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Great Ocean Report – July 2009
17th 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 2,124 auctions reported with 1,789 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 2,500 private sales reported compared to 2,916 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 $572,062 to $553,188. The median house price (the middle sale when the sales figures are placed in consecutive order from lowest to highest) was $475,000 down from $485,000 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 $905,000 to $935,000 however the average house price fell from $1,085,000 to $927,898. 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 $804,256 to $1,014,000 and the median also rose from $750,000 to $800,000. 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 $539,212 in 07/08 to $535,610 in 08/09. With the median price at $455,000, 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 4th 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.
great ocean report – may 2009
9th June, 2009
Good news for some, great news for others.
Just like the Australian stock market often takes its performance leads from what happens on Wall Street, the coastal property market within three hours of Melbourne, can generally get an idea of future performance from the metropolitan markets lead. This is simply because most of the buyers for coastal property come from that metropolitan area and confidence is contagious.
News just released by RP Data, a leading supplier of real estate data to the industry, is reporting that the Melbourne median house price has risen by 4.5% in the first four months of 2009. This is good news for property owners who have been scared by widespread media coverage of marginal economic commentators, stating that prices would fall up to 40%. It is always amusing how the newspapers will run to the same commentators who can provide them with the greatest headline. It is a good and tangible reminder that the only objective of newspapers is to sell advertising space and to do that they need to keep the attention of the public. There is no doubt that some of the upper end suburbs have dropped in significant value in 2008 but this must be kept in the context of their stellar run over the past five years. Figures released by leading Melbourne real estate agency Jellis Craig in their Autumn Property Review, show that the median house in Hawthorn, for example, rose 83.98% from 2003 – 2008.
On the coast we have continued to be busy below $1m, but are also starting to see sales between $1m and $2m after a hiatus of about six months. Again, this reflects exactly what has been happening in Melbourne. In recent weeks the metropolitan market has been recording 80% plus auction clearance rates but even more importantly on auction volumes similar to 2007 levels.
This all bodes well for coastal property on the Great Ocean Road and, in our opinion, a buoyant Spring can be expected. The insurance policy for this is the great news that the Geelong Ring Road is set to open Sunday 14 June, six months ahead of schedule. Since this was announced our enquiry levels from prospective purchasers has considerably increased, a most unusual occurrence in May, which is usually one of our quietest months of the year. The biggest issue we are now facing is the lack of stock available for sale, especially in the preferred areas.
Advice we had received when the Geelong Ring Road was proposed, was that we would see a lot of positioning before the Ring Road was opened (which we have seen) but that we would not see significant capital gains until it was actually opened. People could then experience the ease of access to the coast and therefore justify their purchase. This was because they felt they would get regular use from their coastal asset because it was so easy to access.
We have been constantly asked to put time frames and percentages on potential capital gains and, of course, this is extremely difficult to do. Mainly because we have never seen a piece of infrastructure like this since the West Gate Bridge opened in 1978. Overall we need to look at the fundamentals and try to make a general observation of the likely outcomes for the second half of 2009.
The fundamentals specific to our areas are all good and include:
1. A resilient property market that is seeing a rise in median property prices in most capital cities.
2. Cheap interest rates that look to remain that way for some time because of the overall world economy.
3. The Geelong Ring Road providing uninhibited access to the Great Ocean Road for the four million people in metropolitan Melbourne.
4. Lack of supply available for purchasers. There will be two reasons for this. Current owners will use their properties more often and therefore are less likely to sell them. Secondly there will be more people looking because they can justify purchasing through increased usage through ease of access.
5. Many Baby Boomers getting toward retirement age will probably not retire in the conventional manner but rather look to work less and more flexibly. They are often over achievers or business owners (workaholics) who will look to spend more time at their coastal home and keep in contact via the Internet. But also know that they have quick access to Melbourne if required to commute.
6. This principle will also be applicable for families who want to live a coastal lifestyle. Typically the breadwinner would enjoy a flexible work life that would only require commuting a few days a week to the CBD and the rest online. Or have a place to stay a few nights a week near the work place.
7. A rising stock market providing general positive sentiment.
8. The main wane on the from a sentiment point of view could be rising unemployment which in past economic downturns has peaked six to 12 months after bottom of the stock market.
On balance we see a positive winter and spring ahead of us, this is good news for property owners who have been waiting for the Ring Road to open to sell. It’s also great news for buyers looking to create a life on the coast that they can now easily access.
If we can be of any assistance to you in regard to any real estate matter please do not hesitate to call.
See you on the coast.
Marty Maher
Mim Atkinson
Great Ocean Properties March Report
31st March, 2009
A fascinating market.
