MAJOR SHIFTS IN CONSUMER BEHAVIOUR
IN RESPONSE TO THE COVID-19 MEASURES,
RPM CONTINUES ITS INDUSTRY LEADERS Q&A
WITH DANIEL GRADWELL, ASSOCIATE DIRECTOR,
PROPERTY AT ANZ TO DISCUSS THE SHORT AND
LONG TERM IMPACTS OF SUCH A SIGNIFICANT
ECONOMIC EVENT ON THE HOUSING MARKET.
RPM: How did we see Victoria’s residential
property market impacted in Q1?
We saw an immediate impact on the property
market from the day the state of emergency and
lockdown restrictions were announced in response
to COVID-19. Before that, price growth in the housing
INDUSTRY LEADER INSIGHTS
R P M R E A L E S TAT E G R O U P
FEATURE STORY:
DANIEL GRADWELLASSOCIATE DIRECTOR PROPERTY AT ANZ
market was still solid in Q1, continuing to improve
upon last year’s encouraging progress, fuelled by
lower interest rates, decreased unemployment and
steady population growth.
In the Melbourne housing market, prices have already
started to fall and are likely to continue declining, with
new listings for all types of houses and greenfield
developments dropping off sharply. So far we are
seeing all segments equally affected.
Banning auctions and inspections created large
headwind, but we are seeing innovative approaches
in this space, like virtual tours and online auctions,
which may prove successful and stick around after
the physical restrictions are removed.
RPM: How will the current climate impact supply
and demand in the housing market?
I think supply and demand will likely be one of
the biggest challenges for the housing sector.
Our population growth has always been such an
important part of the story, for both the housing
market and the economy. About 60% of Australia’s
population growth in the past 10 years has come
from overseas migration, and with our borders
closed, that falls to zero immediately.
The problem is a lot of housing in Australia has
been targeted to a projected population level, and
with 200,000 to 250,000 fewer migrants over the
next 12 months, the demand for housing will shift
significantly. This will likely put downward pressure
on prices, and the longer migration is impinged, the
greater the impact on the housing sector.
There may be some winners in that scenario, however,
like first home buyers. Over the past 20 years the
housing market has been somewhat inflated, and
there’s been a decline in younger people (under 35)
entering the housing market. Lower migration and
easing housing prices may be an opportunity for this
demographic to enter, but only for those who remain
gainfully employed.
RPM: What are other key economic indicators
telling us?
From an economic point of view, the labour market
is the most important. Employment levels are an
immediate indicator, and while key economic data
often lags, the Australian Bureau of Statistics (ABS)
has started releasing new data sets specific to
COVID-19 which helps firm up the bigger picture. We
can already see by the start of April the total number
of people employed had fallen by around 6%, with a
similar drop in overall incomes too.
Rising unemployment will impact the broader
economy as well as property, and we are likely to see
workers at the ends of the age spectrum being hit
disproportionately hard. Longer term we may need to
look at retraining people in different industries, given
the stark impacts on certain sectors to date and the
possibility of longer-term shifts across spending
10
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PRIC
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ROW
TH %
ANN
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ROLL
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SUM
- 00
0’S
Sydney
Change in population
Melbourne
Net overseas migration Natural increase
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20
State of emergency announced
0
50
100
150
200
250
300
350
400
450
500
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
DANIEL GRADWELL
Source: CoreLogic, ANZ Property
Source: ABS, ANZ Research
EMPLOYMENT DATA IS KEY TO WATCH. IT’S A GREAT INDICATOR OF PEOPLE’S EVERYDAY LIVES, AND THE IMPLICATIONS ARE FAR-REACHING.
patterns. It will be important for the Government to
have the right education and training programs in
place, as well as investing in infrastructure and major
projects to boost the economy.
RPM: What’s the outlook in the coming months
and longer term?
We’re already seeing people’s spending patterns
change significantly. Places like supermarkets are
doing really well, with spend up 15% from a year
ago, while of course the hospitality industry in
particular is suffering, dropping by around 50%.
From a broad economic point of view, that sort of data
is really interesting. We may even see preferences
change as industries reopen, and we’ll see spending
patterns shift completely from what we had before.
In the housing market, it’s hard to see anything other
than lower prices in the short to medium term as
demand is hit by rising unemployment and the lack of
population growth. The extent of the falls will depend
on the number of forced sellers who need to offload
their property in a hurry, and when restrictions on
migration are lifted.
We strongly expect that population growth will rebound
in time. Australia is an attractive place to live and long
term that won’t change. Our handling of the COVID-19
situation has so far been respectable compared with
many parts of the world, so that in itself may clear the
way for migration to improve.
There was an immediate impact to the housing market when the state of emergency was declared in response to COVID-19.
Migration is the key driver behind population growth, which in turn drives demand in the housing market.
11Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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R P M R E A L E S TAT E G R O U P
DEVELOPMENTSITES
OVER THE PAST FEW MONTHS COVID-19 HAS
UNDENIABLY WREAKED HAVOC ON GLOBAL
MARKETS. WHILE THE DATA IS CHANGING
RAPIDLY, THE IMMEDIATE IMPACT TO BUSINESSES
AND SUBSEQUENTLY EMPLOYMENT RATES HAS
BEEN STARK.
The start of 2020 saw the englobo development
market maintain its strong resurgence continuing
from December quarter 2019, with a wide range of
buyers aggressively chasing opportunities,
particularly those with approved precinct plans.
This was demonstrated when, in January, a 12 hectare
site in Officer was purchased for $26 million, the
highest rate ever for a medium-scale development
site in this area. The sale was executed on cash terms
indicating confidence around both the market and
forecast sales for the immediate period. However
by March 2020 transactions rates had stalled, with
investors anticipating potential impacts on the
Australian economy.
In that month alone we saw a dual cash rate reduction
to a record low of 0.25%, significant changes to fiscal
OVERVIEW
12
CHRISTIAN RANIERIDIRECTOR, TRANSACTIONS & [email protected]+61 416 445 078
and monetary policy, and dramatically reduced
business activity across a large number of industries.
Across the board, transaction levels drastically
reduced as purchasers began facing the unknown
in terms of the immediate and medium-term impacts
of COVID-19. Even experienced investors, who
survived previous downturns, began to take leave
from the market to focus on pressing demands on
existing projects and investments, particularly
those companies impacted by the drop in the
Australian Stock Exchange.
WHILE THERE IS LITTLE DOUBT THE PROPERTY INDUSTRY WILL BE IMPACTED BY COVID-19, WE ANTICIPATE THERE WILL BE OPPORTUNITY FOR PROTRACTED PROSPERITY IN THE DEVELOPMENT SITE SPACE, WITH PREVIOUSLY SUCCESSFUL INVESTORS WELL-BACKED TO ACQUIRE LAND DURING THE DOWNTURN WITH A LONG-TERM DEVELOPMENT VIEW.
When we consider the current situation in relation
to the Global Financial Crisis (GFC) in 2008-2009,
we garner some insight on how the situation may
unfold in relation to the property and development
industries. In Australia during the GFC, despite
economic growth slowing and unemployment rates
rising, banks had little exposure to the flailing US
property market and our economy was supported
by a large export boom to the emerging China market.
Conversely, the COVID-19 pandemic has broader-
reaching flow-on effects. Without the option to
leverage the strength of international markets to
reverse the downswing in the economy and Australian
dollar, it may result in a prolonged downturn.
The post-GFC property boom may be another
indicator in predicting the outcomes of the current
climate. At that time, house prices in Australia were
relatively low, and following significant cuts to the
official cash rate as well as a strong government
stimulus package, confidence within the business
community buoyed, employment rose, and industries
such as property benefited.
Fast forward to December 2019, and house prices
were higher than ever. According to Domain figures,
median house prices in Sydney and Melbourne rose
to $1.14 million and $901,951 respectively. Coupled
with high household debt and an impending rise in
unemployment rates, there is significant risk to the
housing market broadly. However, as with the GFC,
stimulus packages and a lowered cash rate have the
potential to support the market’s recovery in the
medium to long term.
While the impacts of this situation will transcend the
property market, the englobo space is somewhat
insulated by the sheer nature of land development
sites. Conditioned by historically long project
lifespans that encompass multiple economic cycles,
as well as benefiting from recent lucrative growth,
many developers are well positioned to capitalise
on future opportunities. Recognising a potential
reduction of competition in the market due to the
uncertainty caused by COVID-19, savvy investors
have already increased their focus on securing
projects in the short term.
13Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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The reality is all industries will be impacted by the
current conditions. We’re already seeing listed
groups take a more conservative approach, as
we anticipate impact on a broad economic scale
comparative to World War II in terms of consumer
sentiment, spending, GDP and business continuity.
With billions in private lending currently deployed
to the development and construction sector, and
making up a huge proportion of private investment
in englobo land development, the secondary debt
market will no doubt be apprehensive. If property
sales, construction and settlements slow, and
valuations reduce significantly against secured
assets, these groups may remain supportive in the
short term, but there is potential for this to shift.
As investors seek to recall these loans, land values
may be reduced as distressed buying puts downward
pressure on overall values – providing favourable
conditions for developers who are well-placed to
buy. This type of market cycle has previously proved
lucrative for seasoned land developers who can see
the medium-term recovery and longer-term uplift in
the englobo land market.
Home ownership is the Australian dream. While
dramatic changes to household and business
balance sheets will likely trigger declines in house
prices and increase mortgage stress, we anticipate
the property industry will continue to play a major role
in the Australian economy. The industry’s recovery,
and stabilisation of property prices, is dependent on
numerous factors over the coming months.
Given employment is so intrinsically linked to
property ownership, Federal and State Government
stimulus decisions will play an important role in the
endurance of this sector. Equally, industry-specific
stimulus such as a first home buyer package, coupled
with low interest rates, could help pivot the trend to
deliver a much needed boost to sales.
The flow-on effects of COVID-19 on the economy
as a whole, coupled with the anticipated lagging
effect on the property industry, signifies that we
may see impacts from this crisis for a long time yet.
We simply don’t know what the ‘new normal’ is yet,
but our economy, and the property industry, has
rebounded before.
OUTLOOK
R P M R E A L E S TAT E G R O U P14
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SAVVY INVESTORS HAVE ALREADY INCREASED THEIR FOCUS ON SECURING PROJECTS IN THE SHORT TERM
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OVERVIEW
COMMUNITIES
MARCH 2020 WILL FOREVER BE DEFINED BY
THE RAPID CHANGES THAT OCCURRED ALMOST
IMMEDIATELY AFTER THE IMPLEMENTATION OF
RESTRICTIVE SOCIAL DISTANCING MEASURES
TO MITIGATE THE SPREAD OF COVID-19. BUT THE
FIRST QUARTER OF 2020 HAD IN FACT BEEN A
PROMISING ONE FOR THE HOUSING MARKET IN
THE MONTHS PRIOR TO THIS SEISMIC SHIFT.
