How Melbourne’s Real Estate Market Became Millionaire’s Row
How did Melbourne’s real estate market become Millionaire’s Row?
In Victoria as a whole, 29% of all suburbs now have a median house price of at least $ 1 million, and the median house price in Melbourne is nearly $ 1.038 million, according to data from the domain.
Seven-figure sales have spread from the sought-after inner east and across town, with outer suburbs such as Ringwood North and Eltham now joining the million dollar club.
Even the pockets of regional Victoria have reached similar heights, such as Anglesea, Ballarat’s Lake Wendouree and Geelong’s Newtown.
We are far from just two decades ago. The first suburb to achieve a median million dollar real estate price in Melbourne was Exclusive Toorak, and not until 2001. It was joined five years later by Brighton, Canterbury and East Melbourne, before wealth rose. spreads further.
Years of falling interest rates have pushed up house prices, while fiscal parameters and insufficient new residential construction have also contributed, economists said.
The first million dollar house in Melbourne was at 20 St Georges Road, Toorak, which sold for $ 1.01 million in 1980.
Sales agent Paul Armstrong remembers excitedly about the prospect of a seven-figure sale in Melbourne.
“It was in sight, but it had not been realized,” said Mr. Armstrong, who now works at RT Edgar Flinders on the Mornington Peninsula. “So there was a build-up, a little bit of excitement for what was going to be the first.”
Mercedes Benz dealer James O’Connor bought the house from former mayor Sir Maurice Nathan and Lady Nathan, and for that price, Mr Armstrong said, the buyer got a stately two-story house on just under of an acre, or approximately 3,700 square meters.
The block was then subdivided and the original house demolished, but its replacement was sold this year by the Stamoulis family for $ 19 million.
Melbourne buyers agent David Morrell remembers the buzz around the city. “Everyone was like, ‘Can you believe it? Someone paid $ 1 million for a house in Toorak, ”he recalls.
“The next obstacle was that someone paid $ 1 million for a weather board in Toorak. “
In the late 1970s, someone with a million dollar budget in the affluent suburb could have bought an “absolute mansion,” he said, citing the oversized spread by trucking mogul Lindsay Fox, which cost $ 600,000 in 1977.
Mr Morrell said he had seen a change in the market since the abolition of inheritance tax in the late 1970s, allowing families to transfer wealth to the next generation on a scale that was not possible before.
High-end Melbourne agent Mike Gibson recalls his first million-dollar sale at Toorak at 16 St Georges Road.
The house then made headlines when it was sold for $ 18.58 million in 2013 to an owner who demolished it despite outrage from residents concerned about its heritage value. They then relisted the empty block for $ 40 million in 2019.
Mr. Gibson’s first sale of over $ 1 million to South Yarra was at 226 Walsh Street, which then traded for $ 9.9 million in 2007.
“A million dollars back then bought you almost an acre in Toorak,” he said.
As for today? “You would definitely buy a nice apartment. “
He said he had recently seen demand from young entrepreneurs who had made their fortunes faster than others in the past, and who were keen to spend it on their living spaces since the advent of pandemic lockdowns.
Marshall White’s Marcus Chiminello has been in the industry for 20 years, but said the days of buying a mansion for $ 1 million were before their time.
In the early 2000s, $ 1 million would have bought “quite a nice house” in parts of Camberwell or Glen Iris.
“I’m selling houses today for $ 10 million, or $ 15 million or $ 20 million that, even 20 years ago, were selling for one million, two or three million,” he said. .
“Five, six years ago, if you had $ 10 million to $ 15 million to spend at Toorak, you expected you to get a tennis court at home. Today, at less than $ 20 million, that does not exist.
It has managed multiple sales to the $ 20 million plus mark this year, and has seen high-end home values jump 15-20% since the COVID hit.
Research and economics chief Nicola Powell said the million dollar club had grown from an elite Melbourne neighborhood to a spider’s web of suburbs all over the city and in the Victoria area. Melbourne has more broadly hit a median of $ 1 million this year.
“We know house prices have far outpaced wage growth,” said Dr Powell. “The average price of your property has changed so dramatically – it really shows that buyers are getting a lot more for it. “
She called the seven-figure psychological threshold “very disheartening” for first-time homebuyers, but, on the other hand, noted the wealth effect for homeowners who were able to leverage their equity. and move on to their next home.
“Because many more of us own homes, it is not in a politician’s best interest to deal with falling house prices,” she added.
Grattan Institute’s household finance program director Brendan Coates said rising house prices were inevitable as interest rates fell to record levels, while tax parameters and planning rules that limit construction had exacerbated the situation.
“If you have additional demand for housing when interest rates are low, you should also see a construction boom,” he said, adding that there had been more new buildings, but not much by historical standards.
“Today, the supply is quite small and quite modest given the record interest rates we have. “
Mr Coates echoed recent comments from the reserve bank that the ability of many young workers to buy a home would depend on their parents owning one.
“People are increasingly disillusioned – no matter how quickly they save for a deposit, the market is slipping away from them,” he said. “It usually means they ended up on the wrong side of the family lottery.”
Over the past two years, inner city dwellers have flocked to the outer suburbs in search of larger homes with backyards and enough space to work from locked out homes, driving prices up.
In the leafy town of Eltham, house prices jumped 16.2% in the 12 months leading up to September to a median of $ 1.13 million.
Previously, around 65% were local buyers, but that number has dropped to 30%, according to Graham Morrison of Morrison Kleeman, with newcomers often coming from apartments or cottages in Northcote or Fairfield.
“It’s just families moving here to have more space – it always has been, but it’s more pronounced,” he said.
Ringwood North is also part of the club, up 18.6% year-on-year to a median of $ 1.1 million.
If a potential buyer had a million dollar budget, they could afford a substantial townhouse or a house in a subdivided block, said Reilly Waterfield of Fletchers Maroondah.
He said he had seen a trend of small house families arriving in Brunswick or Carlton for seven or eight years, but that had accelerated in the past 12 to 18 months.
“They can get a bigger house on a lot for less money,” he said.
Others have left Melbourne for the regions, causing prices to skyrocket in hot spots of marine shifts and tree changes.
Anglesea joined the club after house prices climbed 39.4% in one year to a median of $ 1.37 million.
Darcy Bennett of Hayden Real Estate Angelsea said demand has skyrocketed from a mix of buyers including sea changers, retirees, local upgraders and residents of other parts of the Victoria area who had took advantage of their own booming markets to move to the coast.
Entry-level prices were now no longer $ 700,000 to $ 1 million, but closer to $ 1.2 to $ 1.3 million, he said, and for that a buyer could expect a property to renovate, some distance from the beach.
Economists have warned that an impending interest rate hike could slow the market boom, but Bennett said he didn’t see it on the coast.
“We are seeing a lot of buyers, a very strong market right now,” he said. “We expect the market to continue very strongly next year.”