It was just seven years ago in the Spring of 2000, property values in Melbourne started on a boom-like course which lasted almost a year, abruptly halted by the September 11 terrorist attacks which took the mania out of the market.
Seven years later, and it’s happening again – if you believe local agents who agree we are at the onset of a real estate boom, Melbourne’s first in seven years.
There’s no denying the market in Spring 2000 draws many comparisons to that of today.
Auction clearance rates – like today – were consistently over 80 per cent; properties regularly sold for considerable amounts more than their reserves (and quoted asking prices) – and almost every suburb had a record broken, for its highest priced home.
The situation baffled many, as it followed a long period in Melbourne’s real estate market where median values were relatively stagnant. More cynical buyers eventually assessed the market as unsustainable, anticipating a bust.
They were wrong.
The Real Estate Institute of Victoria noted that since the last property boom, median house prices in Melbourne decelerated, steadying in 2003 and falling slightly (1.37 per cent) in 2005 before recovering in 2006.
According to the REIV, Melbourne’s metropolitan median house today is $420,000, up 79 per cent since September 2000 when median prices were $235,000.
We look at a sample of the strongest performing suburbs over the last seven years, and asks what, and who is driving the market.
The stellar performance of Toorak’s property market has been well documented ever since the sale of 774 Orrong Road in March this year for $7.8 million against a reserve of $6 million. That sale sent a sign to agents, advocates and prospective buyers, that the Toorak market had moved beyond what was ever previously experienced – even surpassing those levels achieved in the heady and flamboyant days of the late 1980s economic boom.
According to local agents, Toorak’s real estate market success has been buoyed by a strong economy resulting in massive executive bonuses, and a booming share market, which has bolstered residents share portfolio values.
The Real Estate Institute of Victoria says median house values in Toorak are currently $2.7 million – up 337 per cent on seven years ago, when its median was $620,000.
They came, they saw, they conquered.
There’s no other way to describe the “yuppy” influence on Fitzroys property market.
Median house prices for the bohemian suburb, once shunned by property buyers, have surged more than 200 per cent in the last seven years. Where an average home in Fitzroy cost $305,000 in the September 2000 quarter, it will now set you back $930,000, according to the REIV.
“Buyers will struggle finding anything in Fitzroy for less than $600,000 nowadays,” says Nelson Alexander property consultant Arch Staver. “As little as two years ago we would have considered entry level prices like that extraordinary.”
Mr Staver says accountants, bankers and lawyers dominate the buyer profile for property in Fitzroy, attracted to the suburbs ease of access into the city.
“They (buyers) like to hop on a tram and be home in ten minutes,” says Mr Staver. “Or if they’re feeling a tad more energetic, take 20 minutes to walk home.”
“Many of those executive couples are now starting a family, and looking for something bigger in the area,” he said. “There’s definitely a baby boom happening in Fitzroy.”
Mr Staver says the most coveted pocket of Fitzroy are the streets between Gertrude Street and Victoria Parade, near the East Melbourne border, where terrace houses sell for more than $2 million.
Like neighbouring Balwyn, Surrey Hills joined the “$1 million median house value” club this year. An average home in the leafy eastern suburb will now set you back about $1.171 million, up 204 per cent on the $385,000 it would have cost in the September 2000 quarter.
“Young professionals with two or three young children, are the most common buyer type in Surrey Hills,” said Woodards sales consultant Jim Kiley. “They either move in from a smaller place closer to town, or from a bigger house they own further east along the train line – after they start a family”.
“Most parents move here because they want their kids to be connected to the private school belt, and they want to live close to where they grew up themselves.”
Mr Kiley says property values in Surrey Hills have always been influenced by those of neighbouring Canterbury and to a lesser extent Camberwell. “When buyers are priced out of Canterbury they move a couple more stops further along the train line to suburbs such as Surrey Hills and Mont Albert.”
“Renovated or unrenovated homes on tree-lined streets attract the most buyer interest in Surrey Hills.”
Buxton real estate agent Paul Bond is quick to admit that a big part of Hampton’s meteoric rise into million dollar territory has a lot to do with buyers being outpriced from neighbouring Brighton.
“However, that’s only part of its success,” Mr Bond said. “Hampton has been discovered in its own right, and many people who live there, choose to live there despite being able to afford Brighton.”