Prior to the impact on vacant lot demand in the last
two weeks of the three month period, the rebound in
sales activity that emerged during the second half of
2019 had continued to strengthen. This was evident
as gross lot sales were higher in January compared
with the similarly seasonally impacted month prior,
followed by gross lot sales in February reaching an
18-month high. This trend was on track to escalate
further in March, based on sales activity during the
first half of the month.
16 R P M R E A L E S TAT E G R O U P
LUKE KELLYDIRECTOR, [email protected]+61 400 688 520
MELBOURNE’S MEDIAN LOT PRICE RECORDED A
MODERATE RISE OVER MARCH QUARTER 2020
TO $311,000.
PER SQUARE METRE LOT PRICE INCREASED BY
1.3%. THE MEDIAN LOT SIZE REMAINED
STATIC AT 400SQM.
$311,000
400sqm
Subsequently, gross sales across Melbourne and
Geelong growth areas increased by 2.1% from the
previous quarter to 3,363 lots in March quarter 2020,
despite the abrupt shift in new house demand midway
through March. This was also the highest quarterly
result since September quarter 2018.
Titled lots continued to account for a significant
proportion of gross sales, estimated at 37%
throughout the March quarter 2020. This reduced the
requirement for new supply to drive sales activity, as
evidenced by releases for the March quarter being
somewhat lower at 2,585 lots while overall sales
remained almost identical to the previous quarter.
From the second half of March, purchaser sentiment
weakened in response to the surge in job losses and
incomes impacted by COVID-19. This manifested in
falling new enquiry levels across the Melbourne and
Geelong growth areas, which contracted by almost
half, and in turn slowed sales activity considerably.
This is supported by data from the Australian Bureau
of Statistics (ABS) which showed approximately
26,700 employed Victorians worked fewer hours in
March compared to February due to lack of work
or stand downs. Furthermore, there was a spike in
workers taking annual and long service leave, which
cannot be attributed to holidays given the ban on
international and domestic leisure travel.
Another indication of demand deteriorating was the
level of unsold stock on the market at the end of
March, exceeding the February number by over 400.
This was a reverse of the trend seen in the previous
four months where lot absorption outpaced new lot
supply and excess lots on the market reduced.
17Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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OVERVIEW
% OF TOTAL GROSS LOT SALES
MELBOURNE GROWTH CORRIDORS
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0
50
100
150
200
250
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
March quarter 2020 March quarter 2019 March quarter 2018
Gross lot sales
Median lot price
380
385
390
395
400
405
410
415
420
425
430
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
$325>
$301-
$325
$275-
$300
$251-
$275
<$250
0% 10% 20% 30% 40% 50%
Source: RPM
18 R P M R E A L E S TAT E G R O U P
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% CONTRIBUTION TO TOTAL GROSS LOT SALES
MARCH QUARTER 2020
MARCH QUARTER 2019
WESTERN NORTHERN SOUTH EAST
GREATER GEELONG
March quarter 2020 median lot price $308,000 $299,000 $331,000 $278,900
Change from March quarter 2019 -$8,450 -$11,000 -$23,500 $2,950
% change from March quarter 2019 -2.7% -3.5% -6.6% 1.1%
March quarter 2020 median lot size 394.0 400.0 392.0 448.0
Change from March quarter 2019 -6.0 5.0 -8.0 0.0
% change from March quarter 2019 -1.5% 1.3% -2.0% 0.0%
March quarter 2020 gross lot sales 1,323 761 806 473
Change from March quarter 2019 523 266 415 82
% change from March quarter 2019 65.4% 53.7% 106.1% 21.0%
March quarter 2020 sales contribution 39.3% 22.6% 24.0% 14.1%
March quarter 2019 sales contribution 38.5% 23.8% 18.8% 18.8%
March quarter 2020 active estates 91 54 45 37
Change from March quarter 2019 12 9 5 6
March quarter 2020 lot releases 1,028 558 635 364
Change from March quarter 2019 104 183 113 15
% change from March quarter 2019 11.3% 48.8% 21.6% 4.3%
March quarter 2020 no. of trading days 189 180 145 166
Change from March quarter 2019 -25 -27 -137 -61
% change from March quarter 2019 -12% -13% -49% -27%
Casey 20%
Cardinia 4%
Hume 11%
Whittlesea 6%
Sunbury & Macedon 3%
Mitchell 3%
Wyndham 16%
Melton 22%
Moorabool 1%
Greater Geelong 14%
Casey 16%
Cardinia 4%
Hume 12%
Whittlesea 8%
Sunbury & Macedon 2%
Mitchell 3%
Wyndham 17%
Melton 21%
Moorabool 2%
Greater Geelong 16%
19Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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PORT PHILLIP BAY
WYNDHAM
MELTON
MOORABOOL
WESTERN GROWTH CORRIDOR
THE PROPORTION OF TOTAL LOT SALES FOR THE
WESTERN GROWTH CORRIDOR IMPROVED TO 39% IN
MARCH QUARTER 2020, ENDING THE DECLINING TREND
UNFOLDING SINCE LATE 2018.
While this share is still relatively low compared to its
high of 49%, it was a 9% uplift from the previous quarter,
with 1,323 gross lot sales in March quarter 2020. This
growth occurred exclusively in Melton, with sales activity
continuing to contract in Wyndham and Moorabool.
While the increase in new lot supply was lower by 5% with
1,028 releases, the volume of unsold stock across the
Western growth corridor still increased further by the
end of March to approximately 2,740 lots. This was
attributed to cancellations, which picked up notably
in the second half of March after purchaser sentiment
deteriorated substantially in response to the impacts
on job and wage security following the introduction of
COVID-19 social distancing measures.
A high level of overhang stock continues to restrain price
growth. While the median lot prices of Wyndham and
Melton both recorded quarterly growth of 3%, much of
this increase was derived from larger median lot sizes.
As a result, per square metre lot prices improved marginally
in Wyndham but contracted in Melton.
20 R P M R E A L E S TAT E G R O U P
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ITIE
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PORT PHILLIP BAY
WYNDHAM
MELTON
MOORABOOL
PETER GRANTDIRECTOR, [email protected]+61 411 494 499
0
500
1,000
1,500
2,000
2,500
0
5
10
15
20
25
30
35
40
45
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
380
385
390
395
400
405
410
415
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
WYNDHAM
Gross sales in Wyndham remained steady at 546
lots throughout March quarter 2020, edging down by
less than 1% from the previous quarter. However, this
reduction is coming off already low sales activity levels
for Wyndham, leading to new supply experiencing a
larger decline of 9.3% to 350 lot releases.
Some upward pressure was applied to lot prices as
demand outpaced new releases, leading to a quarterly
3.2% rise in the median lot price to $320,000. Although
part of this price growth has been derived from a
corresponding 2% increase in the median size of lots
sold during March quarter 2020 to 400sqm.
The improvement in gross lot sales has mostly been
underwhelming across Wyndham, compared to
other growth areas, during the short-lived recovery
cycle for vacant lot demand from the second half
of 2019 to early 2020. This is likely to be influenced
by increasingly scarce availability of lots for sale in
the sought-after sub-market of Point Cook/Williams
Landing, with their few active estates almost complete.
New house demand within Point Cook/Williams
Landing originated from a relatively wider expanse of
suburbs than sub-markets traditionally derive from,
including suburbs outside the Wyndham corridor.
Consequently, it is more likely demand from these
buyers has shifted to other growth areas rather than to
other estates within Wyndham.
21Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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WESTERN GROWTH CORRIDOR
0
200
400
600
800
1,000
1,200
1,400
1,600
0
10
20
30
40
50
60
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
320
330
340
350
360
370
380
390
400
410
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
MELTON
Melton recorded the highest number of gross sales
with 730 lots in March quarter 2020. This equated
to significant growth in sales activity up 20% from
the previous quarter, and more notably, represented
the only quarterly increase in sales activity in a
Melbourne growth area.
The high number of active estates in Melton rose by
a further two in March quarter 2020, which ensured
ample new supply to meet purchaser demand, as
an additional 596 new lots were released onto the
market during the three month period. Furthermore,
new supply is encompassing a diversified product
offering to capture more segments of demand.
Relatively affordable conventional lot prices in Melton
make them attainable to purchasers. However, its
median lot size of 385sqm was the smallest for a
growth corridor and was also the fourth consecutive
sub-400sqm figure for a quarterly period. This
highlights small lots and medium density products
continuing to feature prominently in sales volumes.
Nevertheless, the median lot size is still 5% above the
previous quarter, which underpinned a 3% escalation
in Melton’s median lot price to $298,000 in March
quarter 2020.
22 R P M R E A L E S TAT E G R O U P
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ITIE
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ROD ANDERSONDIRECTOR, [email protected]+61 417 595 859
0
20
40
60
80
100
120
140
160
180
200
0
1
2
3
4
5
6
7
8
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
0
100
200
300
400
500
600
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
MOORABOOL
New supply in Moorabool almost doubled from
the previous quarter to 82 lots in March quarter
2020. However, this did not initiate an escalation
in sales activity, with gross sales declining by
7.8% to 47 lots.
It seems new lot releases missed the mark in
capturing purchaser preferences. This is highlighted
by the 533sqm median lot size in March quarter
2020 being significantly larger than the 448sqm
median size of those sold during the same period
last year. Unsurprisingly, lots released in the March
quarter accounted for under a third of sales during
the period.
The resultant 6.7% reduction in the median lot size
led to a commensurate quarterly decline of 6.3%
in the median lot price to $225,250. Notably, this
was the largest fall in median lot price across all
Melbourne growth areas.
23Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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NORTHERN GROWTH CORRIDOR
THE NORTHERN GROWTH CORRIDOR RECORDED
THE GREATEST QUARTERLY DECREASE IN
SALES ACTIVITY IN MARCH QUARTER 2020,
REDUCING GROSS SALES BY 8% TO 761 LOTS.
CONSEQUENTLY, THE CORRIDOR’S PROPORTION
OF TOTAL GROSS LOT SALES DECLINED TO 23%.
NEVERTHELESS, LOT SALES STILL OUTPACED NEW
SUPPLY, AS TOTAL RELEASES INCREASED ONLY
MODERATELY BY 3% TO 558 LOTS.
