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March 2008 Newsletter


As predicted the reported clearance rate fell below 70% for the second week in a row and don’t hold your breath for any relevant data next week as it is Easter. Has the property market taken a nose dive, is it following the Dow Jones index. NO!

There were over 1400 scheduled auctions for last weekend. A new record for Melbourne. We know that supply and demand are the quintessential ingredients driving prices and where there is an abnormal supply there needs to be an abnormal demand to maintain the “Status Quo”. We had a normal demand for Saturday. Many good properties sold well and many not so good, didn’t sell at all. This is normal behaviour for the Melbourne property market. It was simply intensified because so many properties were on the market on one day. This is simply a matter of timing for Easter and Labour day making it the only main selling day for March.

Is the market the same as it was four weeks ago? NO! There are enough media outlets breathing forth gloom and doom. The Reserve Bank may lift interest rates again but they may not. What would happen if they dropped the rates? Everyone from the Prime Minister to David Koch on Sunrise has said the Reserve Bank has gone too far. I am not a world renowned economist. I don’t know if they have or they haven’t. But I do know if they level out the interest rate or, actually drop the rate, then the property market will take off, rapidly mimicking the growth of last year.

Buyers have a small window of opportunity whilst vendors have become a little “uncomfortable”. There may be some good properties to be had over the next few months and how long that continues for will depend on external pressures on our economy and how the media reports it.

Ian James

From now on Melbourne will have a two-tier property market

Supply and demand are the quintessential factors determining value of property in today’s market. Our illustrious leader, Premier Brumby, has opened up massive tracts of land that developers can now be rezoned from Rural to Residential. 90,000 new blocks of land are being opened up. What will that do to struggling home owners that have beaten the odds and actually bought their dream homes in Caroline Springs, Werribee, Roxburgh Park, Narre Warren or Epping last year?

The median house price in Metropolitan Melbourne went up 23.4% between the December median 2006 and December median 2007 according to the statistics released by the REIV. Most of the suburbs median house our company bought in last year has shown rises in the 20%– 30% range. Some suburb medians went up 40% plus. It was not difficult to buy good property in good suburbs whilst paying the “right” price. Areas such as Seaford, Hawthorn, Ringwood East, Preston, Thornbury, Malvern, Brighton, Elwood, Caulfield, Sunshine, Williamstown, St Albans, Yarraville, Moonee Ponds, Essendon, Kew and Camberwell are just some of the suburbs we bought in last year.

In the table below we can see the difference between two properties both costing $400,000, one in a suburb where the average growth rate is 12% the other 5%. Both cost exactly the same to buy, own and sell but one is going to leave you in a far different financial situation than the other.


1 Year

2 Years

3 Years

4 Years

5 Years

10 Years

15 Years

20 Years

12% pa growth









5% pa growth









So spare a thought for those who bought 12 months ago in Caroline Springs. There was an increase of median price of just 1.3%. This is not a misprint. The median house price of a property in Caroline Springs in December 2006 was $306,000 and last December 2007 quarter it was $310,000. Even assuming this was an abnormal year lets look at the median house price for 2003 - $276,250. This is equivalent over 4 years to an average growth rate of 2.92% The average median increase throughout new estate areas last year was about 5%

I think living in a new estate is fantastic for a family with children. The demographic is very good. My two children grew up in Pakenham and Hallam and enjoyed playing cricket out on the street, having court parties and barbeques every weekend. There was no shortage of kids to play with. This can be vastly different as you get closer to Melbourne. But!! Owning a place in a new estate is fraught with danger. If you buy something average and pay an average price and sell for an average price then you should actually rent and put your repayments in the bank. Although you will not own your house you will come out marginally ahead over the long term. If interest rates go up then you will end up being a long way ahead. You can still buy in a new estate but you must buy well.

Alternatively you could rent in a new estate and buy a good investment property. This would put you substantially ahead of the game. We have made a few assumptions here but in round terms after 5 years buying and living in your house comes in pretty close to even but the rental property in a good area puts you $40,000 up and after 20 years nearly $1.5M better off.


1 Year

2 Years

3 Years

4 Years

5 Years

10 Years

15 Years

20 Years

Bank Money and Rent









Live and own home
in new estate









Buy investment property
and rent in new estate









The assumptions we have made are:

  • Deposit $30,000, Monthly Repayments 2,800
  • Purchase price for Owner occupied house $400,000
  • Weekly Rent payable on similar house to Owner occupier $300
  • Purchased price for Investment property $350,000
  • Weekly rental return expected on investment property $260
  • First Home Owners Grant $10,000
  • Capital Growth Rate of Owner Occupied 5.00%
  • Capital Growth Rate of Investment 12.00%
  • Return on cash at bank 7.00%
  • Interest Rate 9.00%
  • Real Estate Agents fees: 2% of sale price of property.
  • All these assumptions are incredibly conservative; I could easily have made a much greater point with harsher figures.

