0247 thereport richmond&surrounds 150616 issuu

R I C H M O N D A N D S U R R O U N D S 1

2 T H E J E L L I S C R A I G R E P O R T

Richmond and surrounds

The demand for property within the city of Yarra is driven by:

— The need for medium to high density housing as the population of

Yarra grows by an estimated 29,000 people over the next 20 years

(source: .iD Consulting Pty Ltd)

— Historic low interest rates enabling buyers to access more

money, rebalancing the proportion of owner-occupiers within

the market

— The growth of lone person households and couples without

children who represent the largest growth segment of the

community

— The desire for detached and semi-detached inner city dwellings

for families who aspire to live close to high quality education and

transportation routes

The city of Yarra is known for its culturally rich community,

eclectic mix of residential housing and heritage listed

streetscapes. Proximity to high quality education, inner city

employment and transportation routes is particularly sought

after by home owners and those looking to invest.

Buyer interest extends across all segments of the Yarra market,

with particular call for:

— Established and newly built apartments, townhouses and terraces,

with a particular desire for inner city warehouse conversions

— Single and double-fronted period homes within walking distance

to schools, transportation links and close proximity to the city

— Prestige homes with historical or architectural significance

— Market entry opportunity for first home buyers

Welcome to the Jellis Craig Report. This report is designed to provide an insight into the key economic, demographic and sociocultural factors that currently affect the Melbourne property market, particularly for suburbs within the city of Yarra.

This year’s report has defined the top five factors as:

1. The global liveability of Melbourne, which

continues to drive interest from abroad

2. Australia’s economic transition to a consumption

based open market experiencing slow growth

3. Record low cash rates and rising household

debt, which has led to tighter lending conditions

4. Changes to Australia’s foreign investment rules

and regulations

5. New developments that continue to

evolve in our city

As the Melbourne property market adapts to record low cash rates, new foreign investment regulations and revised lending conditions, the suburbs within the city of Yarra have experienced a shift in the balance of owner-occupier and investor activity.

The property market in the inner east and south eastern suburbs will remain an attractive option for local and international buyers, however the changing environment has moderated price growth to a more sustainable level.


Demand for residential property will continue throughout Richmond and surrounds.

1Global liveability of Melbourne

In 2015 Melbourne was named the world’s

most liveable city in The Economist’s Global

Liveability Ranking, for a fifth consecutive

year. The city scored 97.5 out of 100,

based on economic stability, access to

healthcare, cultural diversity, environmental

wellbeing, quality of education and

infrastructure.

Melbourne’s diverse population is estimated

at 4.35 million people, forecast to reach

8 million in 2051. Melbourne residents

come from 180 countries, speak over 233

languages and belong to more than 140

cultures. Immigration from China and India

accounted for 32% of overall population

growth in 2015, making Mandarin the

second most commonly spoken language

in Melbourne.

As overseas migration and foreign

investment interest increases, the real

estate sector is the largest foreign

investment type in Australia today. Foreign

investment approvals for Australian

residential real estate rose 75% to $61

billion in 2015, 36% of which was

accounted for by mainland China.

L O O K I N G A H E A D

As globalisation continues to strengthen the economic and financial integration of countries around the world, Melbourne has become

increasingly attractive for the investment and lifestyle opportunities offered. The world’s most global cities are interconnected, and serve

as local hubs with access to finance, production, trade and distribution of goods and services. The ability to meet these international demands

has become a crucial element that continues to drive population growth and foreign investment in Melbourne’s property market.

97.5100

Innovations in technology and the internet

have made it easier to research, locate and

transact international property, which is

expected to continue throughout 2016

as the Australian dollar remains low and

Melbourne continues to globalise.

International buyers will continue to seek

proximity to elite government and private

schools and drive demand for different

housing types, including apartments for

tertiary students, townhouses for one-child

families and larger homes for extended

families.

China will remain a dominant source of

investment, but interest from other Asian

countries such as India and Indonesia is

expected to increase.

