Low rates push businesses into buying property in Melbourne's inner suburbs

While owner-occupiers are being pushed out of the residential market by investor and developer speculation, zoning restrictions on vast swathes of inner-north land that will keep ”commercial 2 zoning” for the foreseeable future meant business owners were in a strong position to buy rather than keep renting, said Chris Kombi of Fitzroys.

“No doubt tenants are realising that, interest rates being where they are at historical low levels, there’s an opportunity to buy property and pay a low interest to the bank rather than paying a landlord. It’s been a driving force,” Mr Kombi said.

For this reason Abbotsford, Collingwood and Clifton Hill have emerged as the commercial suburbs to watch in 2017, with the office sector in particular attracting a high level of interest from these business owner-occupiers.

“Abbotsford, Collingwood, the key areas where there’s significant amounts of land near to the city that’s commercially zoned (are being targetted),”  said Julian Heatherich of Savills.

He said interest rates were making their impact on the inner-city market. 

“That market is extremely strong; as well low interest rates, the economy is strong and people are looking to buy instead of lease,” he said. 

3 Hilton Street was one of two Clifton Hill properties sold to owner occupiers by Savills. Photo: Supplied

“Clifton Hill is now clearly on the radar as it offers very close proximity to the CBD, the Eastern Freeway, and trams and train services.”

It all means that there’s plenty of competition for sites, with a recent auction of Mr Kombi’s going for $735,000 more than the reserve.

The property at 90 Hoddle Street, Abbotsford, sold to an owner occupier for $1,935,000 after attracting more than 100 inquiries.

“We had spirited bidding from six parties at auction, including investors, owner occupiers and developers that pushed the final price well above the reserve in front of a large crowd,” Mr Kombi said.

The 403-square-metre site comprises a commercial 2-zoned office and showroom area of 204 square metres, with a large on-site car park at the rear.

Two of Mr Heatherich’s most recent sales – both in Clifton Hill – also went to owner occupiers.

The property at 3 Hilton Street – a 205-square-metre office-warehouse with roller-door access – sold for $900,000, and 10 Reeves Street – a 884-square-metre showroom-warehouse on an 1175-square-metre site – sold for $3.6 million.

Meanwhile, developer demand is also driving price increases in the inner north, but it’s not apartment sites set to be centrepiece in 2017. Townhouses are proving a more palatable prospect for many developers, particularly in middle-ring suburbs.

Of those sites that can be converted to residential or mixed-use zoning, developers are increasingly looking for townhouse-friendly blocks.

“There’s definitely been more interest in middle-ring suburbs, from developers and certainly townhouse sites are in high demand, there’s a move away from apartments,” Mr Kombi said.

Mr Heatherich said that the demand for townhouse sites was stretching far beyond the inner north, with a current listing for a permit-approved townhouse site at 7B Copernicus Way, Keilor Downs, attracting more than 200 inquiries.

Recent moves by the Victorian government to address housing affordability would only strengthen demand for these properties, Mr Heatherich said.

“The government change to stamp duty and first-home owner assistance is only going to increase demand throughout the middle suburbs,” Mr Heatherich said.