The local government area (LGA) of Mornington Peninsula Shire juts out between Port Philip Bay and Western Port Bay to the south of Melbourne. The environment ranges from the commuter towns of Mornington and Mount Eliza, to country locations such as Red Hill and the vacation spots of Dromana and Tootgarook. This is a desirable location filled with high-value homes.
The property market in Melbourne hasn’t been doing very well recently and the gravitational pull of the state’s capital has dragged nearby property markets down, too. Only LGAs away from Melbourne, such as Greater Geelong City, Surf Coast Shire, Bass Coast Shire, and South Gippsland Shire have managed to experience property price rises.
The Melbourne urban area has a similar profile to that of Sydney. The local property market overheated during the economic boom years and now those prices are correcting. Being a desirable location within the sphere of Melbourne, Mornington Peninsula Shire follows the same pattern.
House prices in Mornington Peninsula Shire fell by 1.71 percent in the last quarter. Price drops become more pronounced in LGAs that are progressively closer to the centre of Melbourne. Frankston City, just to the north of Mornington Peninsula Shire saw house prices fall by 2.2 percent. To the north of Frankston City, Kingston City and Greater Dandenong City saw house prices fall by 4.2 percent and 3.94 percent respectively. These price changes were achieved through respectable sales volumes: 200 houses in Mornington Peninsula Shire, 136 house sales in Frankston City, 126 sales in Kingston City and 90 sales in Greater Dandenong City.
The market for units in Mornington Peninsula Shire has much less volume than the market for houses. For example, the last quarter saw sales of just 15 units in the last quarter compared to the sale of 200 houses. However, the unit market is faring much better than the market for houses, seeing a price increase of 3 percent in the last quarter.
Frankston City and Casey City to the north have very similar profiles with sales of 24 units and a price increase of 0.69 percent in Frankston City and a price increase of 3.22 percent on the sale of 19 units in Casey City. Kingston City and Greater Dandenong City also avoided price falls, seeing unit prices rise by 0.69 percent and 2.21 percent respectively.
Demand for houses and units in Mornington Peninsula Shire both for rent and to buy is at the very top of the national demand spectrum. This shows that property in the LGA is going to be a good bet over the long run because there will always be market activity here.
Prices in the rental sector closely reflect price activity in the sales sector: rent levels have fallen slightly for houses, but have risen strongly for units. Yields are not doing too well, but they have fallen only slightly in the units sector.
The demand profile for property sales in Mornington Peninsula Shire shows that 3-bedroomed houses dominate the market. The market for units is smaller than that for houses in every property size category. Four-bedroomed houses and five bedroomed houses are the next biggest sellers in the LGA. Even in the two-bedroomed and one-bedroomed categories, house sales outstrip the sales of units.
The forecast graph below also displays historical records for both sales and rentals of houses in the Mornington Peninsula Shire LGA. Sales were always higher than rental volumes in every quarter until Q4 2018 when the rising volume of completed rental contracts per quarter overtook the number of sales. Rental volumes have been on a constantly rising trend, reaching a peak of 710 contracts in the last quarter. House sales volumes peaked in Q4 2017 at 960 sales and have been in decline ever since. The sales volume of 200 in the last quarter represents a significant drop since 2017.
Both house sales prices and rent levels have seen a steadily increasing trend. However, the average house sales price peaked in Q1 to Q3 2018 at A$970,000 and have been falling gently since down to $950,000 in the last two quarters. House rent levels peaked at A$480 in Q1 2018 and have retreated to A$460 in the last quarter.
HtAG expects house prices to continue to fall down to an average of A$900,000 by Q3 2021. Sales volumes should rise steadily, but they will remain lower than rental volumes per quarter, which HtAG expects will by slightly lower by Q3 2021. Rental levels will fall slightly over the next two years to an average price of A$450.
HtAG’s bedroom-level forecasts are currently using a beta model source, so expect these forecasts to be revised once the model is fine-tuned by our data science team.
Sales prices spurted from 2014, and then flattened, losing the price rise momentum in 2017. This phenomenon is clear in the price change graph below. Price changes have turned negative in 2019. HtAG estimates see price falls up to the end of 2021.
