Great Ocean Report – January 2018

Being January and the start of a new year, it is natural to be looking forward and trying to determine what may occur in the year ahead. Making forward predictions is fraught with danger, however in this Great Ocean Report we will help to identify some trends that will give us some likely indicators of what will occur in 2018 in the property markets.

We always say markets (plural) because, as we have said many times in this report, Australia has hundreds of small property markets that have different influences and therefore different performances. Many interact with each other and it is this interaction that we feel will be the key aspect to watch in 2018. In other words – where is the money moving from and where is it going?

If we firstly look at the greatest source of wealth in Australian residential property it is obvious to look at the Sydney and Melbourne metropolitan property markets. The amount of wealth and equity created in these markets over the past 5 years is significant by any measure. By the latter stages of 2017 we can see that Sydney has peaked for this cycle and Melbourne had seen its rate of price appreciation slow. The difference between these two markets is that Melbourne is more affordable than Sydney and Melbourne attracts significantly more skilled migrants than Sydney does. Hence why Melbourne’s price growth has slowed but not peaked like Sydney’s has.

Regardless of their current growth status, it is the effects of the capital growth in both these markets that we need to focus on. Given Melbourne directly affects our service area, we will focus on that market for the purpose of this report.

If you are an owner occupier in Melbourne and you are trading properties in the same market place, you are less affected by market movement if you are transacting in a short time frame. The dollar values you are now trading in are higher than you were previously used to, but essentially you are trading like for like. The value of the asset you are selling is paying for all or part of your next purchase.

If you are a first home buyer wanting to buy in Melbourne however, you are now faced with a median house price in the low $800,000s ($817,000 at the end of the September quarter). Without assistance from family in some form (either an inheritance or gift) you are going to face being saddled with a huge mortgage to purchase your first home – or you look for alternatives.

If you are at the other end of the spectrum and planning for later life or retirement, you now have significant equity created in your capital gains free family home which is too big for you now that the kids have left. You now are looking at all your options including an alternative property or properties to more suit your current and future lifestyle.

Both of the above examples have been significant drivers of money flow out of the metropolitan markets over the past two years and into the regional and coastal property markets, and we expect this trend to continue in 2018.

Like many of the regional areas within 2 hours of Melbourne, Geelong and the Surfcoast have both seen significant increases in value over the past year. Geelong was up $16.9% to September, according to the REIV, to a median house price of $675,000 which even at that increased level is significantly more affordable to a young home buyer than Melbourne. Torquay with its close proximity to Geelong has shared in this buying demographic and has shared in similar growth.

The lifestyle towns of Aireys Inlet, Anglesea and Lorne have appealed more to the Baby Boomers implementing their future lifestyle plans, but many have been frustrated by the lack of opportunity.

Leave a Reply

Your email address will not be published. Required fields are marked *