02 Feb Flipping as a strategy + Melbourne rents on the rise + Beware of the ‘free cheese’
Highlights from this week:
- How artificial intelligence will impact property
- The rate of flipping has dropped
- Don’t get tempted to take the bait
- Rents rise through competition
- Where flipping is most profitable
Flipping is ‘no flop’ for 90% of investors – Cameron Kusher
Kevin: One of the things that always fascinates me is about the renovation market. People are constantly wondering if this is the time to flip. “If I were to do a renovation now, flip it over, would I make some money? How long would I have to hold onto it for?”
I’m interested to read a report from CoreLogic, which is the first time they’ve produced the Property Flipping Report. Joining me to talk about that, Cameron Kusher.
Probably like me, Cameron, you get asked this question quite often.
Cameron: We do. Obviously, people want to know how many people are flipping their properties and whether or not they’re actually making a profit on that. This report goes to shed some light on whether they are making a profit and how many are flipping.
Kevin: Are they making a profit? That’s the first question.
Cameron: Generally, they are. Nationally, over the 12 months to June of last year, 89.1% of people who flipped their property in less than 12 months sold for a profit, and 89.9% of people who flipped it between one and two years made a profit. Overwhelmingly, the majority of the people who are flipping are making a profit.
Kevin: What percentage of sales – do you know – overall would constitute flipping?
Cameron: What we did is we defined flipping in two ways: less than one year and then one to two years. The reason we did that is because if you’re an investor and you’re reselling in less than one year, obviously, you have to pay the full rate of capital gains tax. Our theory was that fewer people would flip in less than one year. Then we looked at one to two years, which, again, if you’re an investor, you get a halving of that capital gains tax.
What we found is 1.3% of all sales over the year were flipped within a year and 5.7% were flipped within one to two years.
Kevin: Have you been able to work out how that compares with previous years, Cameron?
Cameron: We have. Historically, we look back, so if we go back five years ago, 5.1% of properties were flipped within 12 months, 1% were flipped within one to two years. So, it’s a little bit higher than both of those figures.
But if we go all the way back to 2002, for example, at the peak of the housing boom in Sydney and Melbourne at the turn of the century, 11.3% of all properties were being flipped within one to two years, 3.4% were being flipped in less than a year. Flipping has actually reduced quite substantially compared to where it was at the peak of the market.
Kevin: …Comparing it back that far. But is it still declining?
Cameron: It’s not still declining; it’s creeping up a little bit. But I think, obviously now, the next couple of years will be interesting because we are seeing the Sydney and Melbourne housing markets starting to slow down. Sydney is obviously seeing some value falls. And that’s where the prevalence of flipping has actually been the greatest, in Sydney and Melbourne.
Kevin: What about areas around Australia? Is it more prominent in some areas than others?
Cameron: It certainly is. In terms of flipping, as I said, Sydney and Melbourne are where you tend to find most flipping going on. Interestingly, though, it’s more inclined to be one to two years than less than one year. I think that is probably reflective of a lot of investment that has gone on in those two cities.
You also have a reasonably high amount of flipping in less than a year in Darwin. That could be potentially people getting themselves into a little bit of trouble. Values are falling in that market.
The areas where we’re not seeing a lot of flipping: Perth and regional Western Australia as well as the regional Northern Territories. I think, again, fairly weak markets so people aren’t buying and selling property with the expectation that they’re going to sell at a profit in a short period of time.
I think you can see the difference. The stronger markets are more inclined to see flipping; the weaker markets are less inclined to see flipping.
Kevin: What about the regions compared to the cap cities?
Cameron: In terms of the combined capital cities, 1.2% of properties are flipped in less than a year, 5.7% within one to two years. Not that different in regional Australia, 1.4% of properties are flipped within less than a year, 5.8% within one to two years, so there’s actually slightly more flipping taking place in the regional parts of the country.
Kevin: Let’s have a quick look around the states. What about in New South Wales? Give me a summary on that state in terms of flipping.
