The REIV June quarter median prices show moderate growth in the Melbourne housing market over the last quarter. The median house price increased by 4.9% from $430,000 to $451,000.

While this is good news, I know it’s not the end of the bad news. We still have some challenging times ahead in property. But I also know that times of uncertainty in any market, and particularly property markets, create opportunities.

Not surprisingly the REIV figures show that our multi-tier market is more pronounced than ever – the divide between the inner and outer Melbourne suburbs is expanding.

With higher interest rates and petrol prices hurting the average wage earner more than comparably affluent Melbournians, house prices are falling in the outer suburbs, while some suburbs close to town and near key infrastructure and services are maintaining their value or increasing in price.

The latest REIV figures show that houses more than 20 km from the CBD dropped in value by an overall 1.7% in the last quarter. The middle ring suburbs, between 10 and 20 km from the CBD, recorded an increase in median house price of 2% over the last quarter. The inner ring of suburbs increased in median price by 1.9% to $682,900.

REIV CEO Enzo Raimondo explains that, "The median price for units and apartments has continued to show less volatility than detached homes. The median price for a unit or apartment dropped less than detached homes in the March quarter and in the June quarter remained steady with a median of $370,000.”

He also reported that, "Over the longer term the two housing types, houses and units and apartments have shown near identical increases in value with the median price of a house increasing by 27% over 5 years compared to 28.9% for units.”

Our property values are being supported by the strong demand for accomodation due to our high immigration - each week around 1,500 people move to Melbourne. This has contributed to the Melbourne residential property market performing better than other capital cities in these changing economic conditions.

At the same time there is a severe shortage of rental properties pushing up rents.

We are finding it easier to buy great investments for our clients in these quieter property markets. For example in April we bought a great 2 bedroom ground floor apartment with it's own courtyard for a client, Joan in the bayside suburb of Brighton.

It was being offered for auction, with an expected selling price quoted at $520,000. One of our senior buyers attended the auction for our client. With little interest at the auction, the property was passed in to us at $470,000 (well below the vendor's reserve price).

After negotiating we were able to secure the property for Joan, at $471,000. But it wasn’t really that simple. This great purchase only occurred because we “played the right game” before and after the auction. Before the auction we used our influence with the selling agent to condition them to a lower price.

At the auction we ensured that we were the highest unsuccessful bid to be in the position to negotiate with the vendor, but we would not bid high enough to buy the property just then, despite the agents urging. After the auction we spent 2 hours or so of furious negotiating with a now disappointed vendor, using all our tricks, including walking away on one occasion.

The end result was a great purchase for our client – a property that will always be in high demand and with the potential for value add through renovation in one of Melbourne’s better suburbs.

As soon as settlement occurred our renovation team set about stripping the property, right down to the bare brickwork. We then fitted a totally new kitchen and complete bathroom as well as new carpets, window furnishings, air-conditioning, attended to the plumbing and electrics and all the minor aspects that make the property work well for all involved.

The full renovation took a little over 5 weeks and cost $45,000 and I wouldn’t be surprised if the property will be valued somewhere around the $550,000 range when Joan gets an updated appraisal.

She will also get much better rent, a wider choice of tenants and depreciation allowances.

At Metropole we specialise in buying this type of property in Melbourne Sydney and Brisbane. We find established properties with a “twist”, below replacement cost. We then add value through renovation or redevelopment allowing our clients to manufacture some capital growth.

If you would like to find out more abut this process, please give us a call on 1300 20 30 30 to have a chat or to join us at a free property briefing where we can show you more examples like this. Click here for more details.

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