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How $2m became the new $1m in Aussie property in 2016

Samantha Menzies
How $2m became the new $1m in Aussie property in 2016

With festive cheer in the air, the real estate industry and property owners can look back on 2016 and pop the champagne. It’s been a year to celebrate.

“Melbourne has been growing fastest of any capital city,” Domain Group senior economist Andrew Wilson says. “It has had 16 consecutive quarters of price growth, a record. As a property owner, that’s about as good as it gets.”

After an eastern suburbs-led revival in the past couple of years on the back of low interest rates and steadier economic footing, it has been property owners in the north, west and north-east, in particular, lapping up some of this year’s goodness, according to the Domain Group.

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Wakelin Property Group director Paul Nugent estimates houses in established areas have lifted 10 per cent, maybe up to 15-20 per cent. “It’s most evident in the inner-north single-fronted market, Brunswick, Northcote, Thornbury and even Preston,” he told Domain Group.

Nelson Alexander’s Arch Staver, whose agency network specialises in the north and north-east, says: “It’s the year $2 million became the new $1 million.” This has been fuelled by empty nesters moving from family homes into such inner-city quarters as Fitzroy and Carlton, while people in single-fronted terraces wanting room for a family have been pushing out into areas such as Northcote, Fairfield, Ivanhoe and Eaglemont.

At the same time, people are stumping up premiums for anything period with a contemporary extension. Staver points to a converted warehouse he sold just shy of $5 million and a couple more in the $4.5-$5 million range. A corollary, too, has been the growing number of off-market transactions.

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Richard Winneke for Jellis Craig has similarly seen plenty of inner-city homeowners upgrading to blue-chip pastures like Hawthorn and Kew but also places like Middle Camberwell, Glen Iris and Ashburton as buyers search for like amenity with better affordability.

Similarly, Marshall White’s Robin Parker has noticed a majority of buyers heading bayside for “the lifestyle” from inner suburbs like Port Melbourne, Albert Park, Hawthorn and South Yarra to areas never previously considered, like Hampton, Sandringham and Beaumaris. “It’s gone up a cog, so what was previously about a quarter of buyers is now about 60 percent,” he says, pointing to a record of about $8 million for a Hampton property this year.

Both Winneke and Parker have witnessed another trend emerge: the generational stoush, where Gen X-ers go toe-to-toe with Baby Boomers for the same property. Parker recalls four of five bidders at a recent Hampton auction, earmarked as a “downsizer”, were young families. Winneke has similar tales: “Downsizers have swung back to find land again,” he says. “They don’t all want to head to St Kilda Road.”

However, the big surprise and year’s standout has been the surge at the ultra-premium end of the market – Toorak, in particular, “making up”, says Wilson, for a previously “subdued period”. In June, a property in Robertson Road fetched $24 million, a Melbourne record. Another for sale is now threatening to break it.

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“Sales over $15 million have been one of the most buoyant parts of the market this year,” says Marshall White agent Marcus Chiminello. “Dominated by local buyers.”

Although Kay & Burton’s Sam Wilkinson says international buyers, scarce in the first half of the year, are returning. “There’s a continued confidence in Melbourne property as an investment,” he says, pointing to a spring clearance rate above 80 per cent.

At the other end of the market, the ripple effect of next-out has led to improving results for traditional working-class suburbs with good infrastructure and amenity in Melbourne’s outer ring, such as Glenroy, Fawkner and Keilor East. Wilson says first home buyers even staged a modest come-back, up 3 per cent this year.

There’s also been a move by downsizers into established apartment living, particular in inner and middle southern suburbs. A one-bedroom apartment in East Melbourne recently sold for more than $1 million, a result Nugent describes as “unthinkable” a year ago.

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Overall, though, many homeowners have sat on their hands, preferring to upgrade than sell, restricting the supply of housing stock. Winneke says listings in Boroondara, for instance, are down 14 per cent on last year and 20 per cent on 2014. Nugent says this coupled with low interest rates has stimulated demand and pushed up prices.

Gary Peer director Phillip Kingston has seen keenest demand for properties close to shops, cafes and transport routes. “It’s the year of the renaissance of the suburban strip,” he says. “2016 is the year people have woken up to the community connection.”

Staver views it as buyers being better researched, prepared and more strategic. “It’s the year of the most informed buyer,” he says. “With willing vendors, it’s a pleasant place to work in.”