Urban Melbourne recently sat down with Beller Director, Andrew Fawell to discuss the state of play of the residential property market during spring. Andrew reignited the Beller name as the Director and Owner of the business in 1994 and set about growing and further developing the Beller brand. His insight and understanding of the property market and Beller's client base has seen the business develop into the multi-faceted inner-city real estate agency adding commercial and project marketing businesses.
A range of topics were discussed delving into current housing trends and the impact on Australian residential development from off-shore investors, namely from China. A slowdown in the apartment market that has been fuelled by investment from Chinese investors has been widely tipped with the market currently considered saturated. Despite this housing remains in strong demand overall and according to Andrew a major driving force is low-interest rates which he expects will see further reductions in 2016.
While a slowdown in the market appears on the cards, off shore investment particularly for off the plan housing stock remains strong. The latest fad for off shore investment says Andrew, is house and land with developers already looking to take advantage of this shift. Likewise townhouses are increasingly growing in popularity as they offer long term security to investors given the lower level of supply and are sought after in well-established inner ring suburbs. And despite oversupply affecting main road properties, the benefit is that there's now more choice on the backstreets. Unique well located properties are still very much in demand, however the absence of balconies or lack of private open space is generally considered a deal breaker to achieve optimum sale prices.
Buyers who have a family with children still in school are also prepared to pay more in established suburbs away from the city such as McKinnon, for example due to its high number of well recognised schools but without the school fees of the private schools. Buying in what is considered to be a 'location' suburb that isn't Toorak or Kew is possible largely due to savings that can be made on private school fees; these funds can then be redirected towards the servicing of a mortgage for a property as well as not paying someone else rent. When the children’s education is completed, they then sell and hope to realise a capital gain.
Empty nesters looking to downsize have also been prominent players in the owner occupier market, selling their free hold properties and buying in areas such as Hawksburn Village, largely because they are attracted to the lifestyle associated with those areas; they are considered places with life. "Everyone wants lifestyle aspects" says Andrew. As a result these areas also tend to yield bigger apartments than those within the CBD and Southbank that are targeted towards the investor market.
On the impact that the new residential zones are having on development, Andrew says the introduction of the zones has meant many owners are now looking at holding on to properties as they are no longer feasible to develop. The introduction of other controls may result in the adaptive re-use of existing commercial stock such as the office buildings on St Kilda Rd which has been very strategic with developments such as Fawkner on The Park and the former St Kilda Rd Police complex looking to take advantage of the panoramic views their respective locations afford.
Andrew notes that more recently a number of properties that Beller clients have, are now being developed with a build and hold mentality in what Andrew terms "smart futures for smart money". Clients realise that they can sell for a solid price now but don’t know where to invest the proceeds. So what could be better than reinvesting in the existing asset that has already been performing well for you. There are a number of benefits he says, firstly after 5 years there's no GST applied to any sale. If the property or properties are held for 10 years there are significant depreciation benefits and the properties will see rental growth once initial oversupply is over not to mention potential capital growth. Additionally, there is also the long term ability to subdivide the asset and spread the risk and get the banks claws out of you.
Andrew's parting words to those looking to invest in property are "Don't just read headlines know the market." He says there's a big difference between simply being a spreadsheet developer/investor vs being someone who is much more plugged in and understands the market. According to Andrew if there's no clear strategy it is often better to hold onto the property and get returns as opposed to selling the property and leaving the money sitting in the bank. "Keep it simple," says Andrew "Wherever you buy make sure you're happy to be a long term landlord if the market changes."