Titled lots continued to account for a greater share
of gross sales in Hume and Mitchell compared to all
other growth areas. This reduced the need for new
supply to match lot absorption and has also impacted
on median lot prices, with the annual median lot price
correction of 11.4% in Hume and 8.9% in Mitchell
surpassing other growth areas.
Despite containing more active estates, new supply
in Whittlesea remains below that for Hume, in
response to weak purchaser demand. This has led
to the greatest per square metre lot price contraction
of 7% in Whittlesea.
Sunbury and Diggers Rest have been removed from
the Hume region and joined newly added growth
areas within Macedon to form the new Sunbury &
Macedon region. These peri-urban areas are distinct
from the Hume growth areas, containing different
price points and demand drivers. The Sunbury &
Macedon growth area was formed to better examine
and understand movements within its new house
market. This will be increasingly important given the
recent approval of the Precinct Structure Plans of
Sunbury South and Lancefield Road as numerous
estates come onto the Sunbury market.
24 R P M R E A L E S TAT E G R O U P
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MM
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ITIE
S
LUKE KELLYDIRECTOR, [email protected]+61 400 688 520
0
100
200
300
400
500
600
700
800
900
0
2
4
6
8
10
12
14
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
370
380
390
400
410
420
430
440
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
HUME
Hume’s median lot price witnessed the largest annual
contraction of 11.4%, declining to $299,000 in March
quarter 2020. Significantly, this was the first quarterly
period in almost three years that the median lot
price for Hume dropped below the $300,000 mark.
Moreover, this fall was not in response to purchaser
preferences shifting to smaller lots as the median lot
size remained static at 400sqm, resulting in the same
rate of decline for per square metre lot prices.
The fall in the median lot price was primarily attributed
to Hume’s continued relative high incidence of titled
lots amongst its gross sales, given titled lots are
generally priced at a slight discount to new release
stock. This was evidenced with Hume containing the
highest number of titled lot sales, which accounted for
40% of total gross sales in March quarter 2020.
As a result, sales activity is less reliant on the timely
release of new lots. Subsequently, new supply remains
markedly under lot absorption despite increasing by
a sizeable 33% from the previous quarter to 222 lot
releases. Overall, Hume recorded 378 gross lot sales
in March quarter 2020, which was marginally below
December quarter 2019.
25Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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ITIE
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NORTHERN GROWTH CORRIDOR
0
50
100
150
200
250
0
2
4
6
8
10
12
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
0
100
200
300
400
500
600
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
MITCHELL
Mitchell recorded the largest quarterly decrease in
sales activity of 18.3%, with gross sales falling to 89
lots in March quarter 2020. The drop in purchaser
demand led to corresponding declines of 11.7% for
new releases, totalling just 68 lots, and 3.6% for the
median lot price, reducing it to $265,000.
Almost half of gross sales in March quarter 2020 were
titled lots, which placed further downward pressure
on lot prices, as the price of these lots are generally
discounted compared with similar sized newly
released lots.
26 R P M R E A L E S TAT E G R O U P
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UN
ITIE
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PETER GRANTDIRECTOR, [email protected]+61 411 494 499
0
100
200
300
400
500
600
700
800
900
0
5
10
15
20
25
30
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
320
330
340
350
360
370
380
390
400
410
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
WHITTLESEA
Gross sales in Whittlesea experienced one of the
largest quarterly falls, declining by 17.6% to 187 lots
over the March quarter 2020. This follows a relatively
weak recovery in sales activity during the second
half of 2020. In response, new supply continues to
diminish, slipping by 5.9% to 127 lot releases for
the quarter.
While the 6% quarterly growth in the median lot
price to $317,000 in March quarter 2020 belies the
weakness in purchaser demand, it was underpinned
by a higher rate of growth in the median lot size of
14%. Subsequently, per square metre lot prices
declined by 7%, resulting in the greatest reduction
amongst all growth areas, and reflective of the
current subdued demand levels.
27Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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ITIE
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NORTHERN GROWTH CORRIDOR
0
20
40
60
80
100
120
140
160
180
200
0
1
2
3
4
5
6
7
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
0
100
200
300
400
500
600
700
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
SUNBURY & MACEDON
Sunbury and Diggers Rest have been removed from
the Hume region and joined newly added growth
areas within Macedon to form the new Sunbury &
Macedon region.
New supply contracted by 14% in March quarter 2020
from the previous quarter down to 141 lot releases. It
remained higher than the 107 gross lot sales, which
experienced a corresponding fall of 3.6%. Notably,
the median lot size of 392sqm in Sunbury & Macedon
was the smallest amongst the Northern growth
corridor, with the 2.5% reduction in size leading to a
0.7% contraction in the median lot price to $287,000.
28 R P M R E A L E S TAT E G R O U P
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ITIE
S
DESPITE THE DROP OFF FROM MID-MARCH, GROSS SALES ACROSS MELBOURNE AND GEELONG EXPERIENCED THE HIGHEST QUARTERLY RESULT SINCE 2018
29Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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CASEY
CARDINIAPORT PHILLIP BAY
SOUTH EAST GROWTH CORRIDOR
THE SOUTH EAST GROWTH CORRIDOR’S SHARE OF
OVERALL GROSS LOT SALES IN MARCH QUARTER
2019 DECLINED TO 24%, WITH SALES FALLING BY
7% FROM THE PREVIOUS QUARTER TO 806 LOTS.
Casey and Cardinia’s median lot prices ($327,000
and $345,000 respectively) are still the most expensive
among all growth corridors, and in March quarter 2020
experienced the highest annual growth in gross lot
sales of 113% and 81% respectively.
This growth in sales activity has been underpinned by
relative affordability in March quarter 2020 being
much improved from the corresponding quarter in
2019 in Casey, highlighted by the 6% contraction
in per square metre lot prices, and aided further
by increasing new lot supply. Conversely in Cardinia,
relative affordability has deteriorated and new lot
supply has fallen throughout March quarter 2020, with
lot sales derived mostly from the jump in active estates.
30 R P M R E A L E S TAT E G R O U P
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UN
ITIE
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CASEY
CARDINIAPORT PHILLIP BAY
ROD ANDERSONDIRECTOR, [email protected]+61 417 595 859
0
100
200
300
400
500
600
700
800
900
1,000
0
5
10
15
20
25
30
35
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
360
370
380
390
400
410
420
430
440
450
460
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
CASEY
Casey added two estates in March quarter 2020,
however, the completion or inactivity of other estates
led to the overall number of active estates reducing
by one to 32. Still, this relatively high number of active
estates supported a modest improvement in new
releases of 6.5% to 561 lots.
Furthermore, with titled lots constituting a
diminishing share of lot sales in the March quarter,
new lot supply was increasingly important in
stimulating sales activity. Gross sales ended at 663
lots, and while this equated to a 6.5% quarterly fall, it
was still the second highest amongst all growth areas.
Continuing improved relative affordability for a house
and land package has also been key to driving sales
activity. Although only declining marginally by less
than 1%, the subsequent median lot price of $327,000
was a near three year low for Casey. With the median
lot size also remaining static at 392sqm, it is resulting
in more attractive price points for lot sizes.
31Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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MM
UN
ITIE
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32 R P M R E A L E S TAT E G R O U P
SOUTH EAST GROWTH CORRIDOR LUKE KELLYDIRECTOR, [email protected]+61 400 688 520
0
50
100
150
200
250
300
350
0
2
4
6
8
10
12
14
16
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
0
100
200
300
400
500
600
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
CARDINIA
New releases in Cardinia recorded the largest
quarterly decline of 45% in the March quarter,
reducing to just 74 lots. This occurred despite an
additional active estate lifting the total to a three year
high of 13.
The reduction in sales activity to 143 gross lot
sales was significantly less at 9%, with the widening
divergence between lot releases and lot absorption
maintaining Cardinia’s status at the most expensive
vacant lot market across the greenfield markets of
Melbourne and Geelong.
While the median lot price in Cardinia was steady
at $345,000, upward pressure resulted in solid per
square metre lot price growth following a sizeable
6.3% decrease in the median size to 400sqm.
33Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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GREATER GEELONG
PORT PHILLIP BAY
GREATER GEELONG GROWTH CORRIDOR
THE RECOVERY IN THE NEW HOUSE MARKET THAT
STARTED DURING THE SECOND HALF OF 2019 IN
MELBOURNE EMERGED MORE NOTABLY ACROSS
GREATER GEELONG’S GROWTH AREAS IN MARCH
QUARTER 2020. SUBSEQUENTLY, GROSS SALES
ESCALATED BY 22% TO AN 18 MONTH HIGH OF 473
LOTS DURING THIS PERIOD, WHICH ALSO LIFTED
SHARE OF TOTAL GROSS LOT SALES TO 14%.
New supply outpaced sales activity in the previous
quarter, augmenting the build-up of unsold lots on the
market through 2019. As a result, these lots absorbed
some of the vacant lot demand in March quarter
2020, reducing the need to increase new supply to
align with lot sales. Consequently, releases declined
by 8% over the quarter to 364 lots.
Overhang stock also offset any upward pressure
on prices from improving demand, with Greater
Geelong’s median lot price edging down marginally
to $278,900 in March quarter 2020 and its median lot
size unchanged at 448sqm.
34 R P M R E A L E S TAT E G R O U P
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GREATER GEELONG
PORT PHILLIP BAY
PETER GRANTDIRECTOR, [email protected]+61 411 494 499
0
100
200
300
400
500
600
0
2
4
6
8
10
12
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
370
380
390
400
410
420
430
440
450
460
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
ARMSTRONG CREEK
In Armstrong Creek, both new supply and sales
activity escalated by around 25% in March quarter
2020 from the previous quarter, lifting to 201 lot
releases and 224 gross lot sales. This was assisted
by active estates rising by two to a total of 11.
As a result of supply closely matching demand, the
median lot price for Armstrong Creek remained
unchanged at $271,900 in March quarter 2020, with
the median lot size also static at 400sqm.
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50
100
150
200
250
300
350
400
450
0
2
4
6
8
10
12
14
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
400
420
440
460
480
500
520
540
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
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ROD ANDERSONDIRECTOR, [email protected]+61 417 595 859
0
20
40
60
80
100
120
140
0
1
2
3
4
5
6
7
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
0
100
200
300
400
500
600
700
800
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
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0
20
40
60
80
100
120
140
0
1
2
3
4
5
6
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
0
100
200
300
400
500
600
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
LARA
The 27.8% quarterly jump in sales activity translated
into 101 gross lot sales in Lara over March quarter
2020, which was also its highest total in two and a half
years. The majority of lots sold were existing stock,
with new supply declining by 69% to just 44 lots.
