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great ocean report - january 2010

28th January, 2010

As we finish the school holiday period for the 09/10 summer it is as good a time as any to take a look at what has been happening in the coastal property market this season. In short there is a lot going on.

There have been a lot of sales both on and off market with the last two weeks of January being especially buoyant. There are a lot of factors driving this and when we look at them closely it is not difficult to see why there is a cumulative effect in the market towards the end of the holiday season. Some factors are very fundamental others are pure emotion.

Firstly we came into Summer with the strongest lead from the Melbourne metropolitan market that we have ever seen. In the December quarter the median house price in Melbourne surged 15% to $540500. It was the largest increase in the median house price since the REIV started keeping quarterly records. Given that many coastal property purchases are fuelled by the equity in the purchaser’s prime residence usually in Melbourne this is a strong confidence builder. Just the sentiment from seeing your prime residence’s value soar is enough for some to bring out the cheque book and consider another property purchase especially in the absence of confident investment alternatives.

Secondly it was the first Summer since the Geelong Ring Road had been opened and as we have mentioned in previous Great Ocean Reports what this does is add another layer of justification to having a coastal residence. Every buyer tends to go through an emotional attachment stage (we love the area and the lifestyle) and then goes through the justification stage (should we spend the money). The perception at point of sale is that because the area is so easy to access the property will get used on a regular basis and therefore the purchase can be justified. On the flip side for existing property owners it allows them to use the properties more often and therefore if they are using them they are unlikely to sell them.

This has seen stock levels plummet to the lowest levels for some time so for property owners thinking of selling the timing could not be better.

Other factors are less fundamental but are equally as powerful in the mind of a buyer. The first two weeks of the Xmas holidays this year was some of the best weather ever experienced for that time of year. I was personally involved with the Nipper program at the Fairhaven SLSC and the mood on the beach was nothing short of jubilant. This is the time of year where people emotionally reconnect with the coast and it is obviously the time when the majority of people take holidays. Coastal property purchases are certainly in the first instance emotional decisions that the buyer tries their best to justify with logic. Having access to some of the best beaches in the world in brilliant weather always triggers strong emotional responses. We know because during this time most of our Property Guides fly out the door between 4 and 5pm in the afternoon - after a great day on the beach.

If we look at what has been selling we can see results in all price ranges. The strongest demand has been in the preferred areas within the coastal towns in the $500000-$900000 price ranges. Interestingly this is also the price range where Melbourne homes have seen their median prices increase the most. Land has been slower because lifestyle buyers in the main would prefer not to go through the building process if they can avoid it. However we know from past experience that if the houses that are available are not appealing and buyers are committed to getting a foot in the market then land will be considered.

Looking forward it is difficult to see in the medium term what will slow the property market down (apart from some unforeseen random occurance). Population growth in Melbourne will remain strong and therefore the supply imbalance will continue interest rates will increase but overall will be restrained by factors in the world economy and unemployment will stay low. These are strong confidence building factors on the back of the news that Australia escaped recession.

Specifically for the coastal market it will really be about stock levels. Where supply is tight (such as Aireys Inlet and Fairhaven right now) we will start to see more auctions as competition increases for well located properties especially around the median price points. Where supply is higher such as Torquay the market will be positive but steady. The whole of the Great Ocean Road area has benefited from the Geelong Ring Road and this will continue as they finish the final stages over the next year providing seamless access between the coast and its main buying demographic.

We hope that you have found this report informative and if we can ever be of assistance in any real estate matter please do not hesitate to call.

great ocean report - september 2009

05th October, 2009

spring coastal market outlook

As we roll into the high season for coastal real estate (the start of which is generally regarded as post the AFL Grand Final) we find ourselves at what has the makings of a very strong period. As reported in our last newsletter most of our buyers come from the Melbourne metropolitan area and what happens in that market over Winter generally follows onto to us in Spring and Summer – and the Melbourne market has been flying. This has been caused by low interest rates lack of housing stock economic stimulus packages and population growth.

The June quarter median house price for Melbourne was $441875 up 9% from the previous quarter. This is almost back to the previous peak of early 2008 of around $450000. At writing the September quarterly figures (the sales for July August and September) had not been released. However the REIV has released a median house price figure for September alone and it is a staggering $520000. The quarterly figure is likely to be lower than this because it takes into account more sales regardless it is a stunning result.

What does it mean for coastal property? Although it is early in the season the increased demand is already evident. This time in 2008 the enquiry levels for properties above $1m was almost not existent as the corporate sector battened down the hatches and stock markets dived. In contrast this year we have seen five sales between $1m and $2m in the past few weeks and prior to the season really starting.

A good test of the strength of the market will come on Melbourne Cup weekend. We have two auctions scheduled for the weekend where the expectations are in the $2m-$3m bracket. 425 Great Ocean Road Fairhaven is a landmark property where we are quoting $2.5-$2.6m. Two houses on 2.7acres (app) opposite the beautiful Fairhaven Beach. The second auction is at 41-45 O’Donohue Road Anglesea three properties a residence and two adjoining vacant allotments in a prime position in Point Roadknight. Expecting $2.2m-$2.3m. Check our website for details.