Source: City of Melbourne, FIRB Annual Report 2014-15


Australia’s mixed market economy is largely

based on trade, manufacturing, services

and finance. In 2016, moderating global

growth and a slowing Chinese economy

is prompting further transition of the

Australian economy.

Latest forecasts from the Reserve Bank of

Australia (RBA) show economic growth is

expected to remain under 2.5% in 2016,

before a recovery of up to 3% over the next

two years.

This cautious outlook reflects the cooling

of the Chinese economy and has slowed

the demand for Australian exports, such as

primary resources and agricultural produce.

International investment in Australia is now

a significant contributor to the economy

and the outlook into 2017 remains

optimistic. The lower Australian dollar

combined with the sustained low interest

rate environment provides exceptional

value for investors, particularly those

attracted to commercial and residential

property markets.

O V E R S E A S I N V E S T M E N T A N D E C O N O M I C G R O W T H

In Australia, the real estate sector received

the largest portion of foreign investment,

valued at $96.9 billion across residential

and commercial real estate in financial year

2014-15. Residential real estate investment

approvals totalled $60.7 billion, 75% more

than last year.

China was the largest investor in Australian

commercial and residential real estate,

followed by the United States, Singapore,

Malaysia and Korea.

Source: FIRB, Annual Report 2014-15.

2Slowing Australian economy and its

potential impact on real estate

C H I N A$24.36 billion

K O R E A $2.5 billion

M A L A Y S I A $3.46 billion

S I N G A P O R E$3.86 billion

U S A$7.1 billion

M E L B O U R N E M E D I A N

H O U S E P R I C E : $713,000;

8.3% annual increase.

M E L B O U R N E M E D I A N

U N I T P R I C E : $525,000;

4.2% annual increase.

Source: REIV March 2016 Quarter


Stable economy

Freehold ownership availability

Sustained low-interest money market

Attractive business opportunities

High-quality lifestyle & clean environment

Proximity to Asia

High-quality & accessible educational

facilities

Relative value for money

D R I V E R S F O R I N T E R N A T I O N A L I N T E R E S TI N T E R N A T I O N A L I N T E R E S T I N M E L B O U R N E P R O P E R T Y I S B E I N G D R I V E N B Y

The swelling population of Victoria is driving the demand for housing, retail, education and the creation of new employment opportunities, particularly in the service and construction industries. As a result, the Victorian economy is less dependent on primary resources, than some other Australian states. Melbourne’s property market continues to attract the attention of Australian and international investors seeking both investment and lifestyle opportunities.

C O N T I N U E D I N T E R E S T I N M E L B O U R N E


The residential property market is moderating

to a more sustainable level of growth,

following a period of rapid price growth

in many areas. The ongoing demand for

residential property and the low cost of

finance, will see buyer confidence remain

positive throughout 2016.

While there is some debate about the supply

and demand balance for new apartments in

some areas of Melbourne, the demand for

well-located, high-quality residential property

will remain strong.

Melbourne will remain an attractive market

over the next 12 months, with buyers

benefiting from a slight shift away from

the strong ‘seller’s market’ of 2015. Interest

from international investors may moderate

as tighter Foreign Investment Review Board

(FIRB) controls come into play, however

Melbourne will remain highly attractive

to overseas buyers.

C O N C E N T R A T I O N O F O V E R S E A S I N T E R E S T I N M E L B O U R N E CBD

MOUNTWAVERLEY

BLACKBURN

BAYSIDE

ARMADALE

HAWTHORNBALWYN

DONCASTER

Source: Australian Government Department of Employment

31.2%

18.6%

10.0%

13.7%

19.9%

2.7%3.5%

0.4%

Agriculture, foresty & fishing

Finance & insurance

Manufacturing

Mineral exploration & developement

Services

Tourism

Residential real estate

Commercial real estate

Source: FIRB, Annual Report 2014-15.