A 1.9% correction in the median lot price to $257,900
resulted in Lara maintaining its status as the most
affordable growth area in Geelong. This was below
a 7.4% reduction in the median lot size to 396sqm.
As a result, per square metre lot prices increased.
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LUKE KELLYDIRECTOR, [email protected]+61 400 688 520
0
20
40
60
80
100
120
140
0
1
2
3
4
5
6
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
NUM
BER
OF
ESTA
TES
GRO
SS L
OT
SALE
S
Active estates New estates
Median lot size
Gross lot sales
Median lot price
0
100
200
300
400
500
600
700
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
MED
IAN
LOT
PRIC
E ($
)
MED
IAN
LOT
SIZE
(SQ
M)
Source: RPM
TORQUAY
Sales activity improved to 25 lots in Torquay over
March quarter 2020, outpacing the total new releases
of 16 lots, which fell by 58% from the previous quarter.
Vacant lot demand shifted to smaller, more affordable
lots, with the median lot price contracting by 5% to
$415,000 and the median lot size shrinking by 7.8%
to 448sqm.
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OUTLOOK While the projected depth of the contraction in the
economy will not be unprecedented, the speed of
the contraction will be, with the Reserve Bank of
Australia forecasting a 10% fall in national gross
domestic product (GDP) over the first half of 2020.
Much of this decline is expected during June quarter
2020, where social distancing measures to mitigate
the spread of COVID-19 will be at their most restrictive,
and subsequent impacts to the economy will be
most severe.
There was a 180-degree direction change in the new
housing market during March, with strengthening
purchaser demand collapsing virtually overnight. For
the residential market, further impacts on employment
and income from April will be most pertinent to the
level of purchaser demand and how that translates to
sales activity going forward. We anticipate that while
the $130 billion JobKeeper initiative is projected to
save six million jobs and alleviate income reductions,
this stimulus package will drive very little sales activity
in the residential market.
Owner occupiers are expected to be the dominant
vacant lot buyers for the remainder of 2020, following
a strong 77% representation in the March quarter, with
April indicating similar proportions. While investors
may be put off in the short term by the uncertainty in
the rental market and expected rent declines in 2020,
purchasing a new dwelling in growth areas is currently
more advantageous as the long settlement means
they will avoid having to compete for tenants in a
weaker rental market given the temporary
cessation of migration and tourism.
The current situation is creating a buyer’s market.
With the increase of titled stock available providing
significantly shorter settlements, potential buyers
who were previously priced out of the market may
be in a favourable position to enter the market in the
short to medium term. And with more smaller stock
on the market for the first time in two years, as well as
the continuation of rebates and incentives, first home
buyers who retain employment security during this
period have an opportunity to secure an affordable
foot on the property ladder.
IT IS MORE IMPORTANT THAN EVER THAT DEVELOPERS RESPOND TO CHANGING CUSTOMER NEEDS BY PROVIDING DIVERSE AND INNOVATIVE PRODUCTS TO CATER TO HEIGHTENED PRICE SENSITIVITY, WITHOUT COMPROMISING ON QUALITY. While we are seeing demand shift to smaller lots and
lower price points, buyers are not willing to give up on
amenities, location and fit-out. There is opportunity
for developers to meet the market, with affordable
packages and remaining open to negotiation.
While predicting the full impact of the COVID-19
pandemic on the residential market is impossible
given the lack of precedent for this economic
situation on a global scale, we believe a number
of factors will shape the outcome of 2020. Gross
lot sales in March and April were 1,045 and 638
respectively. The result for April aligns with the lowest
point in the previous cycle (first six months of 2019),
and if Melbourne and Geelong growth areas were
to average this in upcoming months, it would slash
the annualised sales rate by a third. However, results
hinge on multiple variables including the impact of
the JobSeeker and JobKeeper initiatives, breadth of
job losses and income reductions, reintroduction of
immigration and tourism, and ultimately consumer
sentiment and resulting behaviour. We anticipate the
June quarter 2020 will provide key indicators for the
property market moving forward.
The new housing market will no doubt be impacted in
the coming months, but with gradually rising enquiry
levels occurring in April, we are optimistic. With
historically low borrowing costs setting the stage for
the next two to three years, and Australia’s relatively
efficient containment of COVID-19, our country’s
appeal as a place to buy and live in remains strong.
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WHAT DOES A 400SQM LOT COST?March quarter 2020
Officer $349,000 Pakenham $310,000
Geelong $340,000
Lara $252,900
Berwick $428,000
Clyde $344,500
Clyde North $315,000
Officer South $342,000
Cranbourne $330,000
Craigieburn $370,000
Greenvale $410,000
Kalkallo $280,000
Donnybrook $298,000
Wollert $339,450
Doreen $307,500
Beveridge $239,000
Wallan $230,000
Sunbury $265,000
Diggers Rest $297,000
Bacchus Marsh $215,000
Strathulloh $269,000Weir Views $259,000
Mt Atkinson $333,000
Mambourin $295,000
Manor Lakes $288,000
Mount Cottrell $336,900
Tarneit $322,950 Truganina $367,000
Werribee $280,000
Wyndham Vale $294,000
Rockbank $317,000
Thornhill Park $309,000 Deanside $346,000
Taylors Lakes $438,000
Bonnie Brook $347,000Kurunjang $250,000 Fraser Rise $337,000
Mickleham $272,000
Junction Village $368,000
Cranbourne East $329,500
Cranbourne South $369,000
Armstrong Creek $277,000
Torquay $380,000
Bellarine $252,000
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COMMUNITIES BUYER SURVEY DATA
The share of owner occupiers purchasing in the
land market remained elevated in the March quarter
2020 at 77%, in line with the same period in 2019, but
above the long-term level of around 65%. This figure
highlights the proliferation of first and subsequent
home buyers in the past 12-18 months, given the
absence of overseas and local investors in the
Melbourne land market.
First home buyer prevalence has fallen marginally in
the greenfield space since last year, yet interestingly,
the share of subsequent home buyers increased
somewhat. This highlights that those buyers regained
confidence to sell into the established market, and
upgrade into the growth corridor. Favourable to
buyers in the March quarter 2020 were historically
low borrowing costs which in many cases allowed
first home buyers, particularly those renting in the
middle and inner suburbs, to purchase in a growth
corridor without having their new mortgage exceed
their previous rental expense. RPM’s survey data
underlines this, showing an increase of 11% in renter
buyers in the land market compared with this quarter
last year.
Trends showed an uplift in older demographics
entering the greenfield market, so we see not only
the increasing presence of subsequent buyers,
but also the age of first home buyers continues to
increase. With an older population of purchasers
across the board, it’s unsurprising the data reveals
an elevation in household income. In the March
quarter 2020, 51% of purchasers reported a
household income above $100,000, up from 29% a
year earlier. Further still, these households reported
the primary income earner as being employed as a
‘professional’, increasing from 23% to 45% over the
two quarters.
Until mid-March the market was largely unaffected by
the ramifications of COVID-19, operating in relative
isolation to the rest of the globe.
45% OF BUYERS WERE PREVIOUSLY RENTING,
A SIGNIFICANT LIFT FROM 34% IN MARCH
QUARTER 2019.
HOUSEHOLDS OF THREE OR MORE OCCUPIERS
INCREASED TO 46%, IMPACTING TYPE AND
SIZE OF BUILDS.
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42 R P M R E A L E S TAT E G R O U P
However, the pronounced change came quickly. It
occurred alongside increasing shutdown measures
and subsequent impacts to the workforce, including
widespread stand-downs and redundancies.
In general, we anticipate a slowdown in overall
buyer activity for at least the next two quarters. The
impact on buyers is likely to be non-discriminatory.
For instance, we expect first home buyers and
investors to be more conscious of taking on debt,
while upgraders and downsizers will be cautious
about selling their existing home in a depressed
market with unknown demand levels.
Nevertheless, we do not believe activity in the
property market will come to a complete standstill.
While there are many industries that have been
impacted, there will be prospective buyers who are
employed in largely unaffected or growing sectors,
including healthcare, government departments and
essential services. These potential purchasers will be
gainfully employed and have access to an abundant
land market – with lots both titled and untitled –
and developers likely to be open to negotiation.
In addition, first home buyers will be boosted by
considerable existing savings through stamp duty
removal, grants and the newly established
First Home Loan Deposit Scheme. There is also
potential for further first home buyer assistance,
as witnessed in previous downturns, to assist in
stimulating the property industry, and by extension,
the wider economy.
THE DROP OFF IN BUYER ACTIVITY CAUSED BY COVID-19 WILL NOT BE LIMITED TO ANY PARTICULAR BUYER TYPE.
OVER HALF OF ALL PURCHASERS REPORTED A
HOUSEHOLD INCOME ABOVE $100,000.
REALESTATE.COM DROPPED FROM 22%
TO 11% AS THE PRIMARY ADVERTISEMENT
SOURCE FOR BUYERS.
51% 11%
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COMMUNITIES BUYER SURVEY DATA
MARCH QUARTER 2020MARCH QUARTER 2019
Other Other5% 2%4th Home 4th Home0% 3%3rd Home 3rd Home6% 7%2nd Home 2nd Home1st Home 1st Home
20% 24%69% 64%
Owner Occupier
Owner OccupierInvestor Investor
OWNER OCCUPIER VS. INVESTOR
OWNER OCCUPIER TYPE
Other Other2% 1%Group Group2% 1%
With parents With parents27% 22%Renting Renting
Owner occupier Owner occupier34% 45%34% 31%
LIVING CIRCUMSTANCE
24% 23%
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R P M R E A L E S TAT E G R O U P44
Source: RPM
Five or more Five or more2% 6%Four Four12% 21%
Three Three21% 19%Two TwoOne One
45% 37%21% 17%
MARCH QUARTER 2020MARCH QUARTER 2019
HOUSEHOLD INCOME
$120k> 29%$101-$120k 22%$80-$100k 18%
$60-$80k$40-$60k
<$40k
22%8%
$120k> 13%$101-$120k 16%$80-$100k 24%
$60-$80k$40-$60k
<$40k
35%12%1% 1%
COMBINED AGE
60> 60>3% 4%50-59 50-5911% 8%35-49 35-4922% 32%
52% 44%11% 11%
25-34 25-3418-24 18-24
HOUSEHOLD NUMBEROF PERSONS
Source: RPM
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COMMUNITIES BUYER SURVEY DATA
MARCH QUARTER 2020MARCH QUARTER 2019
Other - Student, Part time Other - Student, Part time4% 3%Not employed Not employed1% 0%
Technicians & Trades workers Technicians & Trades workers12% 16%Sales Sales6% 7%
Professionals Professionals23% 45%Managers & Administrators Managers & Administrators9% 8%
Machinery operators & drivers Machinery operators & drivers9% 2%Labourer & related workers Labourer & related workers16% 2%
Community & Personal service Community & Personal service7% 7%Clerical & Administrative Clerical & Administrative13 % 11%
Other Other4% 9%Builder Referral Builder Referral16% 15%Family or Friend Family or Friend21% 24%
Signage Signage26% 28%Google Google10% 9%
22% 11%1% 3%
Realestate.com Realestate.com
Project Website Project Website
ADVERTISEMENT SOURCE
PRIMARY INCOMEEARNER
Source: RPM
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OVERVIEW
APARTMENTS & TOWNHOUSES
WITH THE PROPERTY MARKET PEAKING IN EARLY
2018 BEFORE EXPERIENCING A SUSTAINED
DOWNTURN OVER THE FOLLOWING 12 MONTHS,
SEVERAL INTERRELATED MACROECONOMIC
AND POLITICAL MEASURES PROPELLED A
TURNAROUND THROUGH THE BACK HALF OF 2019.
