As we are about to roll into Summer and the end of 2016, we are now in a position to reflect on the significant market influences that have been driving, what has again been, an extremely buoyant year for the real estate market on the Great Ocean Road.

Stock levels (properties available for sale) are at an all time low. Having multiple interested parties in properties for sale has been very common, especially around the median price points, and certainly on anything considered special.

So, what is driving all this? Low interest rates continue to provide a solid platform for transactions to occur but they are not the main driver. The dominant driving force behind the buoyant coastal market has been the Baby Boomers setting up their future lifestyle plans now. To explain this fully we need to outline the context first.

A “Baby Boomer” is anyone born in the 20 year period from 1946-1966 (definitions vary as to the end date but this will suffice for our purposes). The name refers to the post war period that signified a high level of marriage and fertility rates (a baby boom). In many ways, this demographic has defined Australian culture and living standards as we know them today. As of 2011 they started to hit the traditional age of retirement but just as they have done throughout their whole existence, they have decided to do it their way. They are doing this simply because they can afford to. In history there has never been a more wealthy, highly educated and generally healthy (due to medical advances) demographic to hit retirement age.

In essence, they are creating what is being labelled “the third age”. That is the period after “middle age” (35-50) and is the period between 50-75 after which “old age” kicks in. (Congratulations to those 65-75 year olds who have just been de-classified out of old age!). Due to their wealth and their health, many Baby Boomers are planning for a much more active “third age” than their predecessors. Many will continue to work, but work more flexibly, assisted by advances in technology. This is often because they want to, rather than have to. As part of their pre-designed lifestyle plan, they want to have less obligations professionally but still be active, they want to travel, they want to cash in the tax free family home and downsize and/or they want to buy on the coast (or in the country). These pre-designing Baby Boomer lifestyle planners are the prime movers of the current coastal market place and they still have a long way to run.

An excellent example of using technology to provide a later in life – work balance, is well known business commentator Alan Kohler. Most commonly seen on ABC news demonstrating his love for a good graph, Alan purchased a property from us on the Surfcoast a couple of years ago, as a family getaway and as part of his future lifestyle plan. Having just started a new online venture, “The Constant Investor” (www.theconstantinvestor.com) we are not sure
how the balance is going but being internet based, it allows Alan the flexibility to work from anywhere, including his beach house. This will become a more common scenario for Baby Boomers like Alan, especially as the NBN gets completed and mobile services continue to improve.

It is not difficult to see the perfect timing of the buoyant metropolitan property markets that have funded these moves. Population growth and the lowest interest rates on record had substantially increased the equity in the large family home, which they have now just sold to a nice Chinese family, who simply refused to be outbid at auction.

Outside of the Torquay – Geelong growth corridor which is steadily attracting permanent, particularly young, house buyers, the coastal and regional areas have generally not seen this dramatic population growth or the Chinese influence. Therefore, price differentiation between the coast and Melbourne properties remain significant. In other words, the coast looks cheap (and beautiful) by comparison to the city and the Boomers are taking advantage of this. Even if they are not yet selling the family home, they are buying now using their increased equity to borrow against or using their self-managed super funds and renting them out with the plan to occupy them later.

The activity has not just been driven by purchasers new to the coast. We have also seen a lot of upgrading happening now that they are planning to spend more time in their coastal homes. This is especially happening in the higher price points. As an example, every one of the last 5 front row sales in the Fairhaven – Eastern View stretch was to those upgrading from another locally owned property. This makes sense in the context that it is not common for someone to have the confidence to spend $2m+ in an area that they do not have previous experience in. It is also a strong endorsement of the lifestyle on offer and the accessibility from Melbourne.

On the other hand, we have also seen some selling to cash up for retirement. Even with the price differentiation from the metropolitan property market, the value of these coastal assets is now significant. If they are not going to be utilised, they will often be sold. There are many coastal properties that were bought for future grand children that never showed up or have grown up and now have their own lives. From a timing-the-market perspective, taking advantage of the current property market to sell an under-utilised asset makes sense.
We hope you found this newsletter informative and if we can ever be of any assistance in any real estate matter please do not hesitate to call.