The heatmap of house price changes of zones within the LGA is very illuminating. Very few districts actually saw price falls in the last quarter even though the LGA in general saw a price fall. Red Hill saw a small price drop of 0.88 percent. However, that was over only two sales. Cape Schanck also had only two sales in the quarter and saw the average sales price fall by 3.18 percent. Portsea had eight sales and a price drop of 5.13 percent. Tyabb, with four sales, saw a price fall of 2.52 percent. In all of these cases, the low sales turnover means that price changes shouldn’t be used as a guide to future movements.
Mornington, Mount Eliza, and Mount Martha had much more significant sales levels: and 30, 19, and 25, respectively. Price changes over these volumes offer much better guidance. Mornington experienced a price fall of 1.89 percent, but Mount Eliza, immediately to the north had a substantial price rise of 10.45 percent. Mount Martha saw a price rise of 5.01 percent. So, the overall price fall figure of 1.71 percent for the LGA gets a lot more interesting at zone level.
The strongest prices rises were over on the West Port Bay side of the peninsula. Bittern saw a rise of 13.25 percent and neighbouring Crib Point saw the average sales price increase by 11.66 percent. However, these zones had low sales turnover at four house sales in Bittern and five sales in Crib Point.
The scatter plot below shows where all of the sales activity lies. The Port Philip Bay coastline has a much higher sales activity than the rest of the LGA.
In Mornington Peninsula Shire there is less demand for units than houses in both the rental and the sales sectors. Units have always been more popular in the rental market than for sale. The superior volume in the rental market has become more pronounced in the past year. As with the market for houses, rental volumes have risen and sales volumes have fallen in the units market.
Unit sales hit their highest level in Q4 2017 with 120 sales. In the last quarter, only 15 sales occurred. During the same period, unit rentals rose from 200 in Q4 2017 to 270 in the last quarter. Clearly, there is much more interest in units for rent than units for sale in the Mornington Peninsula Shire LGA.
HtAG expects sales volumes of units to recover, but not back up to their peak levels. By Q3 2021, sales volumes should be at 51 units. HtAG expect this improved interest in units will lead to price rises over the next two years. Rental levels should rise as well. However, volumes will fall dramatically in the rental sector.
The market cycle graph for units is very interesting. The sales market has never seen a price drop and, in fact, annual price increases reached very high levels at the peak of 9.08 percent in 2017. Although price increases were not as dramatic in 2018 and 2019, prices did increase nonetheless.
The market cycle graph for Mornington Peninsula Shire is almost unique among all the LGAs in Australia because it shows the unit sales market has never experienced a price fall. HtAG predicts that prices will continue to rise and at an increased rate over the next two years.
Very few zones within the LGA experienced unit sales in the last quarter. These are represented by coloured areas in the heatmap shown below. Even in those districts that saw sales activity, the volume of unit sales was very low. Although there are areas coloured red, there were no price falls recorded in the LGA during the last quarter. In this map, red signifies a price increase of up to 2 percent.
Low sales volumes make it difficult to use sales price figures as guidance. Mornington experience the highest sales volume with just seven units sold. The area saw an increase in the average price of units of only 0.13 percent. The highest price increase occurred in Safety Beach, but with just two unit sales.
Overall, the prospects for property investors in the unit market in Mornington Peninsula Shire offers a much stronger guarantee of price rises than the sales market for houses. The only problem with the unit market is that volumes are very low.
The scatter plot below shows that most of the sales activity for units in the last quarter occurred in coastal areas on the peninsula.
Although prices are expected to rise in the unit rental sector over the next two years, rental volumes will fall. A shortage of demand might make seasoned property investors a little cautious of the unit rental market in Mornington Peninsula Shire. However, the sales market for units has almost a guaranteed price rise foreseen in the market.
The market for houses doesn’t carry the same prospects for price rises. In fact, it is certain that house sales prices will fall and so will the rent values of houses in the LGA. Therefore, over the next two years, property investors would be advised to focus on buying and selling units in Mornington Peninsula Shire.