INVESTING INTELLIGENTLY - TOWARDS 2019/2020 - CSIPROP INVESTMENT GUIDE - CSI Prop
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INVESTING INTELLIGENTLY TOWARDS 2019/2020 CSIPROP INVESTMENT GUIDE MELBOURNE
Melbourne
Overall, Melbourne’s residential markets have held up well in
spite of lower investor demand resulting from tightened lend-
ing regulations. The city is going through much change due to
its expanding population — Victoria’s population is growing at a
rate of 2.4% — requiring that policies be put into place to ensure
that infrastructure can accommodate ballooning consumption
levels. Going forward, the low interest rates, Melbourne’s grow-
ing population and its sound economic framework will continue
to support rental values and prices.
Research Report: Melbourne.
1
Research Report: Melbourne
Victoria Key Economic Indicators
Victoria
Australia (Melbourne)
3.1% State Final Demand Growth 4.3%
Year-ended 4Q17
2.8% Retail Turnover Growth 4.4%
Year-on-year to Mar 2018 Melbourne VS Sydney:
1.6% Population Growth 2.4%
Projected Population Growth
Year-ended 3Q17
2.7% Employment Growth 1.7%
Year-on-year to Apr 2018
Population
Melbourne shows strong key economic indicators. *2036=projection
Source: JLL
7
6
5
At a current growth rate of 2.7%, Melbourne — the World’s 4
Most Liveable City for 7 consecutive times — is home to a 3
population of 4.9 million. The city, now just 200,000 below 2
Sydney’s, is set to become Australia’s most populated cap- 1
3.7m 3.2m 5.0m 4.6m 6.7m 6.8m
ital by 2036 (previous estimates had predicted that Mel- 0
bourne would overtake Sydney as the largest Australian 1991 2016 2036 *
city in 2050)!
Sydney Melbourne
Previous estimates of Melbourne overtaking Sydney as
Australia’s largest city in 2050 has been revised to the
Victoria mid-2030s, if not earlier.
Source: ABS 3218 population figures & Bernard Salt/
The Australian.
2
Melbourne VS Sydney: Y-O-Y Population Growth
Natural 34,994
Increase
36,284
Nett -18,120*
Internal
Migration 9166
Nett 84,684
Overseas
Migration 79,974
101,559
Population
Change 125,424
Research Report: Melbourne
-2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13
*More people had left Sydney for other parts of Australia than arrived.
Sydney Melbourne
Melbourne recorded the largest — and fastest — growth of Australia’s capital cities in 2016-
17, surpassing Sydney, and increasing by 125,400 people.
Source: ABS y-o-y regional population growth, Australia, 2016-2017
Quick Facts: Melbourne
. World’s Most Liveable City Since 2011
. Fastest-growing city overtaking Sydney by mid-2030s
. 50,000 students studying and living in Melbourne
. Tight vacancy rates of 1.9%
3
Annual Price Growth Driven by Undersupply
Australia experienced a weakening in March 2018) indicating that there is an un-
overall house prices at the start of 2018 dersupply in dwellings led by population
vs 2017 as a result of weakened investor growth: the Urban Development Institute
demand. This is due to APRA's inves- of Australia (UDIA) predicts that if current
tor lending regulations, various policy trends continue, Victoria’s undersupply of
changes and removal of off-plan stamp houses could reach in excess of 50,000
duty concessions. houses by 2020.
However, property prices in Melbourne
rose by 6.2% annually (March 2017 -
Residential Property Price Index 2016-2017
Dec Qtr ‘16 Dec Qtr ‘17 Mar Qtr ‘16 Mar Qtr ‘17
- Mar Qtr ‘17 - Mar Qtr ‘18 - Mar Qtr ‘17 - Mar Qtr ‘18
Melbourne 3.1% -0.6% -13.4% 6.2%
Weighted Ave
of 8 capital 2.2% -0.7% 10.2% 2.0%
House prices have weakened overall in 2018, however, demand for housing in Mel-
bourne remains.
Source: ABS
Research Report: Melbourne
4
Growth Areas
MELBOURNE CITY
Student Population Influences
Housing Demand
Melbourne’s city encapsulates the CBD and
measures an area of about 36.2 km². More
than 500,000 students study and live here as
5 of Melbourne’s top universities are located in
the city, of which 2 are in the country’s top 10
list. The high international student enrolment
has been driving the city’s housing market.