F O R E I G N I N V E S T M E N T A P P R O V A L S B Y I N D U S T R Y S E C T O R 2 0 1 4 - 1 5


B A N K S T A N D A R D V A R I A B L E R A T E ( % )

Melbourne’s price growth has been

steadily increasing over the past three

decades. The median metropolitan house

price in 1985 was $80,200, and is now

$713,000.

D E B T I N C O M E R A T I O ( % )

M E L B O U R N E M E D I A N H O U S E P R I C E ( $ , 0 0 0 )

18

16

14

12

10

8

6

4

2

1985 1990 1995 2000 2005 2010 2015

800

700

600

500

400

300

200

100

Source: RBA 2015, AMP NATSEM Income and Wealth Report December 2015

3Household debt to income ratio

continues to rise

1985 1990 1995 2000 2005 2010 2015

Declining interest rates, low unemployment

and a strong economy have driven Australians

to take on more debt. The official RBA cash

rate dropped to 1.75% in May 2016.

For most Australians, the mortgage on their

home is the largest debt they will have in

their lifetime, and mortgage interest rates

have fallen from a peak of 16.5% in 1989

to the current level of 5-6%.

1985 1990 1995 2000 2005 2010 2015

180

160

140

120

100

80

60

Australian households have more debt

compared to the size of the country’s

economy than any other in the world.

The ratio of household debt to disposable

income has almost tripled since 1988, from

64% to 185% in December 2015, reflecting

an annual growth rate of 5.3%, well above

the income growth rate of 1.3%.

Source: RBA 2015, AMP NATSEM Income and Wealth Report December 2015 (note: dotted line denotes estimated debt to income ratio)

Source: REIV 2016


D E B T L E V E L S I N R I C H M O N D A N D S U R R O U N D S

Households with medium to high income

make up the largest proportion of the

population in the city of Yarra.

The young workforce comprise 28%

of all households, followed by parents

and homebuilders at 23%, and tertiary

students at 11%, which largely reflects the

proportion of home ownership versus rental

dwellings in the area.

49%R I C H M O N D A N D

S U R R O U N D S

RENTINGOWNED WITH

MORTGAGE

Source: Source: ABS Census 2011, .iD Consulting Pty Ltd

22%

OWNED OUTRIGHT

20%

L O A N S T O I N V E S T O R S

5.1% L O A N S T O O W N E R - O C C U P I E R S

8.3%

H O U S I N G C R E D I T G R O W T H

A N N U A L G R O W T H

A N N U A L G R O W T H

Source: ABS Housing Finance Australia, March 2016, RBA


From late-2013 to mid-2015, investors

accounted for about 40% of all loan

approvals in Australia, however investor

activity has subsided significantly in 2016.

Mortgage approvals to owner-occupiers

jumped 13.2% to $13.8 billion this year,

which excludes refinancing existing

dwellings. The changing nature of lending

suggests an emerging shift to a more

balanced market with increased owner-

occupier activity.

Australian banks are implementing tighter

lending conditions in response to the

Australian Prudential Regulation Authority

(APRA) review, which imposes stricter loan

to value ratios and criteria for local and

international investors. As a result it is

expected price growth will ease for some

parts of Melbourne’s property market over

the next 12 months.

The current low interest rate environment

is expected to continue throughout 2016,

stimulating the property market with the

low cost of borrowing money to finance the

purchase of dream homes and investment

properties.

However, it is prudent for both investors and

home buyers to take a longer term view, by

planning for rate rises in future years. Every

0.25% increase in interest rates would see

a significant impact on the disposable

income of Australian households.


C H I N A’ S R E C E N T R E S T R I C T I O N S F O R F O R E I G N I N V E S T O R S

4Changes to foreign investment

rules and regulations

While Australia has become the second

most popular market for Chinese property

investors after the US, China has recently

introduced new international investment

controls in response to the current

slowdown in economic growth. Designed

to decelerate the level of capital outflow

from the Chinese economy, those wanting

to invest in Australia now need to comply

with new restrictions.