Cameron: In terms of New South Wales, if we look at Sydney versus regional New South Wales, 1.5% of properties in Sydney are flipped after a year, 6.8% within one to two years, and then in regional New South Wales, 1.5% are flipped in less than a year and 6% within one to two years. You can see that flipping is fairly similar in that “less than one year” category, but slightly higher in one to two years in Sydney than it is outside of Sydney.
Kevin: What about Victoria?
Cameron: In Victoria, again, Melbourne, you have 1.3% flipped in less than a year, 6.4% flipped one to two years, regional Victoria, 1.1% flipped in less than a year, 4.7% one to two years. Flipping is certainly a lot more prevalent in Melbourne than it is outside of Melbourne.
Kevin: I think I read somewhere, too, the Mornington Peninsula is one of the most profitable regions for flipping.
Cameron: It certainly is. Very successful down in that Mornington Peninsula area when people do flip.
Kevin: What about Queensland? What’s happening there?
Cameron: In Queensland, as you’d expect, not a huge amount of flipping going on. 1.1% flipped in less than a year in Brisbane, 5.4% one to two years. And then in regional Queensland, flipping is actually more prevalent, 1.6% of properties are flipped in less than 12 months, 6.6% are flipped in one to two years.
Kevin: You mentioned earlier about Western Australia and how it’s a bit difficult there. Just give me a summary on WA.
Cameron: Very low levels of flipping taking place in WA. 0.8% in Perth are flipped in less than a year, 3.2% flipped one to two years. And then in regional WA, it’s a very similar story: 0.8% flipped in less than a year and 3.1% were flipped within one to two years. You don’t see a lot of flipping behavior taking place in WA.
Kevin: What about, finally, South Australia and Northern Territory?
Cameron: In South Australia, not a huge market for flipping: 1.1% of properties were flipped in less than a year both in Adelaide and regional South Australia. Then between one to two years, you have 4.2% in Adelaide and 3.9% in South Australia.
Then if we go to the Northern Territory, again, not a huge amount of flipping taking place: 1.9% of Darwin properties flipped in less than a year and 4.1% flipped within one to two years. Then in regional Northern Territory, only 0.6% of properties were flipped in less than a year and 4.7% flipped in one to two years.
Kevin: It’s a very interesting market, flipping, because it’s so easy to over-capitalize, particularly with inexperienced renovators. So, a pretty good insight there into what to do if you’re looking at flipping. It’s a great report reflecting that nine in ten Australian properties are flipped for a profit. That’s according to CoreLogic. And joining me to talk about that was Cameron Kusher.
Cameron, thanks for your time.
Cameron: Thanks for having me, Kevin.
Sydney unit rental prices ease – Dr Nicola Powell
Kevin: A rental price report out from Domain reflects the fact that Australia’s capital city markets are operating on certainly different property cycles. We will have a look at each of the capital cities, but we’ll focus very much on Queensland and Brisbane. Joining me to talk about this is Domain’s data scientist, Dr. Nicola Powell.
Dr. Powell, thank you very much for your time.
Nicola: Hello. Thanks for having me.
Kevin: That’s a pleasure. We saw a little bit of movement in some of them. The Sydney market’s rental figure surprisingly came back. What do you put that down to?
Nicola: Yes, I know. The unit rental prices actually declined 0.9%. For tenants out there, that means a $5 saving on that median weekly rent. There are a couple of things that I think are probably starting to drive this change. You have to remember that house price rents and unit rents were the same in Sydney. They were both at $550 in the previous quarter, so we have seen it ease a little bit in the unit market.
What we are seeing in Sydney is those building completions are coming to a peak, and you have to think a lot of those would have been sold off the plan to investors throughout that peak time of that investor activity. So, I think we’re probably seeing some of those starting to come on to that rental market, which is helping to increase the supply in certain areas. I think that’s really what’s driven this ease in price. It’s great for tenants out there because it does give them a little bit more choice in the market.