Given that we are fast approaching Easter, we thought we would use this Great Ocean Report to look back on our high season and see what occurred, then, be brave enough to look forward and make some predictions.
I saw a great quote this week that I immediately pinned to the wall of my office. I thought it was so appropriate for our current times. It read:
“Life isn’t about waiting for the storm to pass, it’s about learning to dance in the rain”.
Translation: in these times there are opportunities everywhere and if you are adaptable, positive and creative, you can reap the rewards.
It is a fascinating property market at present. Different geographic areas are performing differently as are different price ranges within those areas – and for different reasons. The one thing that is the most pleasing aspect has been the overall resilience of the property market in the face of a highly negative campaign by many parts of the main stream media. It is a pity that our newspapers, in particular, have chosen to make themselves dedicated conduits of misery in an effort to sell newspapers. I think we have reached the point where the general public is realizing that main stream news media has no obligation to be optimistic, there only obligation is to sell advertising space by trying to keep people’s attention.
So what is going on in the property market? If we look back to 2008, we saw the median house price in Melbourne rise 3.1% over the calendar year from $420,000 to $433,000 according to the REIV. Within that we saw different areas performing differently. More affordable areas outperformed the market while traditional upper end market places underperformed. In many ways this has continued in the first three months of 2009.
Fueled by historic low interest rates, the lower price ranges are attracting first home owners and rental property investors. In the past two months the banks have been swamped with loan applications from potential first home owner’s who are keen to get into the market while the government subsidies are still available. The upper end has been softer but this also must be looked at in the context of an extremely buoyant 2007, where prices rose at unsustainable rates, so some correction was not unexpected to long time property market observers.
Coastal real estate at present is a great example of the differing demographics buying in different areas as an example of who is buying and who is not. Our experience has been that we have been very busy below $1m and quiet above that mark. This seems to be the case in Anglesea, Aireys Inlet and Lorne, where supply continues to be tight because they are land locked by National Park. There are several reasons for this. Firstly, low interest rates are the obvious incentive for people to buy at present however this is being greatly assisted by the approaching opening of the Geelong Ring Road later this year creating a deadline. As one buyer put to us recently, “if you had a secure income and wanted to buy on the coast, why wouldn’t you buy this year. Prices are flat and money is cheap”. Doctors and lawyers have certainly been prominent in our buying demographic in the first three months of 2009 and are a good example of those with secure incomes who are taking advantage of the market conditions.
This however, is not true for all coastal locations and this is where who is buying is important. Torquay and Jan Juc, for instance, are doing it tougher because they now attract a larger amount of permanent home buyers rather than the predominately holiday house buyers that Anglesea, Aireys Inlet and Lorne attract. The permanent home buyers are not generally first home buyers (which are most active at present), they are generally lifestyle seekers relocating to the coast that may commute to Geelong and Melbourne for work. This demographic are probably one of the most effected by potential job losses, so caution is the current stance. As Torquay and Jan Juc have a large supply base of properties available, this means when the property market slows the available stock levels build up significantly. This provides too much choice for a purchaser, particularly holiday house buyers who often have very open time frames to buy, so there is no pressure on them to make a decision to purchase regardless of their demographic. It could also be argued that Geelong Ring Road is of less benefit to this area than further down the coast.
Looking forward, we need to look back. As reported in our last Great Ocean Report, we saw a similar cycle occurring in the mid 1990’s and although every cycle has differing factors affecting it there are also similarities. One thing is obvious and that is people will take advantage of cheap money if they can find a good use for it. In 1996 and 1997 interest rate cuts facilitated a revival in the property market after several flat years. This happened in the lower price ranges first as investors bought up rental investment properties as the differentiation between borrowing costs and rental yields narrowed. This spurred confidence in the property market generally which spread to all price ranges. Although I don’t have the Melbourne median house prices for that period, I can tell you that the prices in the Anglesea to Lorne area roughly tripled over the next six years. This was obviously without the benefit of a ring road providing uninterrupted access for its main buying demographic.
If I was so bold as to make broader predictions about the world in general for 2009, these would be it:
1. The sun will come up each day for the rest of the year despite the media suggesting otherwise.
2. Unemployment will rise and interest rates will fall consistent with every other economic downturn in the past 50 years.
3. Australians will continue to look after each other when things get tough. $250m raised for the bushfire victims has proved that to us.
4. The wellbeing of your family will remain your number one priority this year, just like the majority of the planet.
5. When you wake up on the morning of your birthday this year you will wonder where the last year went and realize that life seems to be speeding up.
6. and finally, you will hopefully realize that life isn’t about waiting for the storm to pass, it’s about learning to dance in the rain.
See you on the beach.
Marty Maher
Director
Great Ocean Properties
0419505279
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