There are 35,000 foreign students
in Melbourne city alone. The Uni-
versity of Melbourne singularly
has about 47,000 students, in-
cluding >12,000 international stu-
dents.
Boundaries of the City of Melbourne
Source: whatson.melbourne.vic.gov.au
5Research Report: Melbourne
Underlying Demand & Supply
Estimated Deficiency/Oversupply of Dwellings(‘ooos) as at June 2017
States
2015 2016 2017 2018f 2019f
Victoria 9.9 7.7 3.9 -2.0 -4.1
Australia 92.3 56.5 6.9 -32.1 -51.2
BIS Oxford Economics has predicted an undersupply of housing in Melbourne city.
Source: BIS Oxford Economics & ABS Data
Pipeline Undersupply
BIS Oxford Economics went on re-
cord this year, reversing their ini-
tial predictions of an oversupply of
housing in Melbourne city, predicting
instead, an undersupply due to fast-
er-than-expected population growth.
As it turned out, Melbourne had some
35,000 extra households than initially
expected.
6Inner Melbourne Supply Pipeline
Number of
Research Report: Melbourne
units
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2016 2017 2018 2019 2020 2021 2022
Complete Plans Approved
Currently Marketing Plans Submitted
Under Construction
The supply of apartments in Inner Melbourne has declined, a situation that
looks set to continue over the next five years.
Source: JLL Australia Melbourne Market Commentary 4Q17
Between 4Q16 and 4Q17, the number pated for completion over the next 5
of apartments in the pipeline reduced years will decline further.
by some 12,000, whilst apartments
under construction dropped by 7,000
(33%) since 4Q16. JLL predicts that
the number of apartments antici-Population Growth Projection
City of Melbourne’s Forecast Population
The City’s current population is estimated to be 151,176 residents. By 2037, this is expected to increase to around 266,455 residents.
275k
250k
225k
200k
175k
150k
125k
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037
The population of Melbourne City is poised to increase in the next few years due to immigration and births.
Source: Geografia.com.au
Research Report: Melbourne
Statistics show that population growth will The CBD it self has seen a population swell
continue and is expected to hit 266,455 from 15,249 in 2006 to 35,447 in 2016.
residents by 2037 (if not earlier), due to What will continue to keep the city thriving
births and immigration. ABS reports that are its industries and jobs, and its proximity
the population living within 10km of the to universities, the arts, F&B, services and
CBD, meanwhile, had grown by 40% — from retail — all the things that are crucial to to-
743, 000 to 1,042,000. This also hints at a day’s dweller.
reversal of trends, where cashed-up baby
“
boomers are swapping their large subur-
ban homes for apartments that are closer
to the city, public transportation, cafes and If you look at Melbourne, there’s 120,000
restaurants. people moving to it per annum, but only “
75,000 houses being built.
- Ryan Felsman, CommSec Senior EconomistMelbourne City Rental Vacancy Rates Nov 2018
Number of vacancies
Vacancy rate 8
6
Research Report: Melbourne
4
1.9%
0
Jan 18
Jul 14
Jan 15
Jul 15
Jan 16
Jul 16
Jan 17
Jul 17
Jul 18
Nov 18
Rental vacancy rates as at June 2018 are at 1.9% indicating a respectably strong
demand for rental housing in the city.
Source: SQM research.com.auWEST MELBOURNE
MELTON
Melton
Research Report: Melbourne
Located in the Northwest, Melton is an upcoming suburb on the urban periphery of Melbourne city.
Source: CBRE Infrastructure & Real Estate: Key Melbourne ProjectsCity of Melton Forecast Population
500,000
400,000
300,000
200,000
Research Report: Melton
100,000
0
2016 2021 2026 2031 2036 2041 2046 2051
The city of Melton is one of Victoria’s fastest-growing cities. Its population is forecast to hit
477,900 by 2051.
Source: Population and Household Forecasts, 2016 to 2051, prepared by .id, July 2018.