This set the market up for a potentially robust 2020
with an anticipated focus on how to effectively tackle
affordability concerns in a market that was likely to
grow by 10% through the year.
While the first two months of 2020 followed this
trend, the significant drop off in market activity and
severe weakening in consumer sentiment over the
final two weeks of March was a direct consequence
of the lockdown and social distancing regulations
to mitigate the spread of COVID-19. Nevertheless, a
modest increase in dwelling prices over the month of
March occurred with the early signs of the true fallout
not showing a material effect until April, with a fall of
0.3% (CoreLogic).
Enclave at Riverhills, Wollert Developer: Dahua Group
Builder: TownLiving by Metricon48 R P M R E A L E S TAT E G R O U P
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The banning of open houses and public auctions
resulted in volumes halving through March, with more
pronounced demand issues surfacing in April. This,
coupled with the closure of the country to overseas
buyers and a rapid rise in job losses, will ultimately
have homeowners taking a pause for the coming
months while they recalibrate and adjust to the
current market.
In general, Melbourne relies considerably on
purchaser and consumer activity from overseas
migration. As a result, the closure of borders will
have a profound effect on the economy overall
with a more pronounced impact on the rental
market – particularly in the inner CBD with the
absence of international students.
Much of the new housing demand in the prior boom
came from overseas buyers purchasing within
high-rise buildings. Subsequently, many apartment
developments in the pipeline or commencing
construction will find it difficult to sell and settle
over the next 12 months with the absence of these
migration levels. As a result, what we are likely to see
is a bottleneck of apartment permits sitting in the
pipeline waiting for the market to turn. Unfortunately,
recently or soon-to-be completed apartments will
be faced with buyers who bought 12 to 18 months
ago when the market was stronger. They will now
be attempting to settle in a falling market which will
create valuation issues for buyers. This may also
result in developers dealing with increased levels
of defaults due to buyers potentially becoming
unemployed or underemployed.
COVID-19 WILL IMPACT THE HIGH-RISE APARTMENT SECTOR IN MORE WAYS THAN JUST BUYER AND RENTAL DEMAND. A LARGE PROPORTION OF MATERIALS ARE SOURCED THROUGH ASIA, WITH CHINA AS THE CENTRAL HUB.
These include lifts, aluminum, window frames and
tiles. The extended shutdown of Chinese factories
in the first quarter will have a flow on effect for our
developers with building contractors facing upwards
of a month’s delay.
This interruption in the development phase is
anticipated to push the completion dates of projects
out by up to six months across larger projects, and
potentially increase material costs. This delay will
coincide with the postponement of bank settlements
at a time the market is likely to be falling in value.
Ultimately this will not only impact valuations for the
buyer, but it will impact on profits for the developer.
49Q1 R E S I D E N T I A L M A R K E T R E V I E W | M A R C H Q UA R T E R 2 0 2 0
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The apartment and townhouse market has been
undergoing a profound and structural shift driven by
an expanding and ageing population. Additionally,
developers and buyers alike have been hampered
by numerous regulatory changes which caused the
market to stutter, particularly in the apartment sector.
In previous quarterly reports we have discussed the
likely shortfall of supply to the market in 2020/21 on
the back of significant falls in the number of approvals
across other dwellings (apartments and townhouses).
Since peaking at approximately 13,100 in December
quarter 2017, approval activity for medium and high-
density dwellings continually declined in the seven
quarterly periods since through to the December
quarter 2019 where an increase took place. While
it improved to 7,471 approvals it was still well below
the 2017 peak. It was this sustained reduction
in approval activity which indicated a projected
supply to market issue in 2020/21. However, with no
overseas migrants entering at present, the demand
driver has largely been removed. This suggests that
we may be facing a short-term supply surplus which
will further exacerbate price reductions. This will
be particularly apparent in investment-grade inner
city high-rise apartments following both the drop in
overseas migration and reduced demand from local
and overseas students.
WHILE COVID-19 IS LIKELY TO HAVE A DETRIMENTAL IMPACT ON APARTMENTS, THE SAME CANNOT BE SAID FOR TOWNHOUSES; AT LEAST NOT TO THE SAME DEGREE. WHILE ALL DWELLING TYPES WILL BE IMPACTED BY THE PANDEMIC, TOWNHOUSES ARE LARGELY OWNER OCCUPIED AND TEND TO BE PURCHASED BY FIRST HOME BUYERS OR BUDGET-CONSCIOUS BUYERS IN THE OUTER-MIDDLE TO OUTER RING
OF MELBOURNE. SIMILARLY, TOWNHOUSES IN THE BLUE-CHIP SUBURBS OF MELBOURNE TEND TO BE PROFESSIONAL COUPLES. TOWNHOUSE SALES ARE ALSO LESS EXPOSED TO THE OVERSEAS MARKET.
Further still, townhouse development is far less
complex in terms of generating finance, pre-sales
and build timeframes. This is demonstrated by the
increased activity in the sector over the past decade,
increasing from an average of 7,350 approvals in the
first five years to 11,500 approvals in the latter. The
most pressing concern for townhouse developments
is sourcing suitable sites in amenity-rich and well-
connected suburbs of Melbourne, which is becoming
increasingly difficult to do. Additionally, many
potential sites in attractive locations are simply not
feasible from a development perspective (dwelling
prices won’t cover high land costs).
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Image: Enclave at Riverhills, Wollert, Developer: Dahua Group, Builder: TownLiving by Metricon
WITH NO OVERSEAS MIGRANTS ENTERING THE COUNTRY AT PRESENT, A KEY DEMAND DRIVER HAS LARGELY BEEN REMOVED, WHICH MAY RESULT IN A SHORT-TERM SUPPLY SURPLUS.
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OTHER DWELLING APPROVALS
24%6%6% 25%19%
TOW
NH
OUS
E AP
PRO
VALS
Year to Year to Year to Year to Year toMar-16 Mar-17 Mar-18 Mar-19 Mar-20
15,00014,00013,00012,00011,00010,000
9,0008,0007,0006,0005,0004,0003,0002,0001,000
-
16%10%9% 20%13%
APAR
TMEN
T AP
PRO
VALS
Year to Year to Year to Year to Year toMar-16 Mar-17 Mar-18 Mar-19 Mar-20
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
-1%37%3% 4% 2%
Source: ABS
Victoria recorded 6,899 other dwelling approvals
in March quarter 2020, representing a fall of 7.7%
in approval activity from the previous quarter, but
an improvement of 11.9% from the same quarter in
2019. This highlights the majority of the quarter was
unaffected by COVID-19 and demonstrated a market
that was showing a robust gain from 12 months earlier.
While down from December quarter 2019, it was still a
strong result, considering December was the highest
level since the March quarter 2018.
Townhouse approvals recorded a modest gain over
the quarter (1.4%) with a more pronounced gain of
16.7% comparative to the same period a year earlier.
In addition, while approvals over the 12 months to
March 2020 fell 15.5% from the corresponding period
a year earlier, it was coming off a record level from
2018/19. It is worth noting when the recent annual
result of 10,237 townhouse approvals is compared
to the yearly average across the past 15 years, it
is significantly higher (up 27%). This robust level of
approvals highlights the increasing popularity of
townhouse developments in greenfield areas, and is
offsetting the easing number of approvals taking place
in the built-up middle ring of Melbourne.
Apartment activity on a quarterly basis is more
challenging to analyse due to the movement that
occurs with approvals. It often takes only one or two
large-scale developments to have a material effect on
the overall number. For instance, September quarter
2019 was the lowest outcome since 2009, but the
following quarter recorded a high not seen since March
quarter 2018.
Notwithstanding this volatility, the result in the March
quarter 2020 was up a substantial 8.9% from the
corresponding period and down only a modest 1.1%
from the previous year. This outcome provided a
glimmer of hope that developers were slowly coming
back into the high-rise apartment market as supply
and demand fundamentals moved back into alignment.
This, however, has been stopped in its tracks. The
possibility of a high rise or student accommodation
development in the CBD or Docklands, or a mid-rise
development in Footscray coming to market in the
foreseeable future, looks highly unlikely.
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KEY MEDIUM DENSITY BUILDING DATA
APPROVALS TOTAL TOWNHOUSES TOTAL APARTMENTS TOTAL
March quarter 2020 2,766 4,133 6,899
Change from previous quarter 1.4% -12.8% -7.7%
Change from previous year 16.7% 8.9% 11.9%
12 months to March quarter 2020 10,237 13,221 23,458
% change 12 months earlier -15.5% -1.1% -8.0%
COMMENCEMENTS OTHER DWELLINGS COMPLETIONS OTHER DWELLINGS
December quarter 2019 4,121 December quarter 2019 9,662
Change from previous quarter -18.8% Change from previous quarter 49.6%
Change from previous year -28.7% Change from previous year 47.9%
12 months to December quarter 2019 22,077 12 months to December quarter 2019 28,053
% change 12 months earlier -33.8% % change 12 months earlier 9.0%
TOTAL APARTMENT & UNIT PRICES MEDIAN PRICE CHANGE FROM PREV. QTR. CHANGE FROM PREV. YR.
March quarter 2020 $641,000
December quarter 2019 $637,000
March quarter 2019 $586,500
0.6% 9.3%
NOTE: Approvals are to the current quarter (March 2020), while commencements and completions are delayed by a quarter (December 2019).
