Melbourne s best renovator suburbs. Table of Contents

Transcription

1

2 Melbourne s best renovator suburbs March 2016 Table of Contents 1. About the authors About this report Understanding the market How the suburbs in this report have been selected How accurate have we been? Market overview for your capital city Suburbs with imminent price growth potential How to avoid suburbs with no renovation potential How to find streets with renovation potential How to find properties with renovation potential How to maximise your success How we source our data Disclaimer and copyright Property Predictions Pty Ltd Page 2

3 1. About the authors John Lindeman Melbourne s best renovator suburbs March 2016 CEO of innovative property research firm Property Predictions, John is widely respected as one of Australia's leading property market analysts. With well over a decade of experience researching the nature and dynamics of the housing market at major data analysts, John is renowned as the property market researcher that property experts go to for all their Australian housing market insights. John regularly provides presentations, commissioned reports and other research services on the nature and direction of the residential property market for property industry leaders. His extensive property knowledge is complemented by around 40 years' experience as a successful property investor. John s monthly column on housing market research has featured in Australian Property Investor Magazine for five years. He is a regular contributor to property investment e-newsletters such as Michael Yardney s Property Update and Alan Kohler s Eureka Report and author of the landmark best-selling books for property investors, Mastering the Australian Housing Market (2011) and Unlocking the Property Market (2015) both published by Wileys. Carolyn Tibbett CEO of Understand Property, Carolyn has produced over 30 predictive report issues. She analyses leading indicators and key demand dynamics of every type of housing market and uses her 30 years of property investment experience for the benefit of investors. Carolyn combines intensive desktop analysis with methodical on the ground research of suburbs and cities around Australia. She manages social media for Understand Property and has edited the Housing Heads UP e-newsletter since Property Predictions Pty Ltd Page 3

4 2. About this report Congratulations on purchasing this report. The information in this report is designed to assist you in identifying and securing your next property renovation project by highlighting those suburbs most likely to contain suitable properties. Achieving real growth in the value of a property through renovation is a popular strategy for many Australian property investors. Purchasing a suitable house or unit for adding value through a cosmetic or structural renovation and then selling can be an effective way to generate cash or grow an investment portfolio. For this strategy to work, the most important criteria is the selection of a suitable property. While there are many properties suitable for renovation, only a small portion of them will yield a profit at the end of the process. So, how do you identify these gems in the rough? Where do you even start to look? This report takes you on a step by step journey to help you identify areas in which these gems can be found right now. The selection methodology we employ is clearly explained, along with an explanation of the prediction accuracy rating for each selected suburb, which indicates our level of confidence in each prediction. We provide an analysis of how accurate our predictions have been in the past, when assessed according to the price direction forecast. Along with an overview of the housing market in your capital city, we then reveal those suburbs with imminent growth potential for houses and units. The report shows you how to avoid suburbs with no renovation potential, and how to narrow down your search in the best suburbs to streets and individual properties. Finally, the report shows you how to maximise your success when undertaking your due diligence in narrowing down your search Property Predictions Pty Ltd Page 4

5 3. Understanding the market The database used to create this Property Predictions Renovation Report categorises target suburbs in one of five different ways: stressed, buyer, neutral, seller or boom. The ratio of supply to demand determines a suburb s current type of market while the way in which this ratio is changing over time determines the predicted future direction for that market. Stressed markets are suburbs where there are many potential sellers and few intending buyers. Prices are likely to be falling by more than 10% per annum and changes tend to take several years to occur because of the large surplus of properties in the market waiting to be sold. Buyer markets are suburbs where there are more potential sellers than intending buyers and there s a tendency for prices to fall by 10% or less per annum. Because of the surplus of properties listed for sale on the market, these markets are slow moving and the change to a neutral or stressed market can take up to a year or more to occur. Neutral markets are suburbs where the numbers of potential sellers and intending buyers is equally balanced, and there is likely to be only small price falls or rises while such conditions continue. It usually takes from six months to a year for neutral markets to change to buyer or seller markets. Seller markets are suburbs characterised by fewer potential sellers than intending buyers and there is continual pressure on prices to rise, however rises are usually 10% per annum or less. Because of the low numbers of properties listed for sale on the market, these suburbs can change to boom markets or revert to neutral markets in six months or less if conditions change. Boom markets are suburbs with few potential sellers and many intending buyers. Prices are likely to be rising by more than 10% per annum and will continue to rise at this rate if the prediction is for boom conditions to continue. Because there are typically few properties listed for sale in such suburbs, they have the most price volatility and can revert to seller markets within three months if buyer demand decreases Property Predictions Pty Ltd Page 5