This is not all gloom and doom for those who are struggling to buy their first home and want to live in it. We know that some 380,000 new homes must be built in the next ten years or so to house our new 1,000,000 people that are expected to move to Melbourne 10 years earlier than planned. Intelligent purchases in the new estate areas or close to them will increase your chances of better capital growth. Focus on transport, shops infrastructure, walking distance to schools and many more items can mean the difference between your property appreciating at a rate comparable to better suburbs or having the average 5% rise.

If you are considering a purchasing a new home or an existing home in a new estate please give us a call. We would be happy to have a no obligation chat at any time.

Ian James


St Patrick's Day Quote

An Irish quote from Oscar Wilde: "What is a cynic? A man who knows the price of everything and the value of nothing."

The answer to the question in the March newsletter is:
          Question: If it wasn't Salt, what was the "gold" in the 18th Century Europe?????
          Answer: Porcelain.

Question: Lachanophobia is the fear of ??????

The answer to this question will be published in the next newsletter.

Sam James


In our regular spotlight section we examine a selection of Melbourne suburbs, highlighting what’s happening in these areas right now.


  • Population: 33,511 (2006)
  • Established: 1887
  • Postcode: 3021
  • Area: 13 km² (5.0sq mi)
  • Location: 18 km (11 mi) from Melbourne
  • LGA: City of Brimbank
  • State District: Kororoit, Derrimut
  • Federal Division: Gorton, Maribyrnong

The City of Brimbank is the second largest municipality in Melbourne with an area of 123 square kilometres and more than 170,000 residents. Located just 20 kilometres from the CBD, Brimbank is a dynamic and rapidly growing city encompassing 25 new and established suburbs including Sunshine, St Albans, Keilor and Sydenham.

Median House Price
St Albans $240,000 $263,500 $298,000 $237,750 $210,000 10.8% 25.5%
Source: REIV

St Albans was first established as a township in 1887 and originally subdivided by the Metropolitan Land and Development Co. Pty. Ltd. who had acquired nearly 1,000 acres in the hope of a quick financial gain during that period's land boom. The town was promoted as an attractive location for professionals who had easy rail access to central Melbourne and adjoining suburbs with a recently constructed railway station platform attracting potential homeowners to industry in nearby locations.

Source: Wikipedia


  • Population: 36,420 (2006)
  • Postcode: 3806
  • Area: 23.6 km² (9.1sq mi)
  • Location: 45 km (28 mi) from Melbourne
  • LGA: City of Casey
  • State District: Gembrook, Narre Warren North
  • Federal Division: La Trobe

Berwick was proclaimed a Town in 1861, and proclaimed a Shire in 1868. In 1973 the Shire was subdivided, forming the City of Berwick and the Shire of Pakenham. In 1994 most of the City was amalgamated with most of Cranbourne Shire to form the City of Casey.

Median House Price
Berwick $304,000 $349,000 $428,500 $345,850 $327,500 0.9% 6.6%
Source: REIV

The Shire of Berwick underwent a number of changes due to the pressures of increasing development in the area. In 1970, the Berwick Shire Severance movement was formed to establish a new municipality in the urban section of the Shire. The City of Berwick, being constituted from the Shire's Berwick and Doveton ridings, was proclaimed in 1973.

In 1994, local government in Victoria was the focus of widespread reform with the amalgamation of 210 municipalities into 78. The City of Berwick was merged with the majority of the City of Cranbourne and a small part of the City of Knox to become the City of Casey. The City of Casey has been identified as one of Australia's key growth areas and will play a key role in Victoria's development.

Source: Wikipedia


Fishing Westernport

Another month of fishing has flown past. Whiting, Snapper and the Elephant fish have been in the Port. Nothing stirs up the sleepy hollow Corinella like the Elephant fish run.

Elephant fish are very easy to catch, great fun on light line and can be handled very easily; watch out for the spike on top, it will spear through you very easily and hurt like hell. Grab the fish behind the spike and there are no problems. Make sure you bleed it quickly, similar to sharks; There are no bones and the flavour is similar to that of Gummy Shark.

Using either a paternoster or sliding rig similar to that used to target Gummies is easy and allows you to change the sinker as the tide changes. Be aware they move in schools like locusts across the bottom of the Port. If you have six rods out and the school comes through you are going to have a big mess. The most I have seen on my boat was five rods all go off at the same time. There were only three of us on board and my brother in law was asleep. We woke him up fast, but still had the worlds worst tangle. We only got 3 out of 5 in the boat.

Good luck with your fishing.

Ian James

Capital Growth Verses Rental Return

When it comes to investing in property there are two general schools of thought: Good capital growth verses high rental return. It would be great if you could buy an investment property that provides both, however if you buy a well located property in Melbourne this just isn’t how it works.

