Melbourne’s residential market has undergone major changes over the past 12 months, as regulatory measures take the wind out of investor and foreign buyer demand, developers have had to shift their focus in order to remain competitive.
Melbourne’s shift towards an owner-occupier driven market has been well documented, with owner-occupiers and first home buyers growing to occupy nearly 40 per cent of the market in new property.
Developers are reporting the knock-on effects of this movement with a shift towards developers offering amenity and features that strongly reflect and favour the desires of the owner-occupier over those of the investor. Namely, developers’ offerings are reflecting the closer interest owner-occupiers take in the design of a new build.
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In the past two years, $55 billion of investor mortgages switched to owner-occupier. Reserve Bank figures showed that slowing growth to investors in 2017 was offset by slightly higher growth to lending to owner-occupiers.
NAB recently reported that the share of foreign buyers for new homes has dropped to a six-year low, thanks to regulatory measures and Beijing’s reining in of outbound investment.
This fast-changing landscape has also meant many developers across Melbourne are modifying sales strategies, to address the influx of owner-occupiers who have greater design requirements and expect better service than investment purchasers.
The higher service and customisation that comes with owner-occupier sales, may cause some developers to restrategise planned investor targeted projects; but others are well-placed to address the demographic.
“[The owner-occupier market] requires a very high level of service and coordination, a system we’ve had in place since inception,” Orchard Piper’s Luke McKie said.
McKie leads the Melbourne-based boutique development group, Orchard Piper. Developments include the $40 million Washington Street apartment complex in Toorak, the group have development projects in South Yarra, Brighton, Malvern and Toorak.
“While we’ve been closely watching the changes in the market, it doesn’t mean a change of strategy for our team – indeed, our business was established specifically to service the discerning owner-occupier making the transition from the family home into the next stage of life,” McKie said.
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“There has been a swift shift in the market to address this changing landscape. A great example of this is Mast Brighton: a project that began as small apartments designed for the investor, has evolved into a boutique project of large residences perfectly suited to the owner-occupier,” Beller Poject Marketing director Heath Thompson said.
While stamp duty concessions are giving first home buyers an opportunity to enter the market, residences at the other end of the market are largely being driven by downsizers.
Dahua Group Hawthorn Park sales team have seen an enormous 80 per cent of sales to date go to owner-occupiers, specifically from the Boroondara area. Purchasers are Hawthorn locals and are looking to sell the family home in favour of a lower maintenance apartment.
“Almost all our Hawthorn Park purchasers have been locals who have lived in, and loved the Hawthorn area for decades. Therefore we are pleased to see this shift towards an owner-occupier market,” Dahua’s William Huang said.
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Downsizers are making up a considerable chunk of the sales at the luxury end of the market, with empty nesters wanting to live somewhere more manageable. Dwellings with low up-keep, and a focus on lifestyle and amenity is attracting downsizers to apartment living.
Stricter lending conditions has also cracked the Sydney residential market, while median house prices in Sydney continue to beat out Melbourne, there has also been a noted migration from NSW to Victoria.
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An interesting case study is developer Gamuda Land’s 661 Chapel St project where 15 per cent of sales to date have gone to Sydney purchasers – much more than anticipated by the developer.
“We’ve certainly welcomed the shift towards an owner occupier driven market and have also noticed a surprising number of owner-occupier purchasers come from Sydney to buy in 661 Chapel St," Gamuda Land’s project director Aw Sei Cheh said.
The feedback we’re getting is that they are familiar with the South Yarra and Chapel Street area and are looking forward to the lifestyle the area offers."