6 4. How the suburbs in this report have been selected Whether you are undertaking renovation to sell the property on completion or just to take the increased equity, it is essential that you conduct the project in a suburb where you will gain a better than expected result from market driven growth while your renovation is underway. Doing a renovation where prices are likely to fall during your hold time will cut into your profit margin and may even leave you with a net loss. To help you find the best suburbs we analysed every suburb in your selected capital city and only included suburbs in this report which meet the following criteria: 1. Suburbs with imminent passive growth potential; that is, where property values are poised to rise in the short term, but where it is still possible to purchase a dwelling at a realistic price. This means that the suburb will currently be a buyer, neutral or seller type of market moving to or predicted to stay seller or even a boom type of market. 2. If there are insufficient suburbs with imminent passive growth potential, we have extended our search to include suburbs where prices are not likely to fall. These suburbs will currently be neutral, seller or boom types of markets predicted to move to or stay neutral. 3. We then only include suburbs where there are sufficient houses or units currently for sale to provide you with a good selection of properties with renovation potential and the ability to negotiate on the purchase price. 4. We further cull the list of suburbs to only include suburbs where at least half of the houses or units listed for sale are existing properties. This means that suburbs which have market growth potential are not included if most of the properties listed for sale offer no opportunities for renovators because they are brand new or being sold off the plan. Because the data on which our predictions are based can unexpectedly change, we provide a prediction accuracy rating for every suburb selected. This rating is designed to support your assessment of the risks of median price movement and price performance in purchasing a property in any particular suburb Property Predictions Pty Ltd Page 6

7 5. How accurate have we been? Because our methodology measures the relationship of listings to sales and their trends, it cannot predict a certain price or rent outcome - only the potential for change based on the supply and demand trends. Not only can the indicators on which our forecasts are based unpredictably change, the accuracy of the trend forecasts is likely to progressively diminish over the forecast period. Don t rely purely on our predictions. Ensure that your report is current and be as fully informed as possible about suburbs in which you plan to buy or renovate housing as an investment. We regularly conduct comprehensive analyses of the rent and growth predictions made for all the suburbs contained in the Property Power Database to ensure that our predictive methodology is as accurate as it can possibly be. The latest analysis conducted (September 2015) of over 5,800 suburbs in the Property Power Database shows that an extremely high percentage have moved in the direction forecast at the time. STATE SUBURBS CORRECT RENT MOVEMENT ACCURACY CORRECT PRICE MOVEMENT ACCURACY NSW 1,710 1,512 88% 1,630 95% VIC 1, % % QLD 1,146 1,013 88% 1,089 95% SA % % WA % % TAS % % ACT % % NT % % TOTAL 5,673 5,093 90% 5,227 92% 2016 Property Predictions Pty Ltd Page 7

8 6. Market overview for your capital city There may be thousands of properties in your city which have renovation potential, but only some of those will be located in suburbs that offer an adequate selection of properties available for you to purchase at a fair price. Even more critical is the fact that property prices in some suburbs may have imminent growth potential or remain flat, while in other suburbs prices may suffer a decline before your renovation project is completed and the property is placed on the market. The following overview of your capital city shows you the type of house market in all of Melbourne s house suburbs a year ago, right now and the predicted change. These are expressed as pie charts with the percentage of suburbs in each type of market, ie stressed, buyer, neutral, seller or boom indicated as a percentage of all the suburbs in the city. Melbourne The growth trend is moving favourably with the number of boom potential suburbs predicted to rise in Melbourne even as they fall in Sydney. There are very few stressed suburbs likely to emerge. When compared against other capital cities, Melbourne has the greatest overall potential for price growth during the next twelve months, which is good news for renovators. This information alone is not sufficient to enable us to select the best renovator suburbs in this report because some of the suburbs which are predicted to boom may already be boom suburbs, or they may not have sufficient numbers of suitable properties available for sale. To generate the suburbs in this report we need to drill down to the next level of opportunity, which is to identify those suburbs which meet all our selection criteria Property Predictions Pty Ltd Page 8

