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aaron-campbell> March 14th, 2019

Low-end Melbourne property is becoming even more affordable and first-time home buyers celebrate!

What was once impervious to the decline in Melbourne property markets for several months, the low-end and affordable housing has finally joined the rest of the state as it heads into a downturn.

What was causing prices to increase for the cheapest homes in the weakened market (swelling first-home buyer needs) has ceased to be a factor as credit restrictions become tighter and demand is lessened. The nine-month growth stint against the rest of the market trend is gradually coming to an end.

Looking at the lowermost 25% of sales in the figure below from Domain, an annual price growth of 5.3% is apparent in the fourth quarter of 2019, specifically the month of September. Come the December quarter though, we see a .09% decrease for the same section, which has a median price of $580,000.

As for the other 75% of home sales, the story isn’t as bright for the median value of $1.026 million reflects a harder hit portion of the market. This price group recorded a 1.7% fall in the September quarter, accelerating to a 10.8% fall in the December quarter.

Senior research analyst at Domain, Nicola Powell, explains that further declines you see are likely in both segments of the market.

She goes on to state that “We are seeing a more broad-spectrum downturn across Melbourne. It was focused on the upper end but ow we’re seeing all regions and price points fall. Until we see signals that lending clamps will be loosened, the market will continue to fall.”

Other members of the market agree with Powell. Daniel Gladwell, an associate director of property at ANZ, points out that the downturn can be attributed to the credit restrictions across the entire market.

“What’s interesting now is the divergence is still there, but the gap in what’s happening there is narrowing,” he said.

“The difference being it’s now really negative and not very negative instead of slightly positive and slightly negative. It shows the credit tightening is affecting everyone.”

Gradwell believes the trickle-down effect had just taken more time for the lower end of the property market to see the impact of the stiffer credit requirements, as they had lower debt-to-income ratios in comparison to more affluent home owners.

Once again, Powell and Gradwell are on the same page. In agreement Powell stated “What we have tended to see historically is that the top end leads in price growth but also in downturns as well. When you see a new initiative come into play, you get an influx of new people trying to take advantage of the incentives.”

Powell is referring to the stamp duty concession and grant initiative for first-time home buyers. It was a boon from the state government to encourage enough buying to retain a floor under prices for most of the downturn.

Powell also said that even though prices looked to be declining across the city, the prices for entry-level buyers were obstinately robust. But once the demand ceased, this change did as well.

“They were still facing rising prices until only recently and even though it’s only a minor fall, it’s good news because affordability has improved marginally. That was the hurdle. At the entry level prices were continuing to grow,” she said.

In addition, Gradwell points out that as the amount of first-time home buyers gradually decreased, the value of their loans did as well.

“The average loan size has pulled back a little and that has impacted on prices,” he said.

There may be a silver lining to all that though, according to Danni Hunter, the chief executive for the Urban Development Institute of Australian Victorian division. She states, “This lowest quartile is imperative to ensuring there are more accessible points in the market for buyers with less access to capital.” In other words, the fall in prices was a joyful update for cash-strapped buyers.

She goes on to say, “These prices have only just started to decline, or some would ay correct, and are a good indication of what people buying that product can afford in this financial climate.”

> March 13th, 2019

Everything You Need To Know Before You Build A Granny Flat

If you and your family have outgrown your existing home, a granny flat could be the answer. Or, perhaps you have a big, unused backyard that you’d like to make a bit of money out of. Again, a granny flat could be the answer.

Granny flats are basically small, secondary houses that are placed on the same property as your original house. They can be used to house family members – such as older children or elderly relatives – in an independent manner while keeping them close. They can also be rented out to generate a small amount of rental income for you and your family to enjoy.

However, there are a few things that you have to think about before committing to building a granny flat.

*Note that different states and regions have different laws surrounding granny flat construction, so make sure you check with your local council before building. This article will provide a general overview.

Some States Have Regulations About When You Can & Can’t Build A Granny Flat

The first thing that you have to think about before you even speak to a builder is whether you’re even allowed to build a granny flat in your state. Every state and territory has its own rules surrounding the construction of granny flats. These take into account things like the size of your property, the proximity to other dwellings and who is going to live in your new flat. 