Kevin: Yes, we saw a little bit of growth for investors in Melbourne, and we certainly saw a bit of growth out of Adelaide, as well. That surprised me just a little bit, but it’s good news.
Nicola: Yes. There was a rental growth in houses in Adelaide over the quarter and over the year. Units were stable. What’s happened in the housing market, though, is we’ve had a short-term drop in stock in that market, and I think that’s really put a bit of a short-term pressure on that market.
I’m not sure if that growth will be there. Adelaide is a very steady market. It’s been steady as you go in both the sales and rental market, and I really think that is going to continue.
Kevin: And good growth out of Canberra.
Nicola: Amazing growth out of Canberra. Canberra has a very transient nature in terms of its population. What it’s actually experienced is an increase in the interstate migration, which a couple of years ago was in the negative; they were losing more people to other states and territories due to those public-sector cutbacks. But that has turned around and it’s really regenerated the housing market in Canberra, and we are seeing rents increase.
For Canberra, it’s really going into that peak rental period, which is also putting pressure on the demand. We have all the graduate jobs starting and universities starting, as well. But for investors in Canberra, the yields are pretty good, as well. Units in Canberra are providing investors with the strongest yields compared to all of our major capital cities.
Kevin: Domain data scientist Dr. Nicola Powell is with me.
Great news out of Hobart. That’s an amazing market, and so many people are predicting that it’s going to continue to grow. Investors will be very happy about their returns there.
Nicola: They certainly will. Hobart provided the best growth yields for investors for houses. But in terms of the level of growth that tenants are seeing, we’re experiencing hefty quarter-on-quarter increases for both houses and units.
And Hobart was the only city to record double-digit annual growth in their rents. It’s a tightening market, it’s a very competitive market, and I think moving forwards, tenants really need to prepare themselves that higher rents are probably going to continue into this year.
We’re starting to see a little bit of a response in terms of development approvals; they are starting to increase. But as with any developments, whether it’s a house or a unit development, they take time to impact the market. So, I think it’s going to have little impact this year for Hobart.
Kevin: And the Brisbane housing market rental returns are quite stable, but a bit of a drop in units. What do you put that down to?
Nicola: We know there have been huge amounts of developments in units in Brisbane, and that’s really just reflective of the fact that they’re still impacting the year-on-year growth in rent. It’s really given investors in Brisbane little reason to raise their rents, because they have been impacted by this high level of development in Brisbane.
Kevin: Dr. Powell, thank you very much for your time. Dr. Nicola Powell is the Domain data scientist with that report. Thanks for your time.
Nicola: Thank you.
The only free cheese is in the trap – Brett Warren
Kevin: When we see the market the way it is now – a lot of pressure on it, a lot of over-supply and stock – it’s quite normal for developers to start offering incentives – we won’t call it bait, but that’s pretty much what it is – to buy. I’ve seen people offering “Buy a unit, you’ll get a car,” or “Buy a unit, you’ll go in the running to win a trip overseas.” Brett Warren from Metropole Properties joins me to talk about this.
Brett, do these work? And I think I know what the answer to this question is going to be. Is that a good enough reason to buy a property?
Brett: The answer is no, but to some people, it does. People think of it as a big bonus. I think the biggest one at the moment, especially for investors, is that incentive to rent back for two years, so they’ll actually pay your rent for the next two years even if your apartment is vacant.
Kevin: Why is that a problem if you’re going to be given a really good return for a couple of years?
Brett: The problem is who’s paying for that return? That’s actually built into the price. Developers don’t give away things for free. They don’t give away cars. They don’t give away trips. They don’t just pay your rent to be nice for the next two years. They actually factor that into the price.
Quite often, in the past, we’d get calls from agents telling us about a property that’s coming up. The client paid $550,000 and it’s only going to be selling for $500,000 or $520,000, so it’s a bargain. And when you go back and look through it, they’ve paid probably 5% to 10% too much for the property, because of those types of things – the incentives, the rent backs, the trips, the cars, and those types of things as well.
