Northern Melbourne property prices remain in decline: HTW residential

Prices have declined for both the inner and outer north of Melbourne, according to the latest Herron Todd White (HTW) residential report. 

"In our February edition of the Month in Review, we stated that inner northern suburbs would be the hardest hit with declining property prices whereas the outer north would plateau," the valuation firm said. 

Economists agreed, stating that property prices for the north- east and north-west were set to decline (as shown below).

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The report notes that the outer northern suburbs of Craigieburn, Mickleham and Kalkallo reached their peak property prices in early to mid-2018 and have slowly been declining ever since.

Craigieburn’s urban sprawl previously known as providing a good return on investment for off the plan purchase of land is now being reversed.

A 448 square metre block of land back in early 2018 would be sold for $400,000 however now in mid- 2019 the same product would sell for $340,000 to $350,000.

"Purchasing this land off the plan in 2016 and selling in 2018 would provide a solid $70,000 to $100,000 capital gain, whereas purchasing more recently in late 2017 to early 2018, the land would be lucky to break even and is expected to sell at a loss," the report said. 

"The oversupply of land releases alongside the lack of land purchases due to tightened lending criteria has been the main charge behind the drop in land value."

Melbourne’s inner northern suburbs, for example Carlton, Collingwood, Brunswick and Northcote, have also been hit hard by declining property prices.

An example was a three bedroom house located in the heart of Brunswick which has recently been sold for $920,000.

Situated 5 Hanover Street (pictured below), it comprises three bedrooms, kitchen, separate lounge area, and large pergola area. 

It was sold at $985,000 in 2016. 

Median prices have fallen $30,000 to $50,000 for these suburbs since the start of 2019 and are projected to decline further according to REIV. 

Properties holding their prices are A grade, sizeable family oriented homes that have a prime position, superior floor plans and are in prime or renovated condition.

Secondary properties that do not have these qualities are struggling to sell and are seeing extended time on the market compared to 2018.

"There is an evident stock decrease for these suburbs which is contributing to the price decline," the valuation firm said. 

In the week of 23 March 2019, there were 674 auctions listed compared to 1,783 for the same week in 2018, according to Digital Finance Analytics data.

With stock levels being low and bank lending criteria tightened, home owners are choosing to stay in their current dwellings and choosing to renovate rather than risk attempting to upgrade to a superior property for which they may not get their finance approved by the bank.

According to the HTW report, Pascoe Vale has had the most surprising turn since the start of 2019.

"For a market that has been developer driven for the past two years, it now has completely reversed," it said. 

"Multiple permits granted for three-to-six townhouse developments are unable to proceed as developers struggle for finance."

A prime example is 40 Austin Crescent, Pascoe Vale (pictured below). 

Comprising a four-townhouse development with approved permits, it has been on the market for 203 days with little interest due to the inherent risk of finance availability.

"Pascoe Vale has been development shy this year and if lenders do not reduce their strict criteria, townhouse developments in Pascoe Vale may be very limited going forward."