Some have a ‘stunning view’ on the top of their priority list when searching for a property, and others have more of a subconscious desire. Secret Agent have looked at two prestigious apartment buildings in Inner Melbourne; The Melburnian and The Hallmark, to analyse the monetary value of the different views available.
Continuing our focus on apartments following July’s report on the value of car parking, Secret Agent decided to investigate a related topic: how much of an impact can views have on the price of an apartment?
As humans, we instinctively crave to fulfil basic needs such as shelter, security and nourishment. This has been true for thousands of years through evolution and still applies today. Deep down, elevation and a view over open territory make us feel less vulnerable. Bodies of water assure us that this is a place where we can set up camp.
Jumping forwards several millennia, while these basic needs have remained the same, we now also pursue many higher goals. We wish for success and desire a sense of achievement. In many ways, our homes reflect our pursuit for happiness. When it comes to apartments, for many of us a view acts as a reward for hard work. It is something we feel we deserve and can now enjoy to its fullest. The more grand the view, the greater the desire. This is a study of how this is reflected through the price of an apartment.
The inspiration for this comes from a previous study on the value of greenery, open spaces and water bodies as shown through house prices in regions of the Netherlands. (Luttik, 2000) The hypothesis that people will pay more for houses in attractive settings as opposed to those in neutral settings was tested. It was found that environmental attributes affect transaction prices differently. The highest premium was for houses with a garden facing water (28%). House prices can be increased by 8-10% if the house overlooks water, or 6-12% if it overlooks open space.
There are complications in measuring the value of views from houses. A major limitation is obtaining an appropriate sample size as it is difficult to find multiple houses with the same view that can be compared against each other.
This is why it was decided to focus on equivalent grade apartment buildings instead of houses. Generally, apartments in high rise buildings have similar floor plans, renovation levels and conditions, but most importantly it is easy to find multiple apartments with almost exactly the same view.
Secret Agent chose to take an in depth look at two prestigious apartment buildings for our study. These were The Hallmark Building at 2 Albert Road South Melbourne, and The Melburnian, located at 250 St Kilda Road Southbank. For each building, all apartments sold between January 2001 and June 2014 were analysed based on their position in the building and their size. Using hedonic regression techniques, estimates for the expected price of an apartment were set up. Variables included a date value, which reflects the increase in price over time, as well as a level and area predictor, used to adjust for the different square metre sizes and locations of each apartment. Finally, the direction each apartment faces was noted, and those shown to add value were included in the results.
The Hallmark Building
2 Albert Road, South Melbourne
This building is located within close proximity to parklands such as the Royal Botanical Gardens and Albert Park, as well as the Shrine of Remembrance, which can be seen just across St Kilda Road. The beach is only 3 kilometres away. Figure 1 (page 4) provides a summary of the results. The additional value of having a clear view in each of the listed directions is compared to the apartments that have no view, such as the lowest levels facing South-West, which had their view completely or partially obscured by the government building next door.
BAY AND DOCKLANDS
NORTH-WEST VIEW FROM THE HALLMARK
Image: 11th floor, facing North-West
Apartments facing this direction have a magnificent vista of the Docklands and the Bay area surrounding it. Southbank and Melbourne’s CBD can also be seen a little further North.
BAY AND ALBERT PARK
SOUTH-WEST VIEW FROM THE HALLMARK
Image: 16th floor, facing South-West
The highest premium for the building was found for apartments facing the South West direction. This building has one of the best locations for views of Albert Park Lake, which is half a kilometre away. During the Formula 1 Grand Prix, a balcony in one of these apartments may be the perfect spot to see all the action. Look further and direct views open up of the beaches running from St Kilda all the way down to the Mornington Peninsula. People value an expansive view of landscapes as demonstrated in the 21.5% premium for apartments in this direction.