Kevin: In the event that you are looking at a unit, you genuinely think it’s a good buy and there is a good rent-back on it, how do you make sure that the rent that’s being offered is not over-inflated or, in fact, it is market?
Brett: That’s a good point, too. I’d always get a second opinion. Speak to a reputable agent. Obviously, the sales agents are going to have their rental appraisals that would have been done, but like everything, I’d always get a second opinion on those types of things from an independent third party.
Kevin: I guess the bottom line is if you’re looking to make a purchase, make sure it’s on the quality of the property and not what surrounds it – in other words, not what’s on offer to get you to buy it. I think, generally, if there is something on offer that’s like bait or an incentive, there’s probably a very good reason why that has to be offered.
Brett: That’s what I probably tend to agree with too, Kevin. The higher the incentive, probably the more I’d steer clear of the property itself.
Kevin: Can we just very quickly talk about auction? How do you go about purchasing a property pre-auction? Is that something that’s becoming more common?
Brett: Yes, it is. Again, it’s about having that communication and understanding with the sales agent of what the seller’s needs are. Sometimes they’re desperate to sell; other times they’re going to see the auction through. A good question to ask is “Would they sell before auction?” Most agents will say yes, but you want to understand their needs for selling and things like that.
A little tip would probably be to do all your due diligence at the start and if you are going to make an offer, do it at the start of a campaign rather than towards the end. If you’re going to make an offer a week out from auction, that’s probably here nor there; they’re probably emotionally committed to the auction.
Whereas if you’re putting all your work together at the start, there have been fewer offers, there’s been less time on the market, and there’s more time until the auction, so they’re probably more open and receptive to actually doing an off-market transaction.
Kevin: Would the offer that you make have to be a premium offer? Because agents will tell sellers that the reason they’re going to auction is the opportunity to get a premium price, so to stop an auction, the seller’s agent will probably tell you that they’ll take an offer but it needs to be a premium offer.
Brett: It does. It needs to be a reasonably solid offer. You probably won’t get a second chance at it. It’s not like you’re going to be able to negotiate too much, if at all.
Kevin: Because just the pure sense that you’re going to negotiate is an indication that they’re actually giving away their reserve, which a good agent wouldn’t let them do.
Brett: Absolutely. Your offer probably will also have to be under auction conditions or very close to…
Kevin: Which is cash unconditional.
Brett: …Cash unconditional, so you want to do your building and pest. That’s the first thing I’d do. If I liked the property, I was going to bid at auction, and it was four weeks away, I’d be getting a building and pest done immediately. That way, you’ve ruled it in or ruled it out straight away, and then you can actually put an offer forward without having to do that.
Kevin: Because one indication to a seller’s agent that they have bidders is the number of building and pest inspections that are done prior to auction.
Brett: Yes, absolutely. Also, have there been other offers prior to auction, as well?
Kevin: What is the value in asking that, though? Because you’re not going to be able to find out what the offer was.
Brett: No, but if you were putting an offer together in the last week and there have been four or five other offers, they’re probably not going to take it off the market unless it’s a crazy price. But if you’re doing it at the start of a campaign and if you’ve put a good, solid offer together without all your conditions and things like that, your chance of getting an offer accepted is probably slightly higher.
Kevin: So you really have to be buyer-ready, don’t you?
Kevin: Have you finance in place, have the building and pest inspection done, and get a reasonably good estimate of what the value of the property is.
Do you find, generally, that most buyers know value or do they need to get a valuation done?
Brett: Quite often, valuations are very conservative. Particularly some of the auctions we go to, it’s the last man standing kind of thing – high disposable income areas, things like that. People tend to pay considerably more than what the property is worth just to get into that area, that school catchment, that kind of suburb, and things like that.
They have to have an idea of what the value is but also be comfortable with what they’re spending at the end of the day.
