The Baby Boomer generation revs up Melbourne’s property market
Everybody knows that Baby Boomers have tremendous spending power compared to other demographic groups. But the true impact that cashed-up members of the Boomer generation are exercising over Melbourne’s residential real estate market is more multi-layered and nuanced than many people realise.
Nelson Alexander sales executives have seen a raft of buyers in their 50s and 60s drive up prices for top end properties. In a number of cases, the reserve prices on these properties have been exceeded by $900,000 or more – simply because of aspirational Baby Boomers’ demand for convenient living spaces and their deep pockets.
But more mature buyers also exercise a strong influence on the markets for entry-level and mid-priced residential properties.
Some are helping their children to get a foothold on the property ladder. In other cases, Baby Boomers are both active buyers of investment properties and sellers of these assets, if the price is right.
Nelson Alexander Sales Director Arch Staver says Baby Boomers who are still in the workforce are very active buyers of tightly-held residential properties in the inner-city and northern suburbs.
“It’s where the money is,” he says.
“More mature buyers were the successful purchasers of three super-A-grade properties that Nelson Alexander recently offered in Fitzroy, Carlton and Parkville. Each house sold under strong competition, largely from buyers in the Baby Boomer demographic, and produced an exceptional profit for each vendor.”
There was heavyweight demand for a smartly renovated balcony terrace at 179 Drummond Street, Carlton, when it went under the hammer in November.
The four-bedroom/four-bathroom house had competition from four parties, who pushed the property $1 million above reserve.
The home is in an historic 1865-built row of wide terraces and incorporates a rear four-car basement garage. It was quoted by Nelson Alexander at $4 million to $4.4 million but sold to a mature buyer for $5.46 million against a $4.5 million reserve.
Another Baby Boomer won the keys to a superior two-level warehouse apartment in Fitzroy’s heritage MacRobertson building by placing a strong knockout bid before the property’s scheduled auction on December 2.
The 300-square-metre warehouse conversion, at 46/183 Kerr Street, had been quoted at $2.8 million to $3 million but the robust buyer interest saw the quote lifted to $3 million to $3.3 million during the sales campaign.
Mr Staver says the buyer agreed to pay $3.575 million, a record price for a Melbourne warehouse apartment.
The highest price previously in the well-located and popular MacRobertson development had been $2.25 million.
Elsewhere, a freestanding renovated Victorian home at 108 Park Drive, Parkville, was quoted by Nelson Alexander at $3.6 million to $3.85 million before going to auction on October 21. But its auction produced a tearaway result, with the three-bedroom property selling under the hammer to a mature buyer for $5.6 million.
The property drew offers from four bidders and was declared on the market by Mr Staver at $3.82 million. But from $4.6 million onwards, two mature bidders pushed the Park Drive home a further $1 million up to the final selling price of $5.6 million.
All of these sales involved properties that had undergone a classic and intelligent renovation and which were in tightly-held spots.
“If you have got one those properties you just have to get it listed and marketed and they will come,” Mr Staver says.
He adds that some Baby Boomers are helping their adult children to buy homes.
“Parents are trying to help wherever they can,” he says.
“The banks are reluctant to loan 90 per cent or 95 per cent of a property’s value these days. They will happily lend 80 per cent at a very competitive rate and that is where a family might step in and say to a young adult or a young couple, ‘For your 10 per cent I will contribute 10 per cent as well.’”
Nelson Alexander has also seen some older investors decide to sell long-held investment apartments. In some cases these sellers are responding to the strong recent demand from first-home buyers to buy sub-$750,000 units.
Under incentives introduced by the Victorian government in July 2017, first-home buyers now pay no stamp duty on properties below $600,000 and the payable stamp duty is reduced on properties priced below $750,000.
One of the key demographic trends with middle and late cohort Baby Boomers (born between 1954 and 1964) is that many want to stay closer to home and be close to entertainment and restaurant precincts.
This has made “walkability” a driving factor in the property choices made by mature buyers. Many are prepared to pay a premium to secure a property that is within 200 or 300 metres of such locations as Carlton North’s Rathdowne Street, Fitzroy’s Brunswick Street and Northcote’s High Street.
Boomers want more convenience and are prepared to pay for it.
To find out more about selling or buying property in Melbourne, reach out to the team at Nelson Alexander today or drop into one of our offices for a chat.