International investment into the Australian housing market has changed the way residential real estate is perceived within the global context.

Demand for Australian housing is driven by the sustained low-interest money market and competitive currency, which has made local real estate

prices relatively cheaper to international investors than to local buyers.

The desire for international investment by a growing middle class in China, Singapore and Malaysia has strengthened the level of capital

investment into Australia, prompting a review of Australia’s foreign investment framework.

The latest annual report of Australia’s FIRB

shows Chinese were the largest investors in

2015, with approved real estate investment

worth $24 billion. In response to the falling

yuan and prevention of capital outflow, the

Chinese government has limited individuals

to moving the equivalent of US$50,000 out

of the country each year.

C H A N G E S T O F O R E I G N I N V E S T M E N T F R A M E W O R K

The Australian Government has also

recently introduced changes to Australia’s

foreign investment framework to restore

the enforcement and compliance of laws

that govern foreign investment into local

real estate.

¥¥

¥

M E L B O U R N EV I C T O R I A

Source: FIRB 2016



Source: FIRB Annual Report 2014-15.

As Melbourne’s property market moderates

and the Chinese economy slows, international

investment in Australia is likely to decelerate

as offshore buyers become more cautious of

increased regulations and reforms.

APPLICATION FEES , STRICTER PENALTIES AND INCREASED REGUL ATION

Current laws encourage foreign investors

to buy homes before they are built,

generating new housing supply. In support

of this, foreign investors are required to

apply to the FIRB prior to expressing an

interest to purchase residential property.

The Australian Taxation Office (ATO) has

also implemented a more thorough review

process to ensure the appropriate fees are

paid before applications are processed.

10% NON-F INAL WITHHOLDING TAX PAYMENT FOR $2M+ PROPERT Y SALES

The Australian government has introduced

a 10% non-final withholding tax, which will

be applied to foreign residents who sell

land, buildings, residential and commercial

property in excess of $2 million. The tax

will come into effect from 1 July 2016,

after which point 10% of a sale price will be

withheld and paid to the ATO.

ADDITIONAL STAMP DUT Y FOR FOREIGN BUYERS TO INCREASE TO 7%

When property is purchased or acquired

in Victoria, land transfer duty, otherwise

known as stamp duty, must be paid.

Foreign investors who purchase or acquire

residential property are currently required

to pay an additional duty of 3%, which will

increase to 7% for purchases made on or

after 1 July 2016.

$

Source: ATO Fact Sheet 2015, FIRB Tax Conditions, State Revenue Office May 2016

$5.41 billion

Approved for new dwellings

$4.71 billion

Approved for existing properties

$0.84 billion

Approved for redevelopment

$1.26 billion

Approved for vacant land

$12.85 billion

Approved for development

FOREIGN INVESTMENT APPROVAL FOR VICTORIAN RESIDENTIAL REAL ESTATE

IN FINANCIAL YEAR 2014-15

International investment remains an

important element of the Australian

economy, and it is expected that the lower

Australian dollar in conjunction with the

low cash rate will support commercial and

residential property markets into 2017.

Melbourne will continue to offer attractive

opportunities for investors.


59% of Melbourne’s population growth in

the last decade has come from overseas

migration, and 23% of households in the

city of Yarra speak a language other than

English, with Vietnamese, Greek and Italian

comprising the top three.

23%

Source: ABS Census 2011, City of Melbourne, iD Consulting Pty Ltd

Melbourne’s population is expected to rise

to 8 million by 2051, stimulating significant

urban renewal within the inner city and

middle-ring suburbs.

Investment in Melbourne’s rail system is

a crucial development as living density

increases. Trips on metro trains are

expected to double to 1.5 million every

weekday by 2031.

Housing density across the city of Yarra is

changing in line with current and forecast

population growth.

In the inner suburbs, demand for higher-

density living is adding many new high-rise

apartment blocks to the skyline. In the

middle suburbs, medium-density living is

gradually replacing the traditional quarter-

acre block, particularly near transport and

retail hubs.

