Hi,
Well its been a long time since I posted here last as I was overseas last time (October 2004) and have been busy in the meantime moving back to Australia, finding work, a place to live and all those joyful things that come with moving.
Anyway last time I was here I was needing to settle on a Central Equity apartment in Southbank that I had put a deposit on back in early 2002. It was valued by the bank at about 10% less than I was settling for.
Anyway doing a search here I know most of you would not go near Southbank which is fair enough (I wouldn’t have had I been a bit smarter) but what are your thoughts about where the whole inner city apartment market is heading. There have been falls and as an owner I think its fallen even further than late last year.
However I am wondering where this market is going longer term. From a personal perspective I am looking at about a 12-15% loss at the moment however my rental return is now 5%, which although not great is higher than I know some people are getting in other suburbs. Do you think that perhaps this market may look attractive as the yields increase against other areas?
There are still more apartments coming on this year (Freshwater & Eureka) so perhaps when they come on it will put more downward pressure on prices.
I also think that the levels of the falls are a little under-reported as a lot of people simply can’t afford to make such large losses if they wanted to sell at the moment. I am currently renting an apartment in Port Melbourne which is on the market. I am paying $360pw in rent and they had it on the market originally for $440k, then $425k and now $399k. They have honestly had 2 people look at it and only 1 returned a second time, but didn’t return again. The agent who has it on his books said he hasn’t sold an apartment to an investor since October 2004. I would estimate that roughly a third of the apartments in my block are on the market and none seem to be selling. This kind of scenario I think is masking perhaps the true scale of the falls in the inner city apartment market. Perhaps they were asking too much for the apartment in the first place at $440k but dropping it down to $399k and still having absolutely no interest is fairly worrying for the owner depending on what they paid for it.
Do you think it’s an area that could become attractive in a year or two? Do you think it’s in worse shape than people think?
Regards,
Ben
Hi,
I’ve been watching the apartments in Docklands and SouthBank (Melbourne CBD in general) and I think the prices are about as low as they will reasonably go. The reason I say this is because, just like you said, there really is a minimum at which people will sell their apartments, that being more or less the same amount as their mortgage over them. That means really one could expect a 20%-40% lower price than originally sold for (banks offer only 60%LVR usually on these apartments). If it gets to the point that people can’t sell to cover their mortgage, the only reason they’d sell is because the bank is taking posession and forcing a sale. So simply the apartments will sit on the market or be taken off if they don’t sell.I doubt rents will go up as there is a large supply of empty apartments and only so much people are willing to spend on any given quality of apartment. I for example put a limit of $350/week on my rent as at that point any extra luxury is not worth the extra dollar. I think I’m not too disimilar to other renters of this market. I’m keen to pick up a unit in the city I can live in for about the $250k mark, but I don’t think the prices will drop that far for 2 bedroom apartments in nice buildings.
That’s my disjointed and rambling assessment.
Surrey.
There seems to be a real stigma attached to apartments in the Docklands and Southbank that goes beyond investing logic.
Recently there were a few newbies on the forum who nearly lost their shirts from Melbourne apartments, so it is a sensitive area.
These areas will once again become attractive for investment purposes but it’s just a matter of when and how long can you wait?
All in all, these areas are a great place to live for the lifestyle conscious while subsequently hazardous for the investment weary.
Good Luck…G7
There are much better opportunities for a lot less. I would stay right away from that area.
TMA
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First Home Buyer Websitedocklands was never really an investment area. In 10 years it will be great. The problen today is that the whole area is still a construction zone. Even if tenants were available why would they pay high rents to live in anconstruction zone. If on the other hand you were retiring or wanted an apartment in docklands to live in its a great time to buy. I heard recently of a 20 square apartment 3 bedrooms on the 19th floor selling for $650, the previous owners paid close to $900,000
Nigel Kibel
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I am interested that you say there are few tenants. Where are you getting this from? As far as I can tell (my experience included) the apartments are not taking long to fill at all. Sure when a new building comes on the market with 300 apartments its taking some time to fill but I know people who have had apartments in the docklands for about 3-4 years and they have never been empty yet.
There is a lot of hype about this over supply but I have never really heard of people being forced to sell because they can’t find a tenant.
It is not about finding a tenant. It is about finding a tenant who will pay rent at a level that justifies the ridiculous purchase price of those units. There are 800k units there only renting for less than $400 per week. That is just a joke and makes holding such a property very unaffordable for many investors. This is why they are being forced to sell.
TMA
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First Home Buyer WebsiteOriginally posted by TMA:It is not about finding a tenant. It is about finding a tenant who will pay rent at a level that justifies the ridiculous purchase price of those units. There are 800k units there only renting for less than $400 per week. That is just a joke and makes holding such a property very unaffordable for many investors. This is why they are being forced to sell.
TMA
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First Home Buyer WebsiteYeah I agree with this point although not all apartments are 800k earning $400pw mind you. I am just asking about what people think of the future of this area. I know its been bad and a lot of people were ripped off. Does that mean that will remain forever? I mean if you could pick up an apartment for 400K that was renting for $450pw, say in another years time as this area has such a bad rep from the past few years. Could there be some good deals then?
i agree with chefspop
the apartments close to the city are a lot harder to sell than rent
i just had some brand new apartments in north melbourne and they were a real struggle to sell
ended up selling 5 and reluctantly rented the other 7 in no time at the price askedi think people are happy to pay around the $350 a week as long as the product is good and has some features
There are definately good deals there. The reputation only relates to investment return based on new purchase price. Renters don’t care. The developers are asking for and getting ridiculous prices for the units. It is better to wait until a building is fully sold and then buy something off one of the investors who has too sell quickly due to low returns on investment. Obviously, the new buyers return would be better because they bought cheaper.
TMA
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First Home Buyer WebsiteThat is certanly true, a company like central equity has one of the largest rent rolls in Australia. The point that is being missed is that many of those apartments take Mirvac for instance where aimed at owner occupiers. They started even four years agop at around $550,000, with many being well inexcess of 700-800. Clearly you need corporate tennats. My point is that in a construction zone it is difficult at this minute to get the type of returns required to hold these long term
Nigel Kibel
http://www.propertyknowhow.com.au
Australian and New Zealand Buyers advocate
service and seminarsNigel Kibel | Property Know How
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