Kevin: Valuations tend to be quite conservative. Why is that?
Brett: The bank is not going to over-value and over-stretch themselves.
Kevin: But it’s not a bank; it’s a valuer.
Brett: It is a valuer, but they report to the bank and things like that, so if it comes in considerably more or less, then the valuer is going to have a few questions to answer.
Kevin: Is it possible to say to a valuer, “You’re not doing this for a bank; I’m doing this so that I can get a feeling of what the value of this property is because I want to buy it at auction.” Will that valuation be different, do you think, from a bank valuation?
Brett: I think so, yes. I think it definitely would. Again, it’s about communicating your needs to the valuer and making them understand what you need this for. I think once they realize that they’re working for you and not the bank, then it would be a different story.
Kevin: Brett Warren is my guest. Brett, thank you very much for your time.
Brett: Thanks a lot, Kevin. Good to be with you.
AI in property – Nigel Dalton
Kevin: You only need to have seen Star Wars, The Matrix, Westworld, or have grown up watching The Jetsons to know what artificial intelligence – or, as it’s sometimes called, AI – is all about. The latest Black Mirror series on Netflix even grapples with voice and AI technology, giving us a scarily realistic glimpse of what society could be like in as little as five years’ time.
So, where’s all this going? Where is it headed? How is it going to impact buyers and sellers of real estate? Joining me to talk about this is Nigel Dalton who is RealEstate.com.au REA’s Group Chief Inventor.
Nigel, that’s a pretty awesome term, Chief Inventor.
Nigel: It’s an important term. I have the best job in Australia, that’s for sure. But what we’ve come to realize is that innovation is one thing. That’s understanding customer needs and meeting them. You need to do that on a daily basis to survive today. That’s what most of the people at realestate.com.au do. A few of us work on pure invention: what’s coming in two to five years?
All we tap into is an amazing antipodean Australian and Kiwi spirit of being able to solve problems with stuff. Can we bring AI to bear on some of the problems in real estate? I hope so. We work on virtual reality and artificial intelligence, those kinds of things, and thinking two to five years out.
Kevin: My first experience with virtual reality was actually at REA in Melbourne, I think it was. We went to have a tour of the facility there, and we were given some 3D glasses. I went on a rollercoaster. That was my first experience in virtual reality. It was quite scary, I thought.
Nigel: You were a pioneer, because those games were the entry point to that. We talk about these future technologies impacting three things: time, trust, and transparency. What we think virtual reality is good for is saving people time. It’s the one thing you can’t make more of, and it’s an incredible gift you can give to your customers in real estate.
You’re experienced in that industry. There’s a lot of time wasted. You take a simple thing like a rental open for inspection. We had 200 people turn up to one of those in Sydney late last year, and there were 199 dissatisfied people who lost two hours of their day, probably one hour parking in Sydney, knowing how tough that is nowadays. That’s 400 hours of human time wasted.
If we can get some of that back for people, whether they’re agents or consumers, we know that’s appreciated. So, that’s where we point our technology.
Kevin: It’s interesting to hear you say that, Nigel. We’ve become – I guess because of the Internet and things like Google – so intolerant of wasting time. We even ask Google Home “What’s the temperature in Washington? What’s the time here? Or what open homes there are this week?” and we want an instant answer.
Nigel: Do you know, Australians are among the most impatient people in the world. I saw a study that Uber had done as to which nation was prepared to wait the longest for their Uber before they cancelled or found another opportunity.
What do you reckon is the time an Australian is prepared to wait for an Uber?
Kevin: I had an Uber experience recently and I waited ten minutes and then cancelled.
Nigel: Well, ten minutes, you’re on the 99th percentile of tolerance, because two minutes is the average Australian.
Kevin: Oh, wow.
Nigel: Now, I don’t know about you, I grew up in rural New Zealand, and when you go to a party in a small town, you’d wait two and a half hours for a taxi.
