Welcome to our Summer Great Ocean Report.
A very interesting time at present in the coastal markets watching what is selling, what they are selling for and also what segments of the market are quiet and importantly why. As usual, let’s try and demystify what’s happening.
In the first instance let’s look at the bigger picture and zoom in. In terms of the highs and lows of the market, when we look back with hindsight we can see that the previous high in the market was in 2022 before interest rates started rising and the low of this cycle, we feel, was around the time of the Federal election in May this year. It was held just before the first two interest rate cuts and the stability of no change in the incumbent government gave people at least some certainty of what they were in for moving forward. When trying to make large financial decisions, stability fosters confidence to do so.
Since May we have seen enquiry levels lift and although transaction numbers are tracking similar to the previous year, the amount of new people who are doing research and planning a future move has definitely increased. Recovering markets generally fill in from the bottom up so for a lot of this year nearly all transactions were in the lower price points (for us that’s $900,000 – $1,400,000). Recently we have seen a run of sales in the $2,000,000 – $2,500,000 range but very few sales above this.
When we look at the sales data and talk with those who are yet to buy, the majority of people active in the market are looking for permanent homes for either now or for the future with lifestyle usage in the meantime. All the vacant allotments that we have sold recently has been to those wanting to build permanent homes and mostly to builders or architects for their own homes. The majority of these permanent home buyers are asset swapping rather than borrowing. Given they are searching for permanent homes, it’s therefore the higher quality homes or sites that are most likely to sell at present. This is relative to the budget of the buyer and the choices they have available to them.
This is a change in the coastal demographics where in the past holiday home or lifestyle buyers traditionally outweighed permanent homes buyers in the Great Ocean Road towns.
There are two sectors of the market that are finding it more difficult at present and they are mid range ($1.3m – $1.9m) beach house standard homes and upper end ($3m+) beach houses that are unlikely to be permanent homes because of their style or location. Interestingly they are finding it difficult for completely different reasons.
The mid range beach house standard homes (they are not generally regarded as of a standard that could be a permanent home with today’s level of expectation) are finding it harder because their future flexibility of use is limited without further expense. The prices of these properties are often dictated and supported by the site value of the comparable sales around them but often sit on the market a bit longer because of the standard of the residence. They often require a price adjustment to sell in this market.
The upper end beach houses of above $3m are finding it harder simply because of their increased outgoings since Land Tax increased. They are often in brilliant locations and have genuine aesthetic appeal but unless they can be utilised as permanent homes now or in the future they are finding it challenging at present.
Overall, the mood is much better than the previous years since the Covid peak, supported by a solid metropolitan market that is back at record highs. Interest rates appear to have stabilised although those borrowing significantly will be watching this situation closely.
We see this segregation in the market for different property types continuing due to the demographic of who is buying. The lower end will be supported by affordability (whether for permanent or holiday) while higher priced quality properties will continue to be supported by asset swapping Baby Boomers looking to have their coastal home as their permanent place of residence whether they live there permanently or regularly splitting their time between the coast and an apartment in the city.
We hope you found this Great Ocean Report informative and if we can be of any assistance in any real estate matter we welcome your call.