Image: Enclave at Riverhills, Wollert, Developer: Dahua Group, Builder: TownLiving by Metricon 53
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OUTLOOK
Over the course of a single quarter the outlook
for other dwellings, particularly apartments, has
pivoted 180 degrees. As part of the December
quarter outlook, the discussion was around strong
buyer fundamentals at play, including historically
low interest rates, improved borrowing capacity and
strong employment growth. The consensus was for
price growth reaching double digits underpinned by
buyer urgency and fear of missing out. The focus was
potential affordability concerns and the inability of
first home buyers to enter the market through what
was likely to be the next mini housing-price boom
through 2020.
Unsurprisingly, this outlook rapidly changed. While
affordability concerns are on the horizon, it is not
limited to first home buyers. It is now all mortgage
holders who are looking at a state unemployment
rate reaching 11% by the end of the year and
remaining elevated through most of 2021.
However, if the pandemic continues beyond six
months, or a second wave occurs and restrictions
must be reinstated, consumer sentiment will be
rocked once more, and activity will plummet. At this
point in time the protection that is currently in place,
including JobKeeper and bank payment holidays,
may cease and we could see an increase in forced
sales resulting in a sharp fall in values. This outcome
is in line with commentators who anticipate prices to
fall between 20% and 30%.
Conversely, the more positive outlook indicates a fall
in values of between 5% and 10% by the end of 2020,
buffered by support put in place by the Government
and financial institutions.
Melbourne will likely see a more prolonged downturn
in the apartment and unit market simply due to the
vast majority being rentals, and a significant number
located within the middle and inner rings, occupied
by overseas students or migrants on short-term visas,
who have largely all returned home.
FORTUNATELY, LENDERS HAVE PROVIDED LENIENCY TO DISTRESSED BORROWERS, WHICH MEANS FORCED SALES WILL BE LIMITED AND ULTIMATELY REDUCES THE LEVEL OF SUPPLY THAT WOULD OTHERWISE BE ON THE MARKET. AS A RESULT, WITH LIMITED SUPPLY ON THE MARKET WE MIGHT ACTUALLY SEE SOME RESILIENCE IN VALUES OVER THE COMING MONTHS AS THERE WILL BE BUYERS, PARTICULARLY FIRST HOME BUYERS, WHO ARE SECURE IN THEIR EMPLOYMENT AND WILL LOOK AT THIS PERIOD AS PRIME TIME TO BUY.
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LUKE KELLYDIRECTOR, PROJECT [email protected]+61 400 688 520
With the country closed through to the start of 2021,
this specific market sector will feel the fallout of
COVID-19 long after the broader market goes back
to a level of normality.
Most of the driving demand fundamentals for
property in Melbourne remain uncertain in the near
term. While the borrowing environment is at a record
low, we will not have strong employment growth or
robust migration, and will in fact have a sharp spike
in unemployment and not see any meaningful
migration until the middle of 2021 at best.
On a positive note, once the Government begins
to lift social distancing restrictions, there will be an
instant positive surge to both business and
consumer confidence. This could, if unemployment
reduces significantly in 2021, result in the nation
returning to economic activity sooner than many
expect, and this will have a positive influence on
property prices.
In addition, once travel restrictions are removed it
is widely considered that Australia, and particularly
Victoria, will be held in high regard following our
response to COVID-19. Prior to the pandemic,
Victoria was a highly desirable investment option
for buyers from Asia. This may be enhanced after
COVID-19, given the market offers a deep, liquid and
transparent market with scale, along with clarity of
rules and regulations.
This is in addition to other factors including quality
of life, weather, clean air, and world class education
institutions all acting as magnets to overseas
migrants.
While there will be a price correction in 2020 which
will make detached housing more affordable to first
home buyers and other budget-conscious buyer
groups, a continued shift in demand to less expensive
townhouses in the middle and outer ring will also be
highly sought after.
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OVERSEAS DEMAND FOR RESIDENTIAL PROPERTY
IN VICTORIA REMAINED RELATIVELY LOW IN
MARCH QUARTER 2020. FOREIGN BUYERS
ACCOUNTED FOR 12% OF NEW DWELLINGS
PURCHASED AND JUST 2.3% OF ESTABLISHED
DWELLINGS PURCHASED; A LONG-TIME LOW.
DEMAND FROM CHINA, THE LARGEST SOURCE
FOR OVERSEAS BUYERS IN VICTORIA, IS LIKELY
TO HAVE WEAKENED DURING MARCH QUARTER
2020 AS THE COUNTRY DEALT WITH THE HARSH
ECONOMIC REALITIES OF COVID–19 THROUGHOUT
MUCH OF THE PERIOD.
However, this continues the downward trending
proportion of overseas buyers for much of the last
three years. A myriad of factors can be ascribed,
including; a tightening of domestic credit to foreign
purchasers; increased restrictions on capital
transfers in home countries; the introduction and
subsequent increase to 8% of Victoria’s foreign
resident additional stamp duty rate; and other state
taxes such as vacancy fees.
OVERVIEW
INTERNATIONAL
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Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
New 14% 21% 14% 14% 12% 12% 13% 8% 5% 12% 7% 12% 12%Established 7% 9% 8% 9% 8% 6% 6% 4% 5% 4% 4% 6% 2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
% O
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JINYIN ZHANGDIRECTOR, RPM [email protected]+61 451 898 886
Source: NAB Quarterly Residential Property Survey
Consequently, the number of residential real estate
approvals by Foreign Investment Review Board (FIRB)
in Victoria over 2018/19 was 82% below peak in
approvals in 2015/16.
The expected downturn in property markets over the
remainder of 2020 will make purchasing a dwelling in
Victoria relatively more affordable and attractive for
overseas purchasers. This could lead to a reverse in
the persistent low share of overseas buyers, driven
by rebounding interest from buyers from China in
particular, as their economy recovers more quickly
comparative to most countries.
EARLY SIGNS ARE POSITIVE, WITH REAL ESTATE PLATFORMS REPORTING A SIGNIFICANT INCREASE IN OVERSEAS BUYER ENQUIRIES FOR VICTORIAN DWELLINGS IN APRIL.
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AUSTRALIAN ECONOMIC OUTLOOK
The rapid deterioration in Australia’s economic
outlook, directly attributed to restrictive social
distancing measures implemented in late March
to mitigate the spread of COVID-19, is particularly
evident in the rapid changes of economic forecasts.
It is estimated that gross domestic product (GDP)
will contract by an historic 7-8% in June quarter
2020 alone, eliminating all gains to economic
activity in the previous three quarters, and resulting
in the Australian economy declining by a forecast
0.3% over financial year 2020. It should be noted
that these forecasts take into consideration the
combined massive $320 billion stimulus measures
from the Federal Government and Reserve Bank
of Australia, which equates to approximately
16.4% of GDP.
Early employment indicators released from the
Australian Bureau of Statistics in conjunction with
the Australian Tax Office show that between March
14 and April 18, total employee jobs declined by
7.5% and total employee wages decreased by 8.2%.
Weakening employment conditions were further
highlighted by the additional 81,500 people who
worked fewer hours in March compared to February.
This has led to the unemployment projection more
than doubling in just one month to 11.7% by June
2020, which would have been worse without the
JobKeeper initiative which has kept an estimated
five million people in employment.
Australia’s handling of the COVID–19 pandemic has
been more effective compared to most countries
when considering number of cases and deaths.
This has allowed the country to begin winding back
some of the social distancing measures from May,
in effort to kick-start the economy from hibernation
and get people back into work. However, the roll
back of these measures will be gradual, with some
sectors of the economy, such as the tourism industry,
to experience little recovery through 2020. This
will continue to act as a drag on family finances,
with almost one third of households reporting their
financial position has deteriorated from COVID–19.
Furthermore, people’s confidence to return to
normal activities will take time to recover as we learn
to live with the threat of COVID–19 before a vaccine
is released. Consequently, the initial opening
period for retail, cafes, restaurants, fitness and
entertainment is expected to lead to only a minor
upturn in economic activity.
An important driver of economic growth over the
past two decades has been population growth,
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Source: NAB. The Forward View. F = Forecast.
AUSTRALIAN ECONOMY MARCH 2020 FORECAST APRIL 2020 FORECAST
ECONOMIC INDICATORS (% CHANGE) 2019-20 F 2020-21 F 2019-20 F 2020-21 F
GDP 1.60 1.90 -0.30 -2.50
Employment 2.00 0.20 -0.10 -7.00
Unemployment Rate 5.20 5.60 11.70 8.90
Average Earnings 2.90 2.60 2.70 1.20
Inflation 2.10 2.20 2.00 1.30
RBA Cash Rate 0.68 0.71 0.25 0.25
$A/US cents 0.59 0.60 0.57 0.67
with overseas migration into Australia the largest
segment. However, the ban on overseas migration
to Australia will reduce this inflow from tens of
thousands per quarter to zero in June quarter 2020,
and remain extremely low through 2020–21. The
Federal Government projects Australia’s net inflow
from overseas migration in financial year 2021 will
decrease by 85% from the corresponding figure two
years prior. A substantial decline in dwelling demand
will follow, impacting the entire residential property
industry, particularly the new house sector which has
the largest multiplier benefits on the economy.
While growth in quarterly GDP is projected to return
in the second half of 2020, in line with fewer restrictions
and industries gradually returning to normal activity,
annual GDP at June 2021 is still forecast to be 2.5%
lower than June 2020.
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OVERVIEW
RESIDENTIAL INVESTMENT
THE TAIL-END OF 2019 AND THE START OF THE
NEW DECADE MARKED WHAT MANY HAD HOPED
FOR; A STEADY UPWARDS RETURN TO THE
PREVIOUS 2017/18 PEAK. THIS WAS FUELLED BY
THE IMPACT OF APRA’S RELAXATION OF LENDING
SERVICEABILITY TESTS, AND MULTIPLE CASH RATE
REDUCTIONS RESULTING IN THE LOWEST RATE IN
RECORDED HISTORY.
However, the widespread health, productivity and
economic impacts of COVID-19 saw hope of a
continued recovery dashed by the end of March
quarter 2020. As such, the quarter is a unique
statistical period. It marked the start of an upwards
recovery in both housing price and market sentiment,
but the final weeks of the quarter were characterised
by significant social and economic changes as a
result of stringent (but as we have now seen, effective)
lockdown measures.