Kevin: The technology now is you order an Uber… We’re talking about Uber, but you can do it with pizza as well, and you can see where your pizza is, where the delivery is.
Nigel: And this is really smart use of technology. Uber and Dominos are both pioneers in the world of artificial intelligence, of using mathematical algorithms in a way that gives us more time. And what it is with the pizza thing is transparency.
How good do you feel knowing that that pizza is only two streets away?
Kevin: Yes, well, how frustrating is it when you see them make a wrong turn? Which has happened.
Nigel: I know. And we’re a generation that’s now used to that level of transparency, and we expect it in every single transaction we do.
Kevin: Talking about that, how is voice technology going to be integrated into the property industry? What are we going to see in the future?
Nigel: I’m old enough to remember back ten years ago when these crazy phones came out with glass screens you had to touch, and we all sat around going “That’s never going to work. It’s going to get dirty, and nobody wants to touch their screen. They want a keyboard and buttons.” Well, that changed the world. We’re so used to touchscreens. You see children in cafés trying to touch the screen on a newspaper and expand the picture out. It doesn’t work.
And now we’re in the world of voice. We will remember 2018 as the year we started not touching but talking to our devices.
Nigel: You’re at the cutting edge; you have a Google Home at home. Amazon Alexa is about to hit the market with a real bang because Australians love shopping online, and Amazon Alexa is absolutely made for that.
Yes, we’ll get used to talking to our devices, and we’ll talk to everything. You’ll talk to your car, you’ll talk to your phone, you’ll talk to your glasses. You’ll certainly talk to that thing about getting a decent recipe for cooking that roast leg of lamb for Australia Day.
Kevin: But how is it going to relate to real estate?
Nigel: Very simple. In real estate, we have those hard questions that everyone wants to know. “Who’s the best real estate agent in New Farm?” And we’ll apply both artificial intelligence in behind and the voice technology on the front, because people are going to want to verbalize that conversation, not type that into Google; that’s going to be too long. You’re going to be in the car, you’ll have these devices that’ll be portable.
We sat down with our initial launch to think “Well, it has to be useful in some way.” And the technology is early days. It’s mostly about the talking and giving instructions; it’s less about intelligent conversation, which is still a year or two away. That’s developing rapidly. That artificial intelligence is still expensive, and you won’t get it on your kitchen table for $75.
But in a year, watch this space. It’ll be way more conversational, and you will be able to ask those questions that everyone has that our research shows. “Is there a good property that I can rent with decent air conditioning for the summer in Brisbane?” I’ll bet you that’s a hot topic. And we will verbalize that, not type it.
Kevin: Nigel, how long will it be before we’ll be able to bring up REA on the computer and talk to you with voice technology, without using the keyboard?
Nigel: We certainly have areas of that. We’ll have that in the next year. And where we emphasize our energy is understanding “What are those underlying needs?” The thing that’s driving voice technology is our car. I don’t know if you use things like Siri or OK Google. Alexa is not in the car.
Kevin: Yes, we do.
Nigel: It’s a safety thing. And you have a generation of kids in the back seat watching you do that, and they understand that to be a normal thing to do. So, the generations are the one to watch. Get one, watch your kids use it, and realize they’re not perturbed at all by it not working.
Kevin: No, not at all.
Nigel: I showed it to my dad over Christmas back in New Zealand. He’s 84 years old and very wary of that technology. He doesn’t want to be rude to it. I saw a lovely study last year of who says please and thank you to artificial intelligence devices.
Kevin: Well, you only have to say “Thank you” to Google Home and she’ll come back and respond.
Nigel: And there was much concern how we were giving kids terrible lessons in manners by ordering these devices around. Everyone has this tone of voice for talking to their Google. You don’t need it. It’ll understand a Kiwi accent like mine talking at this speed. And the incredible advance that’s been delivered to us in these consumer devices is voice recognition and processing that information into a meaningful inquiry.
Kevin: Nigel, thank you for spending some time with us. It’s a fascinating area, and I want to get you back on the show to talk more about it, but we’re going to watch it unfold. My guest has been Nigel Dalton who is REA Group’s Chief Inventor.
Thank you for your time, Nigel.
Nigel: My pleasure. Keep pioneering.
Melbourne yields are up – Cate Bakos
Kevin: There have been some mixed stories about the Melbourne market in recent times, but some good news emerging. Cate Bakos from Cate Bakos Buyer’s Agent in Melbourne, CateBakos.com.au, joins me.
Good morning, Cate.
Cate: Good morning, Kevin. How are you going?
Kevin: Good. Happy New Year to you, too. First time we’ve spoken in 2018.
Cate: It is.
Kevin: Cate, tell me about rental yields. They look to be increasing in the eastern major cities, anyway, particularly in Melbourne.
Cate: Yes, that’s right. We’ve had particularly low rental yields in Melbourne. Always, Melbourne is the lowest capital city for rental yields. But we haven’t seen a lot of rental growth of late, either. We’ve had a really strong growth market, and I guess the down side of something like that is rental yields can drop.
For the first time in quite a while, we’ve seen an increase in our rents, and it’s been across the board but we’ve particularly noticed it in the inner ring, as well. We’re even seeing large numbers of tenants attending open for inspections and sometimes pushing the rents above the asking range. So, it has been quite noticeable.
I’d put it down to a combination of things, largely APRA’s interventions in investment lending and a slowdown of investors in the market, and also the tightening on bank servicing, which has precluded home ownership for some people who were only just able to secure a home before the measures got a little bit tougher.
Kevin: Do you think, too, Cate, it reflects a change in lifestyle for us or an acceptance of a change in lifestyle that we’re finding units much more desirable?
Cate: Not necessarily. I think Melbourne is one city, as an example, that has always had an acceptance of people being prepared to rent in areas where they choose to live. And not just the rentvesting model; we also have tenants out there who might be professional tenants who have a portfolio of shares or other investments.
Kevin: There is a wide range of tenants in Melbourne, aren’t there? Very transient?
Cate: Yes, we do. We have people on contracts. We have professional tenants who may not necessarily wish to lock themselves into a particular area. We have a pretty broad array of tenants, and so it’s always been quite accepted that we have professional tenants out there and investors have to cater for them.
Kevin: We’ve also heard a lot of talk over the last 18 months, particularly over the last 6 months, I guess, about an over-supply of apartments in Melbourne. But that’s certainly not being reflected in growth, is it?
Cate: We’ve had some really good growth data for apartments. I was really impressed when I was reading through the growth data in most recent CoreLogic quarterly report to see that what feels apparent out there is actually reflected in the data. So, in the final half of last year, we certainly saw a change in sentiment around particularly boutique gated apartments in great locations.
While there has been talk of an over-supply in the inner city, we certainly have a lot of areas that offer apartments, and particularly, really nicely located boutique ones. They have been going really well. They’ve been performing strongly, and we’ve had the first-home buyers largely pushing those, as well.
Kevin: This raises a great point, and we’ve spoken many times about how diversified the market is in different parts around Australia. We’re now seeing this diversification emerge in the style of property, as well. You just can’t have a statement that says there’s an over-supply of units in Melbourne when you look at the different styles of units, which is really what you’re highlighting there, Cate.
Cate: Absolutely. Units doesn’t just reflect apartments. Units generally reflect something that has been subdivided. So, we have townhouses and villa units in that mix as well. The data integrity is only as good as what’s reported, but we can’t assume that unit just means brand-new, one-bedroom, high-rise apartments; it actually spans a lot of dwellings. And a lot of those dwellings are deemed super-desirable by tenants and by owner-occupiers. Of course, it’s sentiment that drives growth, so we have to take that into account.
Kevin: Great talking to you, Cate Bakos, buyer’s agent out of Melbourne, CateBakos.com.au.
Thanks for your time, Cate.
Cate: Lovely to chat with you, Kevin.