Enquiry levels have been good across all price ranges but what is most interesting to us is the buyer’s motivation. Since the Geelong Ring Road has opened we are seeing a lot more potential buyers who are looking more for a second base rather than the traditional holiday house. With the access now being so streamlined we are seeing people setting themselves up to lead a split lifestyle between Melbourne and the coast.

Typically they are Baby Boomers who want to work less or have the option to work via the Internet at least a few days a week. They may be business owners who know that if their attendance is required they can access Melbourne easily but actually want to spend more time away from work and enjoy life. We have also seen enquiries from young families who want their kids to grow up on the coast with the bread winner commuting at least some of the time to Melbourne or Geelong.

We will also see increased usage from existing property owners who will use their houses more because they can access them more easily. This will keep supply tight.

We have been suggesting that this may occur since the Geelong Ring Road started construction and it is interesting to see it come to fruition. For property owners wishing to sell there will possibly not be a better opportunity than this season after such momentum in the property market over winter. Next year will put us into a rising interest rate regime and although no one is expecting interest rates to go through the roof the media will again use the words “Rate Hike” at every opportunity as they continue to pump misery into our daily lives at every opportunity. This may slow down the current positive sentiment however the fundamentals do look strong for some time to come.

great ocean report - july 2009

10th July, 2009

Looking forward glancing back

At the time of writing this report the Melbourne property market has now seen 9 weeks in a row of 80% plus clearance rates and the median house price is now back to just below its peak of February 2008. Over the past 20 years this has always followed on to the coast in Spring mainly because the majority of the buyers for coastal real estate in our area come from Melbourne and generally come back to the coast in Spring. Add the Geelong Ring Road into the mix for the first time and it is difficult to see what will hold the coastal market back this season.

The REIV recently commented on its website about the performance of the market in June 2009 “compares very favourably with the same four weekends in June 2007. In what was the strongest year for residential property sales in a decade there were 2124 auctions reported with 1789 sold resulting in a clearance rate of 84 per cent. Whilst there were more auctions in June 2007 than June 2009 the reverse applied for private sales. In June 2007 there were 2500 private sales reported compared to 2916 in the comparable four weekends in June 2009. This means that in terms of the number of homes sold June 2009 has been stronger than June 2007.”

Of course this is all ahead of us to be seen on the coast however the fundamentals are strong. For property owners that have been looking to time the market to sell this Spring is looking as good as it has been for some time. Statistically we sell the most property in Spring because often the buyers are motivated to secure a property that they can get some use from over the warmer months. For buyers the Geelong Ring Road will add another layer of justification to purchasing on the coast. If a buyer feels that they will use the property regularly because they can access it easily they are more comfortable with their purchase.

In terms of performance of the coastal market over the past financial year it can be regarded that it has held up well especially in the backdrop of pessimistic media scaremongering through this period. In specific terms we use the definition of a stand alone single dwelling (apartments and attached dwellings are not included) on its own title as the basis for our statistics and the following results are for the 08-09 financial year. The statistics are provided by the Surf Coast Shire.

Aireys Inlet recorded 27 house sales which was exactly the same as the previous financial year. The average house price ( total dollar value divided by the number of sales) fell a little over 3% for the year from $572062 to $553188. The median house price (the middle sale when the sales figures are placed in consecutive order from lowest to highest) was $475000 down from $485000 the previous year. Overall a very solid result.

Fairhaven and Moggs Creek remain some of the most tightly held areas on the coast. We have traditionally grouped these areas for the statistics. This year there were only 15 house sales which is down from the normal average of 19 sales the year before.

The median house price actually rose from $905000 to $935000 however the average house price fell from $1085000 to $927898. These are the sorts of anomalies that can occur when you have such small sample numbers to work with. It just depends on the weighting of the sales numbers above or below the median. The top sale was just below $1.7m. The Aireys Inlet office is very pleased with its market share for the year selling 58% of the house sales in Aireys Inlet and 60% of the house sales in Fairhaven and Moggs Creek. The remaining percentage was split between other agents and private sales.

Lorne had a dramatic drop in the number of house sales from 43 to 26 but a larger number of apartments were sold with the release of the apartments at the Cumberland Resort in the heart of town. It is clear that quite a few would be house buyers bought in this complex due to the excellent position in Mountjoy Parade. The average house price actually rose quite dramatically from $804256 to $1014000 and the median also rose from $750000 to $800000. The top sale was a little over $2.8m

Anglesea also experienced a drop in numbers of sales from 80 to 50 however the average house price held up quite well dipping slightly from $539212 in 07/08 to $535610 in 08/09. With the median price at $455000 reflecting that the lower end of the market was the most active. Stock levels available were also lower during the course of the financial year with many home owners holding off selling because of the quieter market.

The most interesting aspect for all of us will be the effect that the Geelong Ring Road has on the area now that it is open. Everyone that has used it has been very impressed with it and the general consensus is that it takes approximately 13 minutes to get around Geelong. The 4^th stage is well under construction by the end of 2010 will see a seamless access between the Great Ocean Road and the Melbourne CBD.

We hope you have enjoyed this update and if we can ever be of any assistance in any real estate matter please do not hesitate to call.

See you on the beach.

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