SHRINE AND BOTANIC GARDENS
NORTH-EAST VIEW FROM THE HALLMARK
Image: 5th floor, facing North-East
Look in this direction from any of the apartments and the first thing you will see is the Shrine of Remembrance and the parklands that surround it. Higher up in the building are some spectacular views of the Botanical Gardens and the Yarra River.
PARKLANDS AND EASTERN SUBURBS
SOUTH-EAST VIEW FROM THE HALLMARK
Image: 11th floor, facing South-East
In this direction lie some of the most expensive suburbs in Melbourne, including South Yarra, Toorak and Camberwell. The sprawl of Melbourne continues far into the distance. Again, an expansive view of the inner city and horizon contribute to the 14.5% premium for these apartments.
250 St Kilda Road, Southbank
The Melburnian is one of the most prestigious apartment buildings in Melbourne. The apartments and penthouses investigated had an average size of 166m2 and sold for an average of just over $1.5million. It is comprised of three individual towers: the Garden Tower facing to the East, the East tower with many apartments facing North towards the city and the West tower, with views of the city and Port Phillip Bay to the West. Expected sales prices were much higher if they were facing the North, East or West. Again, the price premiums are compared to apartments with no views or those to the South, where views are obscured by another apartment building for the first 13 levels. This, coupled with the sun’s more Northern tilt means natural lighting in apartments facing South will be sparse, making them much less desirable. The results are summarised in Figure 2 and are discussed in more detail below.
BAY AND DOCKLANDS
WEST VIEW FROM THE MELBURNIAN
The main attraction in this direction is the Bay area and Docklands. Here it is likely that the premium is not always equal and depends greatly on what floor the property is located on. Once high enough to have unobstructed views of the Bay, the value obtained from the view increases sharply.
EAST VIEW FROM THE MELBURNIAN
Image: 9th floor, facing (South) East
To the East there are two main parks located in close proximity. Queen Victoria Gardens sits to the North and the Royal Botanic Gardens sits to the South, behind which the Yarra River meanders its way into the city. Some apartments facing in this direction also have side views of the city, which could contribute to the premium prices. Properties on the South side have a view of the Shrine of Remembrance to the far South.
PANORAMIC VIEWS OF CBD, DOCKLANDS AND BAY
NORTH-WEST FROM THE MELBURNIAN
Image: 8th floor, facing North-West
The most expensive apartments are the semi-circle shaped units located on the North-western side of the West tower. Their shape and location allows owners of these apartments to enjoy a full 270 degree, panoramic view of the CBD, Docklands and most of Port Phillip Bay. A premium of almost 30% shows that the main pulling factor of these properties is the large window front and stunning view. While the premium may seem high, sale prices for these apartments were about 18% higher than the average for the building.
NORTH-EAST FROM THE MELBURNIAN
Image: 9th floor, facing North
From level four onwards, apartments in the East and West tower have a clear view of Melbourne’s CBD. Unlike the views to the West, we would expect views to contribute more evenly to the price of apartments on different levels, as angle has a much smaller impact on the views of these apartments.
This study confirms that when purchasing an apartment, you will pay a premium for a view. Depending on the scenery presented in the view, you can expect to pay between $68,113 and $120,588 extra for views from the Hallmark building. In the Melburnian, the cost of a view is significantly higher, with the premium ranging from $218,791 to $448,693 compared to apartments with no views. It is important to remember that these results are only applicable to the apartment buildings tested and caution would be required if extrapolating these premiums to expected sale prices of other apartments in different buildings.
The type of view affects what the premium paid will be. It is difficult to put an exact price on a specific view since different people value different scenes to varied extents. For many, an ocean view is most highly sought after. Others might place more value on park views. It really is a matter of personal preference combined with the competition at the time for an apartment with a specific view.
It would be interesting to repeat this analysis using additional apartment buildings of similar standard. This would enable a greater understanding of what kind of views are more highly valued from apartments in inner city Melbourne.
As Melbourne continues to grow and the inner city becomes more built up, it is reasonable to expect that the value of an unobstructed view will only increase.