Overall, house prices in Metropolitan Melbourne still
rose by a healthy 3.7% during the March quarter 2020,
Enclave at Riverhills, WollertDeveloper: Dahua Group
Builder: TownLiving by Metricon60 R P M R E A L E S TAT E G R O U P
although unit prices increased by a mere 0.63%
compared to the previous quarter. Nevertheless,
comparing house and unit prices to the same period
a year ago (during the middle of the ‘slump’), the
evidence of recovery at the outset of 2020 is clearly
apparent. House prices are 12.5% higher than a year
ago, with unit prices up 9.29%.
The market rebound was supported by overall good
sentiment through much of the March quarter and
saw a robust demand for rental accommodation.
This was as a result of sustained underlying factors
including low unemployment and strong population
growth. However, this all changed in mid-March. The
immediate response pushed up Melbourne’s overall
vacancy rate to 2.3%, compared with 2.2% in the
previous quarter. This rate is now also slightly higher
than the two year average of 2.1%.
The slight increase in vacancy rates can be directly
attributed to job losses or underemployment in
sectors most heavily hit by COVID-19 impacts,
such as retail and hospitality industries, along with
overseas students, leaving many unable to live
independently and consequently leaving their rental
property.
While we expect the vacancy rate to increase above
the 3% equilibrium industry benchmark in the June
quarter, Government initiatives at both Federal and
State levels are aimed at limiting this rise.
OVERALL VACANCY RATES HAVE REMAINED TIGHT IN THE MARCH QUARTER 2020, ALTHOUGH THERE HAS BEEN VOLATILE MOVEMENT IN RENT PRICING FOR HOUSES, AND UNITS AND APARTMENTS.
WHILE THE OCCASIONAL DWELLING TYPE HAS SEEN RENT INCREASING IN THE MARCH QUARTER, MANY HAVE SEEN NO MOVEMENT OR EVEN A DROP. Rental increases in smaller dwellings, such as inner
and middle ring two and three bedroom houses
and one bedroom units, have seen their growth
from December quarter 2019 largely wiped off.
For two bedroom houses in all areas, stagnant or
negative growth has occurred. This indicates that
renters (particularly those living alone or with a
single housemate) have dropped off during the
quarter, again reflecting the hardest hit industries,
and overseas students who have returned home to
complete the year’s curriculum online. We anticipate
this downturn to be even more pronounced in
subsequent quarters.
LYNN NIE
DIVISION MANAGER, PROPERTY MANAGEMENT
+61 488 210 951
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MEDIAN RENTS
HOUSE:
BEDROOMS MAR-19 DEC-19 MAR-20 CHANGE FROM PREVIOUS QUARTER
CHANGE FROM PREVIOUS YEAR
2 YEAR AVERAGE ANNUAL GAIN
Inner 2 $560 $580 $560 -$20 -3% $0 0% 0.9%3 $743 $680 $720 $40 6% -$23 -3% 5.0%4 $800 $900 $925 $25 3% $125 16% 1.7%
Middle 2 $380 $400 $400 $0 0% $20 5% 4.0%3 $440 $460 $460 $0 0% $20 5% 3.4%4 $580 $630 $585 -$45 -7% $5 1% 3.1%
Outer 2 $341 $350 $360 $10 3% $20 6% 1.3%3 $380 $380 $390 $10 3% $10 3% 1.3%4 $430 $430 $430 $0 0% $0 0% 0.0%
Geelong 2 $320 $325 $330 $5 2% $10 3% 4.9%3 $360 $380 $385 $5 1% $25 7% 4.9%4 $423 $440 $440 $0 0% $18 4% 3.6%
Conversely, larger houses of three and four
bedrooms in the inner ring recorded the healthiest
gains, with rents increasing 6% and 3% respectively
relative to the previous quarter. The only other
houses that recorded notable rent increases above
3% were two and three bedroom houses in the outer
ring. On an annual basis, these homes have seen
notable growth at 6% and 3% respectively. However,
inner ring four bedroom houses have seen the
greatest growth year-on-year at an impressive 16%,
despite a modest 3% growth quarter on quarter.
Units and apartments have generally fared worse
than houses across all product types in all areas.
Inner-ring Melbourne one and two bedroom units
dropped by 1% from the previous quarter, and have
recorded no growth from a year ago.
While inner-ring three bedroom units and apartments
saw 10% growth from both the previous quarter and
this time last year, all other dwellings in all areas have
seen growth beneath 3%, or even negative change.
This is most notable in outer Melbourne, where one
bedroom units and apartments have fallen by 7%, two
bedroom dwellings have only increased slightly by
$10, and three bedroom dwellings falling by $5 or 1%.
Interestingly, the largest dwelling types in the inner
ring (three bedroom units and apartments, and four
bedroom houses) have seen the highest upwards
increase year on year, with the dwelling types increasing
by $65 and $125 (10% and 16%) respectively. These
larger dwellings tend to be premium offerings, and we
find consistently that upmarket dwellings generally
fluctuate to a lesser degree.
From a regional perspective, Geelong has seen very
weak performance in the March quarter 2020 after
strong performance the previous quarter. From 2017
Geelong has seen strong growth across all bedroom
and dwelling types due to the Government relocating
offices to the area, creating significant demand for
rental accommodations.
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MELBOURNE’S VACANCY RATE INCREASED
MARGINALLY, BUT ANTICIPATED COVID-19
IMPACTS ARE LIKELY TO DRIVE THIS RISE HIGHER.
INNER RING THREE BEDROOM HOUSES AND UNITS
RECORDED THE HIGHEST RENTAL INCREASES
FROM LAST QUARTER, UP 6% AND
10% RESPECTIVELY.
10%2.3%
UNITS & APARTMENTS:
BEDROOMS MAR-19 DEC-19 MAR-20 CHANGE FROM PREVIOUS QUARTER
CHANGE FROM PREVIOUS YEAR
2 YEAR AVERAGE ANNUAL GAIN
Inner 1 $380 $385 $380 -$5 -1% $0 0% 1.3%2 $495 $500 $495 -$5 -1% $0 0% 0.5%3 $670 $670 $735 $65 10% $65 10% 2.5%
Middle 1 $320 $350 $350 $0 0% $30 9% 3.0%2 $403 $400 $413 $13 3% $11 3% 2.3%3 $503 $540 $535 -$5 -1% $33 6% 3.4%
Outer 1 $300 $290 $270 -$20 -7% -$30 -10% 2.9%2 $350 $350 $360 $10 3% $10 3% 2.9%3 $400 $420 $415 -$5 -1% $15 4% 2.5%
Geelong 1 $220 $228 $230 $3 1% $10 5% 2.2%2 $310 $330 $330 $0 0% $20 6% 4.9%3 $398 $400 $400 $0 0% $3 1% 4.0%
While this underlying factor is still present, during
this quarter Geelong recorded very little or no
growth across all dwelling types and sizes.
The largest growth in Geelong can be seen in two
bedroom houses where rent increased by $5 relative
to the last quarter; a mere 2% increase. Units and
apartments have seen even more diminutive levels of
change, with one bedroom unit rents increasing by
just $3 relative to the previous quarter, while two and
three bedroom units recorded no change at all. This
indicates Geelong may have reached a growth plateau,
with renters who moved into Geelong for employment
potentially now having decided whether to stay
permanently or move into their newly built home.
LYNN NIE
DIVISION MANAGER, PROPERTY MANAGEMENT
+61 488 210 951
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VACANCY RATES & YIELDS
Vacancy rates in the March quarter reflect a minimal
uplift, although trends still follow the previous
quarter overall. Across the board, all areas remained
below the accepted norm of 3%, excepting the
middle ring (up marginally to 3.5%) and outer ring
including Mornington Peninsula (remaining at 3.4%).
These consistently low vacancy rates reinforced
the consensus that the market is not oversupplied,
and likewise current dwelling approval rates have
remained low compared to 2017/18 boom levels.
However, vacancy rates in the coming quarters
will be interesting to witness following fallout from
COVID-19.
Rental yields have been, and continue to be, below
long-term levels due to the significant capital gains
seen in both detached houses and other dwellings
over the past five years. Nevertheless, in the current
market a rental yield above 2.5% is far more appealing
than other types of investment due to the incredibly
low interest rate environment and significant
uncertainty of the world’s stock markets.
Over the March quarter 2020, there were segments
within the market offering far more attractive yields.
While a rental yield of sub 2.5% would be considered
poor for those investing in detached housing in the
outer and regional areas, land value appreciation
tends to be the driving force in the earlier stages.
VACANCY RATE:
MELBOURNE MAR-19 DEC-19 MAR-20 2 YEAR AVERAGE
Inner total 2.0 1.9 2.0 1.9Inner (0-4km) 1.4 1.7 2.0 1.6Inner (4-10km) 2.1 2.1 2.0 2.0Middle (10-20km) 3.6 3.3 3.5 3.1Outer total 1.6 1.9 1.8 1.7Outer (20+km exc. Mornington Peninsula) 1.5 1.8 1.8 1.6Outer (Mornington Peninsula) 2.3 3.4 3.4 2.6Melbourne total 2.2 2.2 2.3 2.1
Geelong 1.6 2.2 2.2 1.8
YIELDS:
HOUSES MAR-19 DEC-19 MAR-20
Inner 2.83% 2.34% 2.52%Middle 2.51% 2.32% 2.33%Outer 3.08% 2.92% 2.92%Metro 2.82% 2.66% 2.61%Regional 4.21% 4.20% 4.22%
UNITS MAR-19 DEC-19 MAR-20
Inner 4.44% 4.10% 4.05%Middle 3.26% 2.93% 2.96%Outer 3.66% 3.35% 3.40%Metro 3.99% 3.67% 3.61%Regional 4.67% 4.66% 5.07%
Source: REIV, RPMSource: REIV
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OUTLOOK In the coming months we expect there will be
significant deterioration in the residential investment
and rental market due to the impacts of COVID-19
and its containment measures. To date, the rental
market has seen the most immediate disturbance
within the broader property sector, with companies
closing their doors in the final weeks of March and
unemployment figures skyrocketing in mere days.
Casual workers and those in industries such as
retail, hospitality and tourism were immediately
impacted. Landlords and agents suddenly found their
tenants were unemployed through unprecedented
circumstances. These circumstances further
compounded the consequences of the December
2019 bushfires on the regional tourism industry.
Over the balance of 2020, Victoria’s reliance on
overseas students will come to the fore. From
February, all flights from China to Australia were
banned, and in late March, all non-Australian Citizens
were prohibited from entering. This significantly
decreases overall demand of inner-city rental
properties, as many international students are
unable to enter Australia; only those who chose
not to go home over the end-of-year break period
have remained.