9 7. Suburbs with imminent price growth potential Houses and townhouses The following tables show you suburbs which have imminent price growth potential, with sufficient properties on the market and sufficient numbers of houses and townhouses suitable for renovation. The suburbs have been grouped by their Local Government Area or Region and are then ranked by their housing market prediction. FRANKSTON CITY HOUSES - CAPITAL GROWTH PREDICTIONS GREATER DANDENONG HOUSES - CAPITAL GROWTH PREDICTIONS HUME CITY HOUSES - CAPITAL GROWTH PREDICTIONS 2016 Property Predictions Pty Ltd Page 9

10 Houses and townhouses (continued) MELTON-WYNDHAM HOUSES - CAPITAL GROWTH PREDICTIONS NORTHERN OUTER MELBOURNE HOUSES - CAPITAL GROWTH PREDICTIONS SOUTH EAST OUTER MELBOURNE HOUSES - CAPITAL GROWTH PREDICTIONS 2016 Property Predictions Pty Ltd Page 10

11 Houses and townhouses (continued) SOUTHERN MELBOURNE HOUSES - CAPITAL GROWTH PREDICTIONS WESTERN MELBOURNE HOUSES - CAPITAL GROWTH PREDICTIONS Units and apartments The following tables show you suburbs which have imminent price growth potential, with sufficient properties on the market and sufficient numbers of units or apartments suitable for renovation. The suburbs have been grouped by their Local Government Area or Region and are then ranked by their housing market prediction. BOROONDARA CITY UNITS - CAPITAL GROWTH PREDICTIONS 2016 Property Predictions Pty Ltd Page 11

12 Units and apartments (continued) FRANKSTON CITY UNITS - CAPITAL GROWTH PREDICTIONS GREATER DANDENONG UNITS - CAPITAL GROWTH PREDICTIONS MELTON-WYNDHAM UNITS - CAPITAL GROWTH PREDICTIONS NORTHERN MIDDLE MELBOURNE UNITS - CAPITAL GROWTH PREDICTIONS WESTERN MELBOURNE UNITS - CAPITAL GROWTH PREDICTIONS 2016 Property Predictions Pty Ltd Page 12

13 This is what the information in each of the above tables shows you Area This is a Local Government Area (council area), or its equivalent in cities (such as Brisbane) which do not have local government areas. In cities where these are in close proximity to each other, they have been combined. Estimated current median selling price This is the estimated median of house or unit prices currently being sold in a suburb, which is the price that an investor would expect to pay for an average house or unit. Unlike published data which can be months old by the time it is available, this is a real time estimate of the median selling price at the time the analysis is conducted. Estimated number of properties for sale This is an estimate of the number of houses or units for sale in the suburb at the time the analysis was prepared. For a more detailed explanation of the purpose of this column, please refer above. Current housing market This column shows you the current type of housing market for houses or units in the suburb, from stressed through to boom. For a more detailed explanation of the purpose of this column, please refer above. Number of months before any change is likely This shows you the number of months before any change is likely in the type of market in the suburb for houses or units. If the predicted type of market is the same as the current type of market, such as seller to seller, then the minimum months before any change is likely will actually be double the number of months shown, as the potential for change in the type of market is extended by this period. For a more detailed explanation of the purpose of this prediction, please refer above. Housing market prediction This column shows you the predicted type of housing market for houses or units in the suburb, from stressed through to boom. For a more detailed explanation of the purpose of this forecast, see above. Prediction Accuracy Rating The prediction accuracy rating indicates the probability that the predicted outcome will occur after the number of months shown in the table has passed. See above for more information Property Predictions Pty Ltd Page 13

14 8. How to avoid suburbs with no renovation potential 2016 Property Predictions Pty Ltd Page 14

15 9. How to find streets with renovation potential 2016 Property Predictions Pty Ltd Page 15

16 10. How to find properties with renovation potential Breakdown of a profitable renovation deal 2016 Property Predictions Pty Ltd Page 16

