Almost everyone knows that the “bank of Mum and Dad” is shaking up Melbourne’s residential real estate market. But parents from the boomer generation aren’t simply advancing or loaning money willy-nilly to their adult children to help them into a home. To a large degree, parents are influencing the property choices their 20-something and 30-something kids are making.
Nelson Alexander Director Nicholas West says single-fronted Victorian and Edwardian cottages are still preferred by a lot of people aged 50-plus who may be investors or helping children get into a first home.
Cottages are also strongly favoured by investors as well as by owner-occupying couples and singles aged in their 20s and 30s.
Why? Because inner-city cottages offer advantages that units and apartments can’t match, including your own land and title, and the potential to extend.
“Now that rents are starting to lift, single-fronted houses are appealing to investors as well as to first-home buyers,” Mr West says.
“With people who are assisting their kids to buy, there is generally a preference for a single-fronted home as opposed to an apartment or a contemporary property. People want to own a bit of land and because of this, single-fronted cottages always have a broad appeal.”
Across inner Melbourne, there is currently a good supply on offer of period cottages in the $1.1 million to $1.5 million range – and well-researched buyers are taking advantage of a slight dip in prices in certain areas after 2020’s high-growth market.
“A lot of the media report on real estate data that is 90 days old,” Mr West notes. “The savvy buyers know this and they are out there now purchasing. They know that the market will come back.
“The single-fronted market is interesting. Quite a number of these properties have come onto the market recently. That is a sign of people upsizing and taking advantage of the more stable conditions in the market.”
He says investors and people assisting children to buy have both been more active in the cottage market in recent weeks, recognising the improved value proposition that these properties offer.
There are particular opportunities for buyers, who may be handy or have renovation experience, to snap up an unrenovated small house at a good price.
According to Mr West, before 2020 unrenovated houses in the inner-city almost always attracted a premium when they came up for sale. But that premium has evaporated in many cases due to today’s acute shortage of builders and tradies to carry out renovation work.
One of the big trends in the cottage market is that wider-than-normal single-fronters are attracting a steadily growing premium.
The price gap between the common single-fronter, which is 4.5 metres to 5.1 metres wide, and those that are 5.5 metres to 6.5 metres wide is increasing fast.
Wide cottages, especially Edwardians, have bigger foundations, which coupled with the extra width, makes major renovations and extensions a solid, value-adding proposition.
Another element in the equation for many buyers is that double-fronted houses in the inner suburbs are now fetching prices beyond the reach of the vast majority of home buyers. Little wonder that the people who can’t afford the double-fronted houses anymore are buying the wider-than-normal single-fronted terraces.
But fixed supply is only one of a number of reasons why compact period homes continue to sell strongly.
Mr West says streets with a good supply of period cottages occupy some of the best positions within 5 kilometres of the CBD, and a broad spectrum of buyers recognise this.
“People love the romance of the period cottage,” he says. “There is a greater preference for them over contemporary properties – and we’re seeing this right through the Nelson Alexander office network.”
He says one reason why owner-occupier vendors are listing more single-front homes for sale at the moment is a desire for more space. The Covid-era work-from-home phenomenon has fuelled demand for three- to four-bedroom homes on larger land than the typical single-fronter.
“There is a lot of availability of single-fronted houses now,” Mr West says.
It’s not surprising that in the inner-west and inner-east, prices for weatherboard cottages have edged up – to the point where in some areas there is now little difference in price between a brick and a weatherboard cottage.
Richard Reed, who heads Reed Property Insights and was previously a Professor of Property and Real Estate at Deakin University, says it’s a standard economic principle that the market will pay a premium for a good that is limited and not in production.
“The limited availability of single-fronted Victorian and Edwardian cottages fits into this category, especially considering that the trend with larger homes is toward a generic housing design and construction approach,” he says. “Therefore the long-term capital growth for this type of property is positive.”
For vendors who are selling a cottage, location works just as strongly as the scarcity factor as a lure for buyers.
Victorian and Edwardian houses were generally built in the pick of positions in inner Melbourne between 1870 and 1910. Position-focused buyers target this, and they will pay a hefty premium for a cottage in the right spot.
If you would like to discuss your property needs in greater detail, please contact any Nelson Alexander office.