You Need To Consider Who Will Live In Your Granny Flat

Expanding on the above point, the person who is going to live in your granny flat will play a large part in determining whether or not you can get council approval. For example, parts of Victoria, Queensland and South Australia only allow immediate family members to live in your granny flat. On the other hand, granny flats in the NT, ACT, Tasmania, WA and NSW can be rented out to generate rental income.

Make Sure You Can Afford It

If your current home is mortgaged, you need to closely consider your finances before you commit to building a new granny flat. The average cost can run from around $20,000 for simple DIY flat pack to hundreds of thousands of dollars for larger custom designed flats.

However, you shouldn’t let the cost deter you, even if it seems like you can’t afford it at first. There are various ways you can finance your new granny flat, especially if you have a steady income and enough savings for a deposit.

The best way to pay for a new flat is arguably to take out a new home loan. This may require refinancing your current mortgage (if you have one), but don’t let this scare you away – it’s not that hard! Note, however, that different banks have different financing options for granny flats, so you should speak to your local account manager before making any major decisions.

How Long Will My Granny Flat Take To Build?

Ultimately, the actual build time for a granny flat isn’t very long. Even the most complex flats are usually complete within 3 months, while simpler ones take even less time. You might find that it takes a lot longer than this to plan your flat and get the relevant council approvals.

In some states, council approvals can take anywhere up to around 10 weeks. However, in the stricter states (VIC, SA and Queensland) it can take up to a year for your build to be approved.

Now that you know everything you need to start thinking about building a granny flat, it’s time to start planning!

> February 9th, 2019

Two Cities, One Dilemma

Sydney takes the cake when it comes to the most expensive residential real estate to purchase in Australia where the average housing price sits at $1.1 million dollars. Melbourne, being the second most expensive, averages $847,000 per house. Which leads to the question, why is it so much more expensive to purchase real estate in Sydney than it is in Australia, and does it justify a $300,000 difference?

Supply and demand plays a huge part in the cost of real estate between Sydney and Melbourne. With constraints in geography, Sydney is running out of places to build, but it still holds less population per square km than Melbourne does. Melbourne has a population density of 453 people per square kilometer, while Sydney has 400. Compared to other well-known cities around the world, both Sydney and Melbourne still have very small population density which attracts buyers and investors overseas.

It’s apparent that high real estate prices can really mean the opposite of success and may represent a failure to deliver the housing its residents need. A recently published article on the housing situation in Sydney, listed a few more interesting statistics. “According to Demographia’s annual index, Sydney is the most unaffordable housing market, and Melbourne listed 6th. Its mentioned that this is due to the Urban containment policies which aim to curb the growth of urban sprawl by encouraging greater density in existing housing areas. ‘This is associated with higher land prices, and in consequence, higher house prices,’ the report stated.” With that, Melbourne has done a better job keeping up with the supply portion of this delicate balance by allowing more urban sprawling. Housing approvals in Melbourne are currently running at 50,000 new homes a year, while in 2017, Sydney saw approximately 39,000 homes built. Both cities are years into a housing boom, but Sydney simply hasn’t offered enough of a surplus in housing and as a result real estate prices have exceeded its sister city.

Outside of crushing numbers and examining housing bubbles, one could also say that the weather, sunny beaches, and landmarks play a part in this real estate variance of $300,000. Warm and sunny days occur more often in Sydney than they do in Melbourne as Sydney is 3 degrees higher in average annual Celsius temperatures than Melbourne is. While this may not seem like a vast difference, those who like to get and stay warm may gravitate toward Sydney. People don’t just flock to Sydney to feel the warmth of the sun though, they go to enjoy iconic scenery at some of the best beaches in the country. If you’re in Sydney, Bondi beach is a mere 7km from CBD, whereas in Melbourne you must travel double that (15km) to feel the oceans waves at Brighton Beach.

Sydney may just beat out Melbourne in terms of nature as well. Nature enthusiasts call Sydney home as there is an endless amount of opportunity for them to get outside. Sydney is home to breathtaking mountains, botanical gardens, and national parks that provide sprawling greenery. Melbourne on the other hand doesn’t have much to offer apart from a few sub-par beaches and the Yarra river that lazily trickles through the city. When compared to Sydney, Melbourne is a negative for those who seek nature or enjoy coastal living.

So do any of the things listed above justify a $300,000 difference? You might just have to holiday to both to determine for yourself which one is worth settling down in or should we say, “down under”.

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