Ararat Property Watch Q1 2012

IN BRIEF

The median sale price for houses softened to close the September 2011 six month period at $167,500 culminated from a total of 62 transactions.

The unit market closed the six months to September 2011 with a new high median price of $257,000

Scope
This report analyses the current trends and performance of the Ararat Local Government Area (LGA) house and vacant land markets. It further highlights the areas characteristics and demographic trends to provide an understanding of the type of real estate product in demand by the local market.
Area Characteristics
While the central township of Ararat is located approximately 205 kilometres north-west of Melbourne, the Ararat LGA expands over an approximate 4,230 square kilometres in the south-west of Victoria. Like many of central Victorias older townships, Ararat settled in the early 1800s with the official discovery of gold in the area in 1857. Today however, the region is driven by a range of primary industries including wool, beef and the Grampians Wine region, while maintaining much of its charming character from years gone by.
Ararat LGA House Market
The median price closed the six months to September 2011 at $167,500 down from the peak of $179,500 achieved twelve months earlier. This is the second time in the last ten years that a significant price growth period has been followed by a downward adjustment. The median price grew at a historical high of 19.7% for the twelve months to September 2010, taking into account the lower median in 2011 the two year average median price stands at 5.7% per annum. The previous period of a peak and trough in 2008 was followed by a steady sustained period of growth. The ten year average median price growth stands at a strong 9.4% per annum. This equates to a house purchased for $100,000 in 2001 being valued at $245,500 in 2011.
Sales numbers are at ten year lows with only 62 sales recorded for the September 2011 six month period. This compares to a ten year average transaction level for a six month period of 108. The vast majority of sales were in the regional city of Ararat itself (54), with Catchcart (1), Lake Bolac (3), Pomonal (1), Wickliffe (1) and Willaura (2) making up the balance. The slowdown in transaction levels that has generally been seen across the Victorian market in 2011 is showing some signs of growth early in 2012.
The middle price brackets dominate the Ararat LGA house market, with sales between $100,000 and $299,999 representing 83% of all sales for the September 2011 six months. Sales under $100,000 have almost halved from 21% in the September 2009 six months to only 11% in September 2011. Sales over $300,000 are increasing their relatively small share of the market, up from only 2% in the September 2009 six months to be as high as 10% twelve months later. Sales over $400,000 are beginning to emerge with 2% of the market as at September 2011.
The seven sales below $100,000 were shared between Ararat and Willaura. The lowest price was seen in August 2011, when a house in Smith Street, Ararat sold for $60,000. The peak of the market was seen in July 2011 for a modern property on a block just over 1,100 square metres in Vanstan Street, Ararat.
Of the 62 sales to September 2011, 23 had previously been purchased in the last ten years. The average holding period for these 23 houses was 5.5 years, for an average annual capital growth of 9.1%, very much in line with the ten year annual median growth.
Ararat LGA Vacant Land Market
The trend of lower sales volumes that has been experienced in the last five years continued in the September 2011 six month period, with 21 sales being recorded. The five years to September 2006 saw an average of 38 transactions for a six month period, since then only once has a six month period reached that figure. The sales were well spread across the region with 9 different localities recording transactions.
The median price has been particularly volatile in recent years in no small part due to the lower sales volumes. The September 2011 six months saw the median close at $70,000 representing a 13% annual decrease. With this level of volatility a longer term view is more appropriate, and the ten year growth rate shows underlying strength, standing at 8.8%. The five year average of 4.9% indicates price growth has slowed in recent years.
One reason for the slower price growth can be seen in the increase in sales under $30,000, which have grown from 20% of the market at September 2009 to 29% at September 2011. For the September 2011 six months all of these sales occurred outside of Ararat itself, with Lake Bolac, Glenthompson and Willaura sharing these transactions. The $30,000 to $99,999 price bracket remains the single largest, however its share has decreased markedly from the September 2009 six months when it represented a dominant 73% of the market to now represent 43%.
Following several delays the Evans Park development has begun construction. The first stage of 34 lots should be available to the public in May/June of 2012 with the remaining 42 lots timing dependent on initial sales. Lot sizes will vary from higher density townhouse sized lots, to 800m_ house blocks.
Ararat LGA Unit Market
Sales volumes which have been gradually increasing over the last ten years, fell back to their fourth lowest level over this period when only six transactions were recorded for the six months to September 2011.
The September 2011 six month median closed at a new high at $257,000, however all short term movements should be viewed with reference to the rollercoaster pattern seen in the median price, due largely to the very low transaction levels.
Only one sale in the last ten years has occurred outside of Ararat in the unit market, this for a townhouse in Pomonal sold in January 2011.
Prices for sales in the September 2011 six months ranged from a low of $177,500 to $337,000.