It is easy to see why investors would seek a high rental yield (The rental yield is the income earned over a year, and represented by a percentage of the value of a property). A property with good rental yield will help an investor manage their mortgage repayments, and in some cases provide positive cash flow. However this generally only happens in regional areas or secondary locations where capital growth is typically very poor. In contrast, well located property in Melbourne where capital growth is much stronger - rental income is generally much poorer. (See some examples I have used below).

It is also worth noting that positive rental income is taxed as income, and will therefore affect net earnings. So a rental profit of $1,500 a year would only give you approximately $1000 after tax.

You don’t need to spend a fortune on real estate to find a well located property. Recently we have seen excellent growth rates from suburbs such as Seaford and Croydon where the average house price is between $300,000 and $500,000.

Let’s look at two examples. Say you spent $400,000 on real estate in an area with a low capital growth rate of around 5% per year (Some examples of areas in Melbourne with low capital growth rates are Caroline Springs, Pakenham, Mill Park etc). However you receive a positive rental yield of around 10% per annum.

After a period of five years your investment would be worth approximately half a million dollars ($510,512), and the rental return will have added up to $51,051. After ten years it would be worth well over $600,000 ($651,557), and the rental return would be $65,155 approx

Now let’s look at another example. You spend the same amount of money in an area that returns at least 10% capital growth per year, but only 5% rental income. (Some examples of good capital growth suburbs in Melbourne are Highett, Yarraville, Footscray, Sunshine etc)

After a period of five years the property would be worth over $600,000 ($644,204 - over $100,000 more than our first example), and the rental income will have added to $32,210. After ten years the property will have increased in value to over one million dollars ($1,037,497), with a cumulative rental return of approximately $51,857.

Please note these figures are only a guide. It is impossible to assume that rent will rise by 5% or 10% every year, but taken as an example, you can see the point I am trying to make. The first property has only increased its value by $251,557. However the second property located in a suburb with good capital growth has increased by $637,497. And the longer you hold onto the home, the greater the division comes.

The trick is to balance the two equations in line with your personal budget. Buying for long term capital growth may require you to budget carefully for a few years, so it is important to seek advice and make sure you can manage the mortgage repayments.

My advice is to research the market in your chosen area. Finding well located real estate, and investigating a suburb can be a time consuming task – especially if you are not familiar with the area. However the results can also be extremely rewarding.

Catherine Cashmore


Step-by-step hot cross buns

Hot cross buns. One a penny buns. One a penny, two a penny, hot cross buns. Everybody loves hot cross buns. Makes 16.

  • 1 1/2 cups (375ml) warm milk
  • 2 tsp (7g/1 sachet) dried yeast
  • 1/4 cup (55g) caster sugar
  • 60g butter, melted
  • 1 egg, lightly whisked
  • 4 1/2 cups (675g) plain 00 flour
  • 1 tsp salt
  • 3 tsp mixed spice
  • 1 cup (170g) sultanas
  • 1/4 cup (45g) currants
  • 1/4 cup (50g) mixed peel
  • 1/3 cup (80ml) cold water
  • 1/2 cup (170g) apricot jam

Combine the milk, yeast and 1 tbs of sugar in a small bowl. Set aside in a warm, draught-free place for 10 minutes or until frothy.

Combine the milk mixture, butter and egg in a jug and whisk to combine. Combine 4 cups (600g) of flour, salt, mixed spice and remaining sugar in a bowl. Add the sultanas, currants and mixed peel and stir to combine. Make a well in the centre. Pour in the milk mixture and use a wooden spoon to stir until just combined, then use your hands to bring the dough together.

Turn onto a lightly floured surface and knead for 10-15 minutes or until smooth and elastic. Place the dough in a bowl and cover with a damp tea towel and place in a warm, draught-free place for 1 hour or until dough doubles in size.

Preheat oven to 200°C. Grease a 23cm square cake pan. Punch the dough down with your fist. Turn dough onto a lightly floured surface and knead for 2-3 minutes or until dough is smooth and elastic. Divide dough into 16 even pieces and shape each portion into a ball. Arrange dough portions, side by side, in the prepared pan. Set aside in a warm, draught-free place for 30 minutes or until dough has risen 2cm.

Meanwhile, mix the remaining flour and water together in a small bowl until a smooth paste forms. Place in a small plastic bag and snip off the end. Pipe a continuous line down the centre of each row of buns, lengthways and widthways, to form crosses. Bake in preheated oven for 10 minutes. Reduce heat to 180°C and bake for a further 20 minutes or until golden and cooked through (buns are ready when they sound hollow when tapped on the base).

Turn onto a wire rack. Place the jam in a small saucepan over high heat. Cook, stirring, for 2 minutes or until jam melts. Strain through a fine sieve. Brush hot jam over the buns. Serve warm with butter, or toasted.


Kind regards from the team at JPP.

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