“Entry level homes in Hampton start at around $1 million now,” said Mr Bond. “This compares to about $500,000 in year 2000.”
The REIV agrees, saying median house prices in Hampton have increased from $437,250 in the September 2000 quarter, to $1,170,000 today – a rise of some 168 per cent.
“Anything with a period home on it always creates a lot of interest in Hampton,” Mr Bond said. “Buyers will pay top dollar for homes between the Hampton Road shops and the beach.”
Glen Waverley is a city within itself.
The suburb has its own hotel, a long list of exclusive private schools, a sophisticated public transport system, its own office and industrial hubs – and is surrounded by shopping centres north, east, west and south.
This amenity makes the suburb, about 20 kilometres south-east of Melbourne, one of the easiest to live in, according to Ray White director Glen Waverley Damian Moore.
“Buyers wanting to get into the Glen Waverley market now need to spend around $500,000,” he said. “This compares to about $250,000 in the Spring of 2000.”
According to the REIV, median house prices in Glen Waverley increased from $228,000 in September 2000, to $580,000 today – a rise of 154 per cent.
Case Study: Nick & Joanna Elias
Nick and Joanna Elias made the right decision to relocate from the leafy suburb of Ferntree Gully, to the bayside suburb of Aspendale. Both are about the same distance – about 30 kilometres – from the Melbourne CBD.
Irene Casey of Hocking Stuart’s Mentone office says 3-bedroom original post-war weatherboard prices have increased from about $200,000 in Spring 2000, to around $500,000 today – a rise of about 150 per cent.
She says Aspendale has shifted from an alternative to nearby Beaumaris and Mentone, to a destination suburb with its own personality.
“Many of the homes around Aspendale are comparable in theme to Bentleigh, McKinnon or Parkdale,” says Ms Casey. “Buyers found they could get a similar style ‘romantic’ home, closer to the beach for much less money.”
For Nick and Joanna who had only recently married, the lifestyle Aspendale offered – which included being closer to the family – influenced the decision to move.
“There’s a lot more to do on this side of town,” said Nick. “We always go for walks along the Mordialloc Creek, or along the beach.”
“However there are four kids now, and despite an extension to include an extra bedroom and a second living area, we need something bigger,” he said. “Ideally we’d love to stay in the area but if we can’t, we’ll definitely try to stay by the beach.”
The Elias family are selling out of Eulinga Avenue, a street bound by Browns Reserve at one end, and Nepean Highway and the beach at the other.
Nick said when they first looked in Aspendale, average 3-bedroom homes could be picked up for between $100,000 to $130,000.
That’s a far cry from average 3-bedroom house prices today, which now start at $500,000, Ms Casey says.
“At the start of the year we were flabbergasted when a modified family home in Aspendale fetched $695,000 which was a record for the area” she said. “A couple of months later a similar home sold for $726,000, then another reached $750,000 – and most recently we had one sell for $850,000.”
“Buyers are discovering Aspendale is minutes from some of the best beaches in Melbourne, has straightforward car access to the city and is well serviced by train lines which can get residents into Richmond in 25 minutes.”
What hasn’t performed so well?
Go west? Not if you’re after capital value growth.
According to REIV figures, nine of the ten worst performing suburbs, in regard to median house value growth, were in the west and north-west of Melbourne.
This includes Taylors Lakes, about 20 kilometres north-west of Melbourne which experienced a 28 per cent increase in median house price over the last seven years, making it the worst performing suburb since the last boom.
An average home in Taylors Lakes costs about $345,000 today, compared to $270,000 in September 2000.
It was followed by nearby Keilor Downs which experienced a 42 per cent increase in median house values over the last seven years. Hillside (44 per cent), Laverton (44 per cent) and Keilor (50 per cent) make up the remainder of the Top 5.
Meadow Heights, Melton, Deer Park and Gisborne ranked next, followed by the outer eastern suburb of Donvale, which recorded a median house price increase of 66 per cent.
It’s important to note that this analysis compares REIV-produced median house prices in September 2000, to September 2007. Median values are ascertained by putting all sales in a suburb in order from lowest to highest, then choosing the sale price that rank midway between the highest and lowest range.
It can fluctuate greatly from one quarter to the next, depending on what quality homes are put to the market in that period.
Suburbs which experienced less than 30 sales for a period are excluded from the REIV’s analysis, as the values are considered statistically unreliable.