In addition, urban renewal is taking place

across many of Melbourne’s inner suburbs,

leading to increased gentrification of

suburbs previously used as industrial or

commercial spaces.

8m

5Our evolving city

1.5m

Source: ABS Census 2011, City of Melbourne, iD Consulting Pty Ltd

O U R C H A N G I N G C I T Y


L O C A L P R O J E C T S O N T H E H O R I Z O N

As the demand for inner city living grows, a

new mini suburb of up to 2,500 homes will

soon transform the former Alphington Paper

Mill, catering for up to 5,000 residents along

with commercial and retail spaces to provide

local employment. The Richmond Plaza

shopping centre redevelopment will bring

300 new residential apartments to the area

among new retail outlets, a supermarket and

community amenities.

The value of building approvals within the

city of Yarra was $506 million over the

financial year 2014-15, and the number of

residential dwellings is expected to increase

by an average of 799 dwellings per year.

A review of built heritage in the Hoddle Grid

has recently been approved, which will now

see all heritage structures up to the post

World War II era prevented from demolition

or inappropriate development. This heritage

overlay will ensure the character and rich

history of the precinct is kept intact, and the

integrity of each unique building protected

as housing density increases and the

community expands.

Richmond & Surrounds fast facts

One-in-three people living in

Richmond and surrounds is Gen Y

(aged 21 to 35), making this the

largest generation represented.

Nearly one-in-two Yarra residents

journey to work on a sustainable

form of transport: public transport,

cycling or walking.

North Richmond is forecast for

the greatest increase in residential

developments over the next 10 years.

Source: ABS Census 2011, .iD

Consulting Pty Ltd

Source: Urban Melbourne, .iD Consulting Pty Ltd, City of Yarra Source: Melbourne Heritage Action, City of Yarra

Gen Y


There will be an increased desire by

residents to access local services and

amenities by walking or cycling, rather than

the ‘highway life,’ which requires a strong

reliance on cars and parking.

With higher density and less indoor space,

the demand for local amenities, public

recreation space and parkland will increase.

Shared spaces will not only be in the

outdoor public places. New high-density

apartments will increasingly provide shared

recreation spaces, including BBQ areas,

gyms and swimming pools.

Commuters will look to alternate methods

of transport to access their places of

employment, and the demand for shorter

commute times will continue to grow.


Richmond and surrounds snapshot

P O P U L A T I O N G R O W T H F O R E C A S T

2016

88,1202036

117,036CHANGE 2016-36

+32.81%

R I C H M O N D A N D S U R R O U N D S ( Y A R R A )

L A N D A R E A19.53 km2

P O P U L A T I O N D E N S I T Y4565 people / km2

Source: .iD Consulting Pty Ltd

T O P F I V E S U B U R B S B Y P R O J E C T E D P O P U L A T I O N C H A N G E 2 0 1 6 - 3 6 ( % )

0 10,000 20,000

North Richmond

Abbotsford

Collingwood

Cremorne and Burnley - Richmond South

Fairfield - Alphington

Richmond - PROJECT POPULATION

+34.4%

+29.3%

+32.0%

+17.4%

+17.4%

+16.5%

+43.0%

+57.7%

+79.7%

+133.2%

20162031

20162015

0 350,000 700,000 1,050,000 1,400,000

Abbotsford

Fitzroy

Carlton North

Princes Hill

Fitzroy North

Clifton Hill

Richmond

Collingwood

Alphington

Fairfield

Burnley $890,000

$1,248,000$965,000

$1,385,000$1,180,000

$903,750$770,000

$1,158,750$995,000

$1,175,000

+13.7%

+15.2%

+11.6%

+10.0%

+8.1%

$1,210,000$1,050,500

$1,250,500$1,100,000

$1,350,000$1,210,000

$1,210,000$1,100,000

$1,297,500$1,200,000

$955,000$906,000 +5.4%

S U B U R B S B Y P R I C E G R O W T HGrowth by % increase in median price over the past 12 months