Following the closure of Australia’s borders, tourism-
dependent regional communities have seen any
hope of recovery from the bushfires dashed as
international tourism numbers plunged to zero.
Furthermore, Stage three domestic restrictions
reduced travel to essential users only, ending all
domestic tourism demand. In turn, swathes of Airbnb
properties have now moved back into the rental
market. This increases the supply when there is little
to no demand, as well as increasing competition for
landlords already facing rent reductions in order to
lease their property.
However, State and Federal Governments have
introduced measures to protect tenants from being
evicted. Further still, the Federal Government
introduced the most comprehensive support
package ever offered to Australians in the form of
JobKeeper. This package was designed to keep
employers and employees in work and in business
as we navigate the current climate.
However, with vacancy rates at acute levels (although
likely to change in subsequent quarters), and what
seems to be a movement from the middle to the outer
ring for renters, yields are at the higher end for these
outlier areas.
Houses and units in regional areas recorded an
average yield of 4.2% and 5.1% respectively during
this period. These strong returns are generally due to
two factors; a lowering house price in regional areas,
and rental prices staying almost completely level.
Similarly, units in the inner ring recorded an attractive
average yield of 4.05% in the March quarter which,
although is slightly down from 4.10% in the previous
quarter, suggests continued robust demand for
one and two bedroom units in the CBD and fringe
suburbs. Vacancy rates have now moved just above
the 2-year average. However, while the inner ring and
regional areas are still attractive in the March quarter
2020, vacancy rates are anticipated to move upwards
in the coming months which will bring down yields as
the full fallout of COVID-19 can be quantified.
LYNN NIE
DIVISION MANAGER, PROPERTY MANAGEMENT
+61 488 210 951
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TO DATE, IN BENEVOLENT FASHION, LANDLORDS WHO HAD TENANTS IN CHANGED CIRCUMSTANCES HAVE BEEN OVERWHELMINGLY SUPPORTIVE AND EMPATHETIC. WE COMMEND THE MANY LANDLORDS WHO HAVE BEEN GRACIOUS IN DEALING WITH TENANTS IN DISTRESS DURING COVID-19. It is worth noting that many landlords are also facing
distressing circumstances of their own. However,
protections at the national and state levels have
been predominantly weighted towards tenants,
with comparatively few concessions for landlords,
including in many states rent moratoriums and
restrictions on rent increases for the next six months.
In Victoria, the state government has announced a
$500 million rent rescue package. A further $420
million has been earmarked for land tax relief for
landlords. While this is something, for the average
residential investor it does not provide the assistance
they require. Land tax concessions are not accessible
until the end of the financial year and will therefore
not provide immediate support if tenants can’t pay.
In addition, land tax only applies on valuations above
$250,000. Consequently, apartments, townhouses
and even some smaller lots will not meet the criteria.
This package, in essence, is targeted to commercial
landlords where their sites are larger, and by extension,
more expensive. Additionally, the tax relief is in the
form of a 25% reduction if landlords can demonstrate
they have offered rent relief to their tenant. If the land
valuation is $300,000, the owner will be billed $375 in
tax, so the 25% relief results in just $93.75 of savings.
Supported by RPM’s survey results, we know the
majority of landlords are average wage earners. As
such, they rely on rental payments alongside job
income to manage their mortgage as well as running
expenses of the investment, including council and
water rates, strata levies and repairs. While landlords
can apply for a mortgage repayment reprieve from the
banks, there are potentially considerable costs further
down the track, with major banks confirming that any
pause in payments will be capitalised into the rest of
the loan term.
WHILE THERE IS CONSIDERABLE UNCERTAINTY AT PRESENT AND SIGNIFICANT HEADWINDS ON THE HORIZON, FOR POTENTIAL INVESTORS WHO ARE SECURE IN THEIR EMPLOYMENT, IT IS A FAVOURABLE TIME TO BUY. LENDING RATES ARE AT HISTORICAL LOWS, AND INVESTORS IN THE GREENFIELD MARKET WON’T BE REQUIRING A TENANT FOR AROUND A YEAR AS THEY SETTLE THE LAND AND UNDERTAKE CONSTRUCTION. THIS UNDOUBTEDLY DIFFERS FOR AN INVESTOR PURCHASING AN EXISTING DWELLING. Through these tumultuous times, it is important to
remember that looking historically, property has
been a significantly safer form of investment than
more volatile options such as the share market.
Additionally, Australia’s response to COVID-19 has
been swift and broad, and has seen the country
fare significantly better than most other countries
affected. Subsequently, in a year’s time, with
COVID-19 behind us, we expect the market to recover
and Victoria to remain an appealing destination.
OUTLOOK
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RESIDENTIAL INVESTMENT BUYER SURVEY DATA
Following increasing buyer appetite throughout much
of 2019, investors represented just 23% of sales in the
March quarter 2020 with the onset of the COVID-19
pandemic, down from 37% in December quarter 2019.
While this share was in line with the corresponding
quarter in 2019 which was impacted by the tail-end of
a slowdown, it is likely to remain around this level for
at least another six months. We anticipate potential
investors will weigh up their personal circumstances
and employment security against it being a favourable
time to buy.
While the 2018/19 market downturn reduced the
proliferation of Indian and Chinese born investors,
the strong December quarter 2019 showed a re-entry
of these buyers. This trend continued through to
2020, with Indian investors accounting for 31% of all
purchasers this quarter up from just 8% last year.
To a lesser degree, Chinese investors have held
ground, but will more than likely remain subdued in the
coming months due to the continued capital controls
the Chinese Government has in place on its residents.
Although there was growing uncertainty in the market
towards the end of the quarter, purchasers with
household incomes above $100,000 increased. This
highlights the growing prevalence of investor-buyers,
with traditional mum and dad investors moving away
from the more volatile share market and uncertainty in
building quality and demand levels of more centrally
located apartments.
The March quarter data revealed a considerable
upswing of investors intending to build a single-storey
home. While at first this appears to indicate a smaller
dwelling, RPM survey findings showed an increasing
share of house builds larger than 21sq. This may
demonstrate investors becoming more considerate
of potential tenant diversity, and not wanting to
exclude older households who may discount
double-storey residences.
DESPITE THE GROWING TREND TOWARDS LARGER SINGLE-STOREY BUILDS, THE ANTICIPATED OVERALL BUILD SPEND IS LESS.
DURING THE MARCH QUARTER 2020, 72% OF INVESTORS INTENDED TO SPEND LESS THAN $250,000 ON CONSTRUCTION, UP FROM 46% A YEAR EARLIER. Interestingly, no buyers indicated their intent to
spend above $400,000 on the build, compared
with 19% falling into this price bracket in March
quarter 2019. This is likely the result of investors
spending slightly more in the land component,
forcing investors to re-evaluate the composition
of their budgets, and a slightly lower total package
price indicating more diversity in investor type.
The landscape has changed for investors over
the past 12 months, but some things remain the
same. One of these is the source of advertising the
investor first noticed; during the March quarter, in
line with previous surveys, over half of all investors
indicated word of mouth (friend, family, builder) as
the primary advertising source.
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RESIDENTIAL INVESTMENT BUYER SURVEY DATA
MARCH QUARTER 2020MARCH QUARTER 2019
NEW HOME CONSTRUCTION
BUDGET
>$450k 8%$401-$450k 11%$351-$400k 0%$301-$350k$251-$300k
$151-$200k$201-$250k
<$150k
3%32%
8%38%
0%
Source: RPM
New Zealand 3%3%4%8%74%
Bangladesh China
IndiaAustraliaCOUNTRY OF PERSON
1&2 TOP 5
OWNER OCCUPIER VS. INVESTOR
Owner OccupierInvestor 24% 76% Owner
OccupierInvestor 23% 77%
HOUSEHOLD INCOME
0%0%2%3%23%
18%54%
0%
>$450k$401-$450k$351-$400k$301-$350k$251-$300k
$151-$200k$201-$250k
<$150k
2%3%4%31%54%
MalaysiaPhilippines
ChinaIndia
Australia
$120k> 39%$101-$120k 17%$80-$100k 14%
$60-$80k$40-$60k
<$40k
19%11%0%
38%25%15%
$120k>$101-$120k$80-$100k
$60-$80k$40-$60k
<$40k
17%3%2%
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Other 18%Builder Referral 28%Family or Friend 23%
Signage 18%Google 5%
5%3%
Realestate.comProject Website
Other 11%Builder Referral 26%Family or Friend 18%
Signage 11%Google 13%
18%3%
Realestate.comProject Website
ADVERTISEMENT SOURCE
RPM surveys every buyer on its clients’ estates in the greenfield market. In March quarter 2020, 23% of all buyers indicated they were investors. The data illustrates demographic and purchase intent changes amongst this cohort based on surveys from the March quarter 2020 compared to the same quarter in 2019.
MARCH QUARTER 2020MARCH QUARTER 2019
HOME & LANDBUDGET
>$600k 15%$551-$600k
$401-$450k
3%$501-$550k
$351-$400k
5%$451-$500k
$301-$350k<$300k
18%33%
0%26%
0%
2%11%11%30%37%
2%5%
3%
>$600k$551-$600k
$401-$450k
$501-$550k
$351-$400k
$451-$500k
$301-$350k<$300k
>30sqs 3%26-30sqs 3%21-25sqs 19%16-20sqs
<15sqs67%8%
Undecided3%Double storey45%Single storey53%
Undecided7%Double storey11%Single storey82%
NUMBER OF STOREYSCONSIDERED
0%5%32%54%9%
>30sqs26-30sqs21-25sqs16-20sqs
<15sqs
INTENDED SIZE OF HOME
INCLUDING GARAGE
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LUKE [email protected]+61 400 688 520
ERIC DICKEXECUTIVE [email protected]+61 418 349 267
KEVIN BROWNCHIEF EXECUTIVE [email protected]+61 418 397 577
PETER GRANTDIRECTOR, [email protected]+61 411 494 499
JINYIN ZHANGDIRECTOR, RPM [email protected]+61 451 898 886
CHRISTIAN RANIERIDIRECTOR, TRANSACTIONS & [email protected]+61 416 445 078
MICHAEL STAEDLERRESEARCH [email protected]+61 434 619 280
ROD ANDERSONDIRECTOR, [email protected]+61 417 595 859
LYNN NIE
DIVISION MANAGER, PROPERTY [email protected]+61 488 210 951
70 R P M R E A L E S TAT E G R O U P
+61 3 9862 9555Level 5, 52 York Street
South Melbourne VIC 3205
rpmrealestate.com.au