Dark brick and white cladded units

Why Now Is A Great Time To Develop Property In Melbourne

Residential markets across Australia were recently in the downswing, with the exception of several key cities, including Melbourne.

Melbourne property appears to be recovering with auction clearance rates reaching their highest point since November 2017. The real estate market is seeing more owner occupying buyers attending open for inspections, and auction clearance rates are also on the rise which clearly indicates that buyer sentiment in Melbourne’s property market has picked up. 

With the banks further reducing mortgage rates and improved sentiment, could this be the ideal time to consider a property development in one of Australia’s most liveable cities? Let’s dive into the top three reasons you should consider purchasing your development property now:

Prices are down in areas that are usually the most expensive

Melbourne’s most expensive areas have recorded the biggest house price falls, in the inner-east and inner-south. There have been price reductions of up to 16% in the last 12 months meaning you may still grab a buying opportunity in these areas and find success with your development.  

With a little research, you can identify the areas where prices have peaked, fallen, and plateaued, and you could secure a bargain. Additionally, you could identify suburbs that have underperformed over the last few years, to determine whether they will experience price drops now or in the immediate future.

Auction Clearance Rates are low

In the last six months, auction clearance rates have changed dramatically. This is good news for developers as with a little patience you could secure a great property for a lower cost. 

Experts agree that the best time to buy a property is a few weeks after auction, when the vendor could be exposed financially or is tired of being on the market and will accept offers. 

Keep in mind that the purchase price of a development property is only positive if you’ve done your analysis on the property and you have market knowledge. You need to ensure you have a clear understanding of the potential expenses and profit in order to safely assume you won’t lose money. 

For example, if you were planning on a multi-unit development, there’s no point purchasing a site for far more than you’ll ever sell the units for once they’re on the market or if there is little demand in that particular area. You must always have the potential ROI in mind throughout the entire purchasing process.

Investors have decreased dramatically

Property investors are more likely to change their buying habits when there are falling prices, an increase in interest rates, and reduced lending options. This is why in the last few years we’ve seen a downturn in investment as banks are under fire, interest-only lending has reduced and the changing political environment. As investors are price and profit aware, and care less about design and structure, they have decreased in line with the changing landscape.

This means, there may be more opportunities to buy with less investors in the market. And although there have been changes in lending options and tighter lending criteria, if you have a solid balance sheet and a team of experienced advisors, then you’re in a strong position to secure finance.

If you are wanting to capitalise on the current market and secure a development property in Melbourne, here are some extra tips to keep in mind:

  • Research the underperforming and overperforming prices in the specific suburbs you’re looking at, then compare with other areas – this will give you a better analysis of the state of the market
  • Wait a couple of weeks after an auction to submit an offer
  • Gather a team of experienced operators to make approvals and finance easier to secure
  • Consider your end buyer and design your property development around a potential buyer avatar
  • Know the market and spend time researching and analysing the past few years of sales and auctions – knowledge is power.