MY PREDICTIONS FOR 2021
Traditionally, the holiday real estate market on Melbourne’s Mornington and Bellarine Peninsulas have been a good indicator as to how the mainstream market will perform.
From what I have seen so far, the prime holiday spots of Portsea, Sorrento, Blairgowrie and Red Hill on the Mornington Peninsula have been incredibly strong. Similarly, on the Bellarine Peninsula, Lorne, Fairhaven, Aireys Inlet, Point Lonsdale, Queenscliff and Barwon Heads are performing strongly.
Usually there is “carry over” stock in December/January in the mainstream market, but this year it was absorbed more quickly than usual.
This tightened supply will factor heavily on results and clearance rates in 2021. Clearance rates for houses in November and December in Melbourne were in excess of 75%. From my experience, this is incredibly strong given the excess supply that usually comes on in Spring. If maintained, a 75% clearance rate usually translates to a 10%-15% capital growth rate.
I believe there are some risks in the new apartment market where there are levels of oversupply and these are to be avoided as investments.
New high-risk apartments in Docklands, South Bank, CBD, West Melbourne, Box Hill, Preston, Footscray, Springvale, Clayton and Broadmeadows should be reviewed with caution.
Similarly, there is risk of oversupply in greenfield sites on the urban sprawl, particularly in Melbourne’s outer west and south east where activity has increased.
Over the last 30-40years, Melbourne median house and unit prices have experienced an annual compound growth in excess of 7.5%. Houses slightly higher than units.
In 2021, due to the reasons outlined in the Market Wrap, it is my opinion that median house prices will rise in the range of 10%-15%. Some highly desirable suburbs will increase 15%-20%.
For houses/townhouses, I like the following suburbs with prospect for growth in 2021:
- Richmond
- Prahran/Windsor
- Hawthorn East
- McKinnon
- Brighton East
- Bentleigh
- Cheltenham
- Black Rock
- Yarraville
- Seddon
- Coburg
- Fitzroy
For low density, older style units/villas, I like the following suburbs with prospect for growth in 2021:
- South Yarra
- Elwood
- St Kilda
- Parkdale
- Mentone
- Richmond
- Malvern
- Armadale
- East Melbourne
- Brighton
- Brunswick
- Prahran/Windsor
In conclusion, you don’t buy a median house price or suburb. In every suburb, there are only certain streets that I will search for property. For example, there is a lot of Richmond, Kensington and South Yarra that I specifically exclude because they are nonperforming streets. When buying a flat in a block, similar rules apply. A certain position within the block may not perform. You may have selected the right suburb, the correct street, but may have selected the wrong position in a street or a location within a block.
Selecting the suburb is just one attribute, there are many factors the drive value. The key is to select high performing assets that will outperform the Melbourne median house price growth. These properties, do exist but they represent less than 2% of all properties for sale each month.
When buying real estate, it is always desirable to consult an independent expert to help you navigate through the pitfalls and help you avoid making and importantly, helping you avoid costly mistakes.