0 10,000 20,000

North Richmond

Abbotsford

Collingwood

Cremorne and Burnley - Richmond South

Fairfield - Alphington

Richmond - PROJECT POPULATION

+34.4%

+29.3%

+32.0%

+17.4%

+17.4%

+16.5%

+43.0%

+57.7%

+79.7%

+133.2%

20162031

20162015

0 350,000 700,000 1,050,000 1,400,000

Abbotsford

Fitzroy

Carlton North

Princes Hill

Fitzroy North

Clifton Hill

Richmond

Collingwood

Alphington

Fairfield

Burnley $890,000

$1,248,000$965,000

$1,385,000$1,180,000

$903,750$770,000

$1,158,750$995,000

$1,175,000

+13.7%

+15.2%

+11.6%

+10.0%

+8.1%

$1,210,000$1,050,500

$1,250,500$1,100,000

$1,350,000$1,210,000

$1,210,000$1,100,000

$1,297,500$1,200,000

$955,000$906,000 +5.4%

Source: REIV March 2015 / March 2016


P O P U L A T I O N M O V E M E N T

Source: .iD Consulting Pty Ltd

R I C H M O N D A N D S U R R O U N D S ( C I T Y O F Y A R R A )

N E T M I G R A T I O Nmovement of persons

150 - 299

300 - 599

600+

dotted line denotes outflow

Yarra

Moreland

Overseas

+6,200

Maribyrnong

Whittlesea

Hobsons Bay

Wyndham

Perth

Brimbank

Darebin

Banyule

ACT

S.E. Queensland

Sydney

Manningham

Monash

Melbourne

Adelaide

-1,100 -1,600

$ $ $ $ $

T O P F I V E S U B U R B S B Y C U R R E N T M E D I A N H O U S E P R I C E ( $ , 0 0 0 , 0 0 0 )

Source: REIV March 2016

East Melbourne

$1.82mAlphington

$1.39mPrinces Hill

$1.35mFitzroy

$1.30mFitzroy North

$1.25m


E X C E P T I O N A L P R O P E R T Y S A L E S

293 Church Street, RICHMOND

47 Rowena Parade, RICHMOND

11/663 Victoria Street, ABBOTSFORD

38 Richmond Terrace, RICHMOND

17 James Street, RICHMOND

114 Clifton Street, RICHMOND

3 Portland Street, RICHMOND

5a Elm Grove, RICHMOND

8 Stanley Street, RICHMOND

SOLD SOLD SOLD

SOLD SOLD SOLD

SOLD SOLD SOLD

300 Mary Street, RICHMOND 148 Highett Street, RICHMOND 36 Lesney Street, RICHMONDSOLD SOLD SOLD


14a Princess Street, RICHMOND

54 Murphy Street, RICHMOND

25 Fraser Street, RICHMOND

11 Barkly Avenue, RICHMOND

18 Brougham Street, RICHMOND

1A Stewart Place, RICHMOND

39/41 Studley Street, ABBOTSFORD

19 Yarra Bank Court, ABBOTSFORD 9 Clarke Street, ABBOTSFORD

10 Elm Grove, RICHMOND

4 Normanby Place, RICHMOND

42 Canterbury Street, RICHMOND

SOLD SOLD SOLD

SOLD

SOLD

SOLD

SOLD

SOLD

SOLD

SOLD

SOLD

SOLD

‘The Report’ has been prepared by Jellis Craig in good faith, as a general guide to the performance and outlook for particular areas of the Melbourne real estate market. The data and information provided in ‘The Report’ is provided by third parties for information purposes only and does not constitute advice or recommendations. It does not intend to predict future performance of particular suburbs, areas, properties or property types. You should consider your personal circumstances and obtain independent professional advice before making

any financial or investment decisions.

jelliscraig.com.au

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0247 thereport richmond&surrounds 150616 issuu