When will the perfect storm break? Beller Property Group voice their opinion

As far back as Spring 2014 Beller Property Group director Andrew Fawell was noting a confluence of factors which has led the Melbourne property sector into a 'perfect storm.'

The market in every property sector that we are involved in is firing on all cylinders at the moment. With historical low interest rates, this has compressed yields on all investment property both residential and commercial. This in turn has bolstered the markets appetite for risk and people are quite prepared to take on greater debt levels and lock in on low rates, given the low term deposit rates on offer.

All of our divisions have seen the continued heat being applied from the Asian market and, more specifically, from the Chinese market. This has added another layer of complexity to the Melbourne marketplace unseen before.

Andrew Fawell, Beller newsletter, Spring 2014

With the above in mind Urban Melbourne sat down with Andrew Fawell, Beller Commercial director Fred Nucara and Beller Residential Sales Manager Robert German to gain a collective impression of where Beller see the market both now and into the future.

The current market

Since Andrew Fawell's comments last year, the Beller team believe the above factors have compounded further, causing the "Stars to align across all sectors." Be it buyers, sellers or renters across residential or commercial, active participants have it very good on all fronts.

In a macro sense, global investment yields are flat, prompting many investors to seek safehavens such as property. Describing banks as "going backwards" in the returns they can offer, the robust Melbourne property price increases, particularly in detached dwellings, are a tasty investment for overseas and domestic investors.

Tied in with this trend is the fall in the AUD which Beller believes is at an ideal level to keep the market churning.

Overall Beller see the market as highly dynamic. Fred Nucara states that data collected six months ago often has little relevance to that which is occurring now, pointing toward the need to pound the pavement in order to get a feel for current conditions and sentiment.

Buyers and sellers

Speaking of the current vendor market, Robert German describes the relationship where confidence in the market is relative to greed. That is, prospective vendors view the lofty results achieved on certain properties (land development sites or private housing) and assume that they will attain the same outcome. At this point the lure of increased returns may well blind reality, leading to unattainable expectations bolstered by a sometimes misplaced confidence gained from a robust market.

Heavily influenced by overseas buyers, the Melbourne apartment market is viewed by Beller as a unique beast with its own set of challenges and opportunities. Described as patchy by the Beller team, it is at the moment a suburb by suburb prospect with middle ring suburbs in favour.

Given the enormous mass of apartments currently under construction in Melbourne's CBD, Andrew Fawell believes that apartments buyers can still achieve value for money purchases away from inner Melbourne on the proviso that they place emphasis on location, amenity and transport. Further to this Beller expects to see an increased divergence of Asian-based property developers away from Melbourne's CBD and into smaller-scale, high quality suburban apartment developments.

On the rental front, renters will continue to enjoy the continuous flow of newly completed apartments into the market, particularly throughout inner Melbourne. This will serve to suppress sizeable rental increases for the time being.

The seven year itch

Empirical evidence would suggest that Melbourne's 7-8 year development cycle is due to make itself felt in the not-too-distant future. From the cooling-off that occurred during the early 2000's post the apartment sales boom capped off by Eureka Tower, to the Lehman Brothers event of 2008 and its flow-on effects, Beller subscribe to the theory that an 'event' is due which will alter the current market dynamic.

Noting that all good things must come to an end, Fred Nucara spoke of the necessity for potential property buyers and sellers not to dismiss or ignore the property cycle, as change is inevitable. Quizzed on what likely event would trigger a 'black swan moment', a range of smiles and multiple machination were on show. Million-dollar questions aside, the Beller team talk of a unpredicted event that will trigger a domino effect that will sent market fundamentals into a spin.

So what does this all mean in the eyes of Beller Property Group?

Decision time

The cycle clock. Image courtesy Quartile

Once more emphasising that change is inevitable, Beller Group are urging their existing and potential customers to act now rather than hold out in the hope of greater returns. In their belief, change to the current market dynamic is nigh, and that the 'prefect storm' of conditions that are in place currently cannot last.

Asked as to whether this is a self-serving argument in which they stand to gain, the team answered that is may sound like the case but historically the 'unseen event' is due which will disappoint those intended property participants who remain inactive in the short to medium term.

Paraphrasing Andrew Fawell in summing-up the discussion; the current strong market is the time to transact - if you're able to do so, don't hold back!

Lead image courtesy

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