17 11. How to maximise your success 2016 Property Predictions Pty Ltd Page 17

18 12. How we source our data Researching the housing market We continuously analyse potential changes in the nature and dynamics of the housing market which may be caused or influenced by both government and private sector policies, strategies, plans and initiatives and gratefully acknowledge the following sources: Urban Development Institute of Australia State of the Land Report, Urban Development Institute of Australia Housing Industry Association of Australia Housing Forecasts, HIA Economics Group Australian Government Sustainable Australia, Sustainable Communities, Department of SEWP&C Our Cities our Future, Department of Infrastructure and Transport State of Supply Report, National Housing Supply Council Rainfall and Temperature Deficiencies and Anomalies, Bureau of Meteorology Measuring housing market dynamics We analyse population, demographic, household, housing, finance, economic and resource related data from information provided to the general public by the Housing Industry Association, Australian Bureau of Statistics, Bureau of Meteorology, Australian Bureau of Agricultural and Resource Economics. This data is then adapted and aggregated at suburb level to determine how changes in demand and supply are trending for both rentals and owner occupied housing. In particular, we acknowledge the following source: Australian Bureau of Statistics House Price Index Eight Capital Cities Released quarterly Housing Finance Australia Released monthly Australian Demographic Statistics Released quarterly Dwelling Unit Commencements Australia Released monthly ABS QuickStats 2011 Census data 2016 Property Predictions Pty Ltd Page 18

19 Analysing housing market indicators Many housing market indicators such as sale prices, weekly rents, price and rent movements are lagging indicators. That is, they provide information about past buyer, seller and renter activities and while there may be useful lessons or patterns in such behaviour that we can learn from, they do not point the way to the future because they represent the results, not the causes which brought about those results. Even if this data were predictively useful, these results are published months after the events have occurred due to the time it takes to settle contracts and the need for the data to be collected and collated before it is published. Although this data can be used for private purposes, there is also the matter of copyright, which further restricts the manner in which such data can be used by third parties. Our approach is to use only leading indicators to forecast renter and buyer demand trends such as current median asking rents, current rental vacancies, current median asking prices, plus current sales and listings which we aggregate from publically advertised property listings and rental vacancies. Each listing or rental vacancy advertiser only has agreements with certain real estate agents and property managers to advertise their properties, so the percentage of the total that they advertise will vary across localities within states, across states and also with each advertiser s reach of the market. We have conducted extensive analyses to estimate the total listings, rental vacancies and sales that occur at any time in any suburb based on the advertised numbers of each advertiser. In similar fashion, we independently calculate current estimated median selling prices and median asking rents for any suburb by deriving and then aggregating median asking prices and asking rents from currently advertised property listings and rental vacancies and applying adjustments to reflect current market conditions. Attributions Cover design and photo by Carolyn Tibbett Photos on pages 3, 15, 16, 23 and 28 by Carolyn Tibbett Photo on page 21 purchased, author Sean Prior 2016 Property Predictions Pty Ltd Page 19

20 13. Disclaimer and copyright Any unauthorised disclosure, use, reproduction, or distribution of the descriptive, analytical or predictive information provided to you by Property Predictions in this report is not permitted and Property Predictions asserts its copyright. Our reports are in the nature of general information on the residential property market. We do not claim or intend to provide financial or personal investment advice. Property Predictions recommends that you obtain financial advice specific to your situation before making any financial investment or decision based on the information we provide. It always remains the responsibility and choice of our clients using our services to make their own individual decisions with regard to their property investments. In providing our reports, Property Predictions relies on information from a number of external sources. While Property Predictions takes every care in the collection of the information it provides and believes it to be correct at the time of publication, it does not warrant the accuracy or completeness of its analysis and information services. The performance of the housing market is subject to factors which are in some situations beyond our knowledge and the figures and forecasts provided in this report may not, as a result, be reliable indicators of future performance. Property Predictions takes no responsibility or accepts any liability for any loss or damage arising from decisions made as a result of information contained in our reports or services and urges its clients to make independent inquiries to satisfy themselves as to the accuracy or completeness of the information we provide Property Predictions Pty Ltd Page 20