Melbourne land boom delivers big gains for short-term investors
Astute investors have taken advantage of boom-like conditions in Melbourne’s commercial and residential property sectors, flipping development sites they have held for only a short time.
In Franklin Street, at the top of the Melbourne CBD, an offshore builder has just sold a car rental showroom to a student accommodation provider for $56 million, after buying it as a permit-ready development opportunity for $36.6 million in late 2015.
South of town in Port Melbourne, a low-rise office complex in a part of Fishermans Bend recently master-planned to become a major mixed-use village, has sold to residential builders for $27.5 million.
The site at 18-22 Salmon Street, Port Melbourne, was sold to residential builders. Photo: Supplied
The vendors bought 18-22 Salmon Street as a passive investment in 2013 for $12.1 million. Agents speculate this site would have sold for in excess of $30 million were it offered with residential redevelopment permits (the recent government rezoning allows for the site to be replaced with buildings of up to 18 storeys).
A variety of factors are said to be driving buyer demand, amongst them a shortage of stock being available for purchase. Low interest rates – both in Australia and abroad – also means more investors can fund the purchase (and often, the redevelopment) of sites.
Melbourne’s continuing and rapidly rising population, which has caused a boom in residential property values and rents particularly last year, is also a developer driver, according to Vinci Carbone director Frank Vinci.
In recent years metropolitan Melbourne’s population has been increasing by some 100,000 per year on a net basis. The affordability crisis that this has created has resulted in expansions to the urban growth boundary, investment in road and rail infrastructure and a greater acceptance of apartment living, even in the suburbs.
The city’s median house value has also been soaring. It is now near $800,000, up from $719,000 a year ago. In 2012 the average price of Melbourne house was less than $530,000.
Melbourne’s median unit price is now $459,181, up 2.4 per cent for the December quarter, according to Domain Group data. The medium and high-density apartment market serves a growing pool of suitors including empty nesters, first-home owners and cashed-up investors, particularly from China.
But the recent balloon in local property values is not limited to residential development sites.
The property in Kew East, sold recently for $4.1 million. Photo: Supplied
In Kew East the local buyer who in October 2015 paid millionaire Forever New founders Dipendra and Amada Goenka $3.2 million for a low-rise office have just flipped it for $4.1 million. Colliers International agents Peter Bremner, who marketed 714-716 High Street with colleague Hamish Burgess, said the property is zoned Commercial 2, which prohibits residential use.
He said a combination of low interest rates, a lack of property supply – and a surge in the number of prospective owner-occupiers joining the market recently (particularly for stock in blue-ribbon suburbs such as Kew East) – are amongst the reasons for the $1 million value increase.
Another investor, who land banked a prime Moonee Ponds holding, may agree, after selling a historic double-storey shop at the edge of the Puckle Street shopping strip before Christmas for $3 million. The vendor bought 21-23 Norwood Crescent a year earlier for $2.5 million. Savills Julian Heatherich was the marketing agent.
