Prahran: The hockingstuart mid-autumn 2012 property review

For Melburnians, Prahran is synonymous with the iconic Chapel Street, hailed as Melbourne’s most stylish shopping precinct and renowned for its funky bars and every cuisine you can think of under the sun. Situated within five kilometres of the CBD, St Kilda and Albert Park, offering every form of public transport – be it tram, train or bus – it’s no wonder it’s a haven for young professionals wanting to make the most of inner-city living.

For these (very) popular reasons, Prahran is an area that doesn’t experience the same level of turnover as some of our nearby suburbs like Brighton. To give you an idea, jump on realestate.com.au and you’ll see Brighton currently holds 42% more stock than Prahran (158 properties listed in Prahran compared to 272 Brighton).

We had our first open for inspections in late January but it wasn’t until  February 11 that we really started building some steam with our first auction. To say things have heated up since then would be an understatement – seven weeks on and we’re working on a clearance rate of 86%.  Bear in mind auctions only represent roughly 70% of our sales and don’t take into account the properties sold privately.  

Statewide, clearance rates are also picking up, with the last few weekends hovering around 60% and Prahran faring even better at 74%. Despite the Big Four breaking ranks with the RBA this year and the unemployment rate dropping in February, confidence is clearly on the rise.

Why? A lot of buyers – especially in Prahran – were holding off towards the end of last year amidst cries of the market ‘bottoming out’. They’re now realising it’s time to get on with their lives while conditions remain favourable. Despite all the hoo-haa around the big four banks raising their rates in February, interest rates are still historically lower – bar the period directly after the GFC – than they have been in a decade.

What’s the major difference between the market now and during the GFC? If you remember back then, despite interest rates hitting a record low of 3% in April 2009, the Rudd government’s boost to the first- home owner’s grant meant property prices were being driven to record highs due to unprecedented demand (not surprising given the first-home owner’s grant was doubled to $14,000 for existing dwellings and incredibly tripled to $21,000 for new homes).

Right now, we don’t have that same level of demand inflating property prices. As a result, housing affordability has never been so attractive, and it’s reflected in what we’re seeing in the marketplace. In the last two months, we’ve seen a 10% increase in our crowd numbers and up to 15% increase in open for inspection attendance. Very strong numbers came through a three-bedroom townhouse we’ve just listed in Mary Street at our first open. With a lock-up garage and courtyard, and located within walking distance to Prahran Market and Chapel Street, we’re expecting this to sell successfully come auction day.

So what can we expect for the year ahead? Our market will remain steady, so those expecting more price reductions in Prahran will be disappointed. While our median unit price decreased from $495,000 in December 2010 to $444,000 in December 2011, our median house price actually increased from $899,000 to $997,500. People flock to Prahran because of its lifestyle and location, and these fundamentals won’t change and will contribute to why capital appreciation and rental yields remain consistent.

My advice to buyers is to take advantage of the steadying market now. It’s a bit of a catch 22. You can continue waiting for more confidence to return before buying, but higher confidence means more buyers. With more buyers comes greater competition, and what will that ultimately result in? Higher prices.

Andrew James has more than a 20 years' experience in real estate and is director of hockingstuart Armadale.

Photograph of Prahran courtesy of Flickr.