If you rank Melbourne’s suburbs simply on the median house price, Toorak comes up year after year as number one. It was no different in 2013/14, with its median price of $2,885,000 the highest in Metropolitan Melbourne.
But is it really the most expensive? If you take just the land component of house sales into consideration in Toorak, at a median of 629 square metres (larger than the Melbourne median of 620 square metres), you’re paying just $4,587 for each square metre of land. On this basis Toorak is comparatively cheap at around half of the highest ranked suburb based on this measure. East Melbourne (which by the way is the second most expensive based on median house price alone) is by far the most expensive suburb in Melbourne ($9,414).
In fact 19 suburbs are ranked more expensive than Toorak on this scale. Albert Park and Middle Park move up the ranking from 13th and 6th place respectively based on price alone to 2nd and 3rd place when taking the smaller land sizes in these suburbs into account. In fact, it is the suburbs in prized locations close to the CBD, but with the smallest land size, that factor significantly in the $ per square metre ranking. Carlton, Cremorne, Abbotsford, Fitzroy, Port, South and North Melbourne, Windsor and Collingwood, all with median land sizes less than 200 square metres are more expensive than Toorak. With all these suburbs located within a tightly knit sphere of the CBD it highlights the premium that is placed on location.
Naturally, improving on a block of land by adding a house adds value to that land. Each square metre of land’s value is improved by having a house on it (unless the dwelling is obsolete). The larger house that a larger block size affords adds to the value of the property where lot sizes are larger, which has also been a contributor to the high median house price in Toorak.
Median house prices in leafy Canterbury, Brighton and Kew come in as 4th, 5th and 7th when ranked purely on median price, but just like Toorak generally have larger median land sizes (which are all over 640 square metres). When you rank them on a per square metre basis they come in at 32nd, 34th and 36th respectively.
If you don’t have the odd $1.8 million to spend on these suburbs however, the locations that stand out as having both the most affordable per square metre median house price (based on land size) and proximity to the CBD (within 5.5 km) are Kensington ($3,724), Flemington ($2,861), Brunswick ($2,921), Travancore ($2,312), and Northcote($2,360). Here the balance between location and land size is the most affordable.
In contrast you could be paying as little as $120 per square metre of land for houses in East Warburton, with the suburb located around 79 km from the CBD. It has the combination of a low median house price on large block sizes. Coming closer to the CBD (within 50km), Cockatoo ($189) and Seville East ($217) are particularly affordable. In contrast Portsea ($1,027 per sqm) and Sorrento ($928 per sqm), at over 100km from the CBD have the seaside location propping up their house prices.
Finding the right balance between affordability, land size and location can be difficult and identifying where land size and location haven’t been fully priced into the market can provide opportunities for price growth even in a tough market.
For more information regarding this analysis or the services and capabilities of BIS Shrapnel please contact Angie Zigomanis, Senior Manager Residential Property.