Melbourne’s Population Growth
Forecast by LGA 2011-2031 Job Growth
Melton is one of Victoria’s top growth are- There is strong job growth in the Melton region;
as, with a population that is projected to hit it has been ranked Australia’s second fast-
175,000 by 2031. Its population growth rate is est-growing job market in the country in the
the second fastest of all Victorian LGAs (Local 21st century. Latest ABS data reveals that the
Government Area), and the most affordable of Melton LGA had a 52% job growth rate from
the top 3 LGAs, with over 70% of residents un- 2011 - 2016 and that jobs creation had out-
der the age of 45. Between 2008 and 2017, its stripped the number of dwellings being built.
population grew 61%. Projections indicate that
the city’s population will exceed 374,700, al-
most equal the size of Canberra by 2041.Property Hotspot
According to Domain Group data, rents in
Research Report: Melton
South and Melton West experiencing increas-
suburbs that were once considered afforda- es of 407% and 293%, respectively. In terms of
ble have increased by up to 18% in the year rental vacancy, Melton’s vacancy rates stand
to March 2018, while the number of properties at 2.1%.
available in the least expensive suburbs was
as low as 10.
Melton, known to be one of the most afforda- TIP
ble areas, has been rated one of the best per-
forming boomtowns in Melbourne with annual
capital gains of up to 27%. Melton South, in We also recommend paying attention to Wynd-
particular, charted the highest annual growth ham, located in the outer southwestern suburb
from 2000 - 2017 according to data by the of Melbourne. Data by CoreLogic in 4Q2017
Real Estate Institute of Victoria (REIV). shows that Wyndham was Australia’s top per-
former for dwelling value growth over the past
Melton saw some of the biggest growth in auc- 10 years.
tion volumes y-o-y in Sept 2017 with Melton
Quick Facts: Melton
. One of Victoria’s top population growth areas
. 2nd fastest-growing job markets in Australia
. 8390 jobs created vs 7968 increase in private
dwellings (2011 - 2016)
. One of Melbourne’s property hotspots of 2018
. Vacancy rates at 2.1%The Mernda rail project has brought ac- cessibility, new jobs and integrated spac- es to Mernda. Credit: Level Crossing Removal Authority
NORTHEAST MELBOURNE
MERNDA
Just over 20km northeast of Melbourne lies
Mernda, a suburb of the City of Whittlesea. From
one of the least glamorous places in Victoria,
Mernda had by 2015 become one of the fast-
est-growing areas in Australia. When fully de-
veloped, it will accommodate over 30,000sqm
of retail space and around 80,000sqm of com-
mercial space for offices, small businesses, Price Growth
medical facilities, gym and child care. By 2041,
the population of Mernda will grow from 16,800 House prices have been growing in Mernda, with
(2015) to an estimated 32,080. Latest data by houses charting a median sales price increase of
the ABS puts Mernda within the top 10 largest 69.2% over the past 5 years compared to units
growth areas in the country, fuelled by the ar- (apartments) at 30.7%. In 2Q2018, Mernda
ea’s relatively affordable real estate. broke the record as Whittlesea’s strongest
performing housing market, driven by the
Mernda Rail Extension. The highest demand for
rental is for units with a yield of approximately 4%
Improved Accessibility over the past 12 months (data as of Aug 2018). In
terms of rental vacancy, Mernda’s vacancy rates
Thanks to state funding, Mernda residents no stand at 1.7%. Like Melton in the west, Mernda
longer need to be heavily reliant on private ve- has been ranked among the top-charting sub-
hicles for transport as passenger services for urbs for house price growth in the country.
the South Morang train line extension to Mern-
da has commenced. It is the first time a pas-
senger train has run to Mernda in 60 years. This
award-winning project comprises 8km of new
rail line and 3 new stations that will cater up to
8000 commuters a day. It will give passengers
access to 982 services to the city every week.
The project also brings with it new and rea-
Research Report: Mernda
ligned bus routes, walking and cycling paths
that link the new stations, brand new commu-
nity spaces and created more than 1,800 jobs
in other businesses and industries.Words Research Design & Layout
VIVIENNE PAL VIRATA THAIVASIGAMONY AHMAD MUNAWAR ABD RAHIM
VIVIENNE PAL JANE TAN
IAN CHOONG
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