Safe As Houses
Predicted increases in value signals strength in local property market.
4 min
OPINION
The latest official property data figures have been released, indicating Australian houses prices in some capital cities have risen as much as 29% —the sharpest increase in the residential property market since 1988.
What makes this even more astounding is that this occurred during a once in 100-year pandemic and negative net migration growth, the first time since WW2.
While most of us are scratching our heads in disbelief, bank economists are upping their forecasts. Their consensus is that the property market still has another 10% to 17% in appreciation to go in the coming 12 months.
Essentially, bank economists have generally got it wrong during COVID-19 — first estimating that property prices would drop by over 30% in 12 months. The truth is prices increased by over 15%
As stated in many of previous columns, the health of the property sector in Australia is fundamental in enabling economic recovery and stability.
The real questions to ask are: ‘What are the critical drivers of property prices?’; ‘Are there any structural changes anticipated in the property market?’; ‘Are there any other factors that play a role in contributing to property prices?’
As much as a 14% increase in property price can be directly attributed to a 1% decrease in interest rates according to RBA’s modelling.
Low interest rates undoubtedly are the single most significant factor that drive property prices.
Beyond interest rates, some other factors to consider are:
- Building approvals and efficiency of the planning process (supply of property)
- net migration (increases demand),
- employment
- vacancy rates.
Perhaps the most eloquent modelling recently undertaken is by the RBA’s Peter Tulip and which quantifies a premium attributed to property prices due to lack of supply and planning constraints.
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Sydney
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Melbourne
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Addition cost to houses
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$489,000
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$324,000
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% to the total value
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73%
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69%
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Additional cost to units
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$355,000
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$97,000
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% to the total value
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68%
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20%
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Tulip’s paper attributes house prices in Sydney to be 73% higher and in Melbourne 69% higher, precisely due to the lack of additional land supply and unit approvals. From an Urban Planning perspective, there is a constraint of available land. New land releases are not cost-effective for the government due to the increased cost of providing infrastructure to support new Green-fill suburbs. Continuing with the urban sprawl as a solution may have outlived its lifespan.
The unavoidable conclusion will most likely align with RBA’s research, more building approvals are needed, and a more efficient and robust planning process is required. Importantly new land releases are the best antidote in keeping prices low. This would avoid making borrowing money harder by dampening demand or increasing interest rates in an attempt to reduce property prices.
COVID-19 lockouts have resulted in net migration being negative, which has dramatically reduced the demand for units. CoreLogic data below shows the premium houses have over units have never been higher.
It’s easy for property commentators to conclude that units are less desirable — people have lost confidence in living in units during the pandemic. Recently publicised cases such as Sydney’s Opal Tower and others have created reduced interest for units.
As Australia’s property market grows in size and immigration recommences, the Sydney, Melbourne, and Brisbane unit market will have commonalities with other cities such as New York, Paris, and London.
Units in these cities are not considered a secondary option to houses but a complimentary option due to the ability to live in desirable locations close to amenities, schools, transport, entertainment, work and avoiding the need for motor vehicles
Units in Australia has historically been specifically catered for either:
- a transient purchaser who wishes to live in an apartment temporarily until they can afford to buy a house
- overseas students
- cheaper investment property option
As a result, units are generally smaller in size with lower quality building finishes
On the flip side, we believe there is a strong demand for larger, high-quality apartments. This high-end unit market is expected to grow further as the baby boomers look towards their future accommodation needs and conventional houses will not fulfill their needs.
The NSW state government is acutely aware of these issues and appreciates that building the correct type of units to meet market demand will keep affordability down and cater to the broader market.
The NSW building commissioner David Chandler publicly names and shames builders by policing defects, thus ensuring that developers pick up their game which in turn will protect purchasers. This will restore confidence for purchasers wishing to buy apartments, especially those who want to buy off the plan.
Despite units performing relatively poorly compared to detached houses, we believe that there will be an increase in demand for units. The challenge will be for quality supply as the demand increases. The consumer will be increasingly selective on the offering, expecting a superior or equal liveability offered in an apartment to that of a house.
Paul Miron has more than 20 years experience in banking and commercial finance. After rising to senior positions for various Big Four banks, he started his own financial services business in 2004.
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.
An architectural jewel of Victoria’s Goulburn Valley, the Noorilim Estate stands as one of Australia’s most extraordinary Italianate mansions.
2 min
Legend has it that opera icon Dame Nellie Melba performed in the minstrels’ gallery and current-day hitmaker Tones and I filmed a music video at Noorilim estate. The high profile property has even been the breeding ground for multiple Melbourne Cup winners including 1910 champion, Comedy King, who was laid to rest within the grounds.
In 1998, prominent art dealer and entrepreneur behind Menzies International, the late Rod Menzies and his wife Carolyn, bought Noorilim for $3.325 million and set about restoring the Italianate mansion to its former glory.
Today, the 65ha property in the heart of the Goulburn Valley is on the market for only the third time in the past 50 years via Sean Cussell of Christie’s International Real Estate with a price guide of $15m.
During the Menzies’ ownership, the glamorous country estate was a venue for weddings, concerts, and private events, welcoming a long list of international guests. Chart-topping artist Tones and I filmed the video for her song Bad Child at the estate, and the period property has played its part in numerous films and television series. Singer and actor Ted Hamilton, known for roles in Division 4, Homicide, The Love Boat, M*A*S*H and Hawaii Five-O, was also a regular performer at the address.
Given its stately grandeur, Noorilim was even a successful auction centre for fine art with works by Brett Whiteley, Sidney Nolan and Jeffrey Smart sold under the hammer at the property.
Built in 1879 by celebrated architect James Gall for parliamentarian William Winter-Irving, Noorilim is a prime example of post-Gold Rush prosperity in Victoria. At the time of its construction in the mid to late-1800s, Australia had been labelled one of the richest nations on earth and Melbourne’s monied elite were spilling out of the city looking to build country estates to rival those in Great Britain. The nouveau riche began commissioning lavish ornamental houses shadowing the Gothic, Italianate and Queen Anne designs of Europe.
Noorilim’s facade is a striking example of this “boom style” architecture featuring an asymmetrical tower, ornate balustrades and grand arched loggias that frame sweeping views of the estate’s manicured grounds.
Inside, the vast 1022sq m residence has 5m ceilings and lavish period features, including 15 fireplaces, seven staircases, and intricate Corinthian columns.
At the heart of the mansion its grand hall has Minton tiles imported from England and laid by Italian artisans who were shipped out specifically for the job. There is a turret lookout, a billiard room, 10 bedrooms, four bathrooms, an office and grand formal rooms such as a lounge, library and dining room all with expansive windows showcasing views of the gardens and vineyard.
Noorilim’s name is derived from the Indigenous Yorta Yorta language and means “place of many reeds” reflecting the estate’s connection to its natural surroundings. Complementing Gall’s vision, renowned landscape designer William Guilfoyle — who worked on Melbourne’s Royal Botanic Gardens — crafted Noorilim’s standout gardens.
The grounds are home to echidnas, kangaroos and koalas, more than 300 mature trees including ancient Moreton Bay figs, a rose garden with a central fountain, an ornamental lake, a boathouse, and even a private beach on the banks of Goulburn River. There is also an extensive wine cellar, numerous outbuildings and barns, as well as a heritage-listed water tower. The working vineyard produces Chardonnay, Shiraz, Cabernet, and Merlot grape varieties.
Noorilim, near Nagambie, is 150kms north east of Melbourne at 205 Wahring Murchison East Rd, Wahring. The property is listed with Sean Cussell from Christie’s International Real
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.
