What does $3 million get you these days? A foot in the door in one of Victoria’s most prized neighbourhoods.

BY KIRSTEN CRAZE

DEMAND FOR LUXURY property soared in 2021 and it seems the desire to acquire a piece of Australia’s most coveted suburbs isn’t about to waver as we settle into a new normal.

Over the past 12 months, an unprecedented number of suburbs recorded a median house price of $3 million or more, as values increased across the country. According to Realestate.com.au data, by January’s end there were 115 suburbs with medians above $3 million (the actual figure, however, is likely to be even higher, as stock levels are so tight in prestige suburbs that those with less than 10 sales annually did not make the list). Throughout Australia, an incredible 32 suburbs now have medians above the $4 million mark, and 17 have medians of more than $5 million.

Ross Savas, managing director of Kay & Burton, says pent-up demand, both domestically and internationally, is being reflected in Australia’s most sought-after addresses.

“Things are going to change dramatically in leading suburbs – whether it’s in Toorak, South Yarra, Canterbury or Brighton – because we’re going to see an increase in people wanting to live in these locations. And with immigration returning, there will be a tidal wave of people moving to Australia, especially along the eastern seaboard. That’s where you’re going to find prices continuing to rise over the next few years.”

Savas adds that the country’s top-priced suburbs still have plenty of growth potential, despite Australia – and Melbourne, in particular – experiencing some of the world’s toughest pandemic-related restrictions. “The perception on the international stage is that Australia has handled Covid-19 incredibly well, and people want to come here because of that,” Savas says. “We’re 95% vaccinated, while other places are maybe 60% or 65% vaccinated. People want to come here for a multitude of reasons, health being just one of them. We’ve got an amazing lifestyle with great schools, shopping, restaurants and fantastic open spaces and beaches. So, from a global perspective, Australia is incredibly strong on many fronts.”

There are now nine Victorian suburbs with a median house price of $3 million or more. Those exclusive neighbourhoods are spread from the city to the Mornington Peninsula. Toorak remains Melbourne’s most expensive suburb, recording a 12-month median of $5.425 million in January. Others in the $3 million-plus club include Flinders, Portsea, Middle Park, Brighton, Canterbury, Deepene, East Melbourne and Merricks North. However demand, according to Savas, is priced far beyond the median.

“Everything from $10 million to $50 million is in very high demand,” says Savas. “When you reach this price bracket in Melbourne, you’ve got people who don’t really want to sell their grand family homes. In Melbourne, the high-end market is largely made up of family homes, so we don’t have the turnover other cities have, which obviously impacts the supply of these types of properties,” he says.

Alex Schiavo, a director at Kay & Burton who specialises in the Bayside area, agrees that supply has underpinned the strong price growth, especially in the city’s waterside suburbs. “Stock levels have been an issue. There has been a shortage of good-quality, top-end properties. Anything on the waterfront – or what we call the Golden Mile – is in high demand. Homes there are incredibly sought after, particularly anything within walking distance of Church Street Village and in the $10 million to $30 million price bracket,” says Schiavo.

With values rising, he says Brighton and surrounding Bayside suburbs might not keep their $3 million median for long. “About three or four years ago, Brighton’s median price was around $2.25 million to $2.5 million, but we’ve obviously had quite a bit of growth since then. It’s hard to know when it might jump from $3 million to

$4 million, because the market has somewhat stabilised. It comes down to supply, obviously, but if we continue to have the shortage we’ve got, clearly we’re going to see strong price growth as a result.”

After years of pandemic restrictions, buyers are placing a priority on lifestyle amenities, and Schiavo says the Bayside neighbourhoods have those in spades. “Working from home has created a shift in what buyers want. In years gone by, people might have felt Bayside suburbs meant a longer commute to the city, but now that most people are working from home, it’s much less of an issue. Now you’ve got people thinking about moving to Brighton who might not have thought about it before.”

While many market commentators have forecast that impending interest rate rises could put the brakes on Australia’s price boom, Schiavo says the luxury market is likely to sail through any RBA­induced changes. “The lower end will be affected, not the top end. We tend to see less borrowings for more expensive properties than we see for less expensive homes. The reality is, if you’ve got a significant multimillion dollar mortgage, you can clearly service it, whether you get a small [interest rate] increase or not. I’d say the $8 million-plus market will be less affected than anything underneath it.”

“In Melbourne, the high-end market is largely made up of family homes, so we don’t have the turnover other cities have, which obviously impacts supply”

Melburnians have long turned to the Mornington Peninsula when seeking space and tranquility, however that desire has skyrocketed during the pandemic. Local agent Tom Barr Smith, of Kay & Burton Flinders, says the peninsula property market had an unprecedented 2021. “There were some extraordinary prices achieved, but we are starting to see this stabilise,” he says. “We’re still at extraordinary levels, but growth is more consistent now. People can assume prices are going to continue to go up – the demand is still there – but supply is now the bigger issue underpinning values.”

Several suburbs across the peninsula have medians of $3 million and above. Flinders and Portsea recorded medians of $3.82 million and $3.535 million respectively, meaning $4 million suburbs could soon surface. Barr Smith says that while beach locations are much sought after, there are also plenty of tree-changers in the market. “Acreages on quiet roads are probably the properties in highest demand, and they’re what’s quickly pushing the median house price up to a higher level. The strongest market segment is properties between two and 10 acres [0.8 to four hectares], and that’s been the case for years.”

He adds that the finite supply of unique properties is likely to keep prices in Merricks North and nearby acreage suburbs on an upwards trajectory for some time. “It’s a very defined area with virtually no subdivision, and people like it that way. But potential vendors are constrained by the lack of supply. People think, ‘Well, the market is strong, perhaps we’ll make the most of it,’ but they can’t find anywhere to go, so they just don’t list,” he says. “Ultimately, I don’t think we’re going to continue to see the crazy prices of late, but I do think we’re stuck in a tightly held market.”