House prices in my neighbourhood

(Is there anything more dull than people talking about house prices?)

Age (last Saturday, I think — can’t find it online) reported on the latest annual rise in median house prices around Melbourne — up 11.7% overall.

Of the suburbs rising, many are those close to the city and/or with good access to transport and facilities. In the outer suburbs, some prices have gone up a bit, some have dropped, but median prices in some areas are still affordable. (See my post on why some suburbs are expensive, some affordable.)

It’s just over two years since I bought my place in Bentleigh. According to the figures, prices in the suburb have gone up a massive 34.6% in the past year. Madness!

It’s not that I want to gloat or anything — it’s really more of a relief for when I glance at my bank statements and note the dizzying amount of money being poured out in interest on the mortgage (HOW much in the past year?!?) At least by jumping in when and where I did, I’ve gained on the market.

I love living here, but the suburb is getting too expensive. From the Age a couple of weeks ago:

He [Nick Renna from Hocking Stuart] said Bentleigh buyers who had been “priced out of houses” were now compromising, rather than searching further out. A house on a subdivided block at 1/10 Pleasance Street sold for $471,000 and a single-storey townhouse at 1/8 Laurel Street, Bentleigh East, sold for $630,000, way above the $540,000 reserve.

So if you’re still looking for a house to buy, and considering Bentleigh… well, I love the location, the lifestyle is great, everything’s so convenient… but geez, it’s getting way too overpriced!

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6 Replies to “House prices in my neighbourhood”

  1. Daniel,
    you deserve to gloat – you did the sensible thing.
    yeah, funny that people want to live where there are existing services! And given that petrol could be $2 a litre in the medium term, people are paying a premium for access to good public transport. If only governments of 10-30 years ago planned beyond the next election, we could NOW have additional railway and tram lines … people would be happy to live further out.
    PS It’s dangerous quoting real estate agents!

  2. Commonsense should tell us that houses nearer transport should be more sought after than those that aren’t, so the former should be dearer.

    But is this really the case?

    And we need to untangle whether it’s mostly due to proximity to the CBD or PT (noting that the two are not independent since inner suburbs on average have better PT than outer areas).

    Two tests can be done to see which is more decisive.

    Suburbs such as Templestowe and Rowville ought to be amongst the cheapest if PT was a decisive factor in land values. But at least for the sorts of people who buy houses in those areas it isn’t (though their offspring and older relatives may disagree). A model that predicts house prices based purely on proximity to the CBD would be more accurate in this case than one based on proximity to fixed rail PT.

    Next take an outer suburb like Werribee, Frankston, Broadmeadows or Dandenong. For the latter three the cheapest areas are just beyond walking distance of a railway station and main street (Frankston North, Dallas & Doveton all have walking times of 30 min or more).

    If we go into the parts nearer to the station for those last three suburbs house prices rise. However given that the abovementioned suburbs are the cheapest in Melbourne the rise is quite modest (maybe 20%). And much of it could be related to other factors, such as privately built vs commission homes. So houses very near the stations/main streets in outer suburbs are very affordable.

    Since their price has more in common with the houses in ex-commission bus only suburbs than the expensive inner suburbs, proximity to the CBD is obviously a bigger driver of prices than the presence of PT infrastructure, even i if it’s heavy rail.

    But the picture is actually a bit more complicated. Because if we go beyond the commission estates into newer areas prices rise. These areas have got less access to transport than any of the areas surveyed yet their price (especially per square metre of land) is dearer. The main difference is that houses are newer and larger (typically twice the size).

    Claims of housing crises and petrol prices notwithstanding, people do seem to value large newer house over an older smaller home nearer the station, with decisive evidence being only limited gentrification of old commission areas. And where it does happen the pace seems quicker in suburbs with almost no local services but nearer the CBD (eg Laverton) rather than suburbs with good local services but further from the CBD (Werribee).

    Although pundits have told us for at least 30 years that houses near public transport appreciate faster than those away from it, the evidence is sketchy. It is easier to substantiate the view that inner suburbs have grown faster than outer suburbs (though even here there are doubters). And if two outer suburbs (or parts of them) are compared – one with rail and one without – the highest value houses in the area are not necessarily found near where the better transport is. About the only thing that can be said is that transport infrastructure does offer a convenience that attracts a modest price premium. This makes it unlikely that the very lowest value part of the suburb will in the prime pedshed (10 min walk) of the station.

  3. We’ve been in our house 18 yrs ( our 2nd home)and until recently prices in Perth have been amazingly good. when we moved to our suburb ( Joondalup)there were no facilities at all but you expect that for cheap land. No trains to the city, crap bus services no other facilities etc Now there are heaps of wonderful things to enjoy. But prices here in Perth in the last year or so have rocketed to match the ES. The concept of being a new home buyer is absolutely frightening. We are currently considering selling up and have considered the alternatives including buying locally and realised without major lifestyle changes we couldn’t even afford to re-buy in our own suburb.
    We are now hoping I get a transfer to the country where we can buy without major work issues and still have a good lifestyle. Fingers crossed but the odds are not at 50%.

  4. I’ve recently moved into a new estate rather than buy an older existing home close to public transport and I can tell you why, land price.

    For the same size block, we’d have paid more than triple to be closer to PT or the city.

    But there are other positives, upgraded telecommunications exchanges, better public spaces and parks, underground power and a structural guarantee on our house.

    Affordability is relative. Our household income is comfortable, we have little debt outside the mortgage and no dependents. However I know many people who complain they can’t afford to buy at all, but they are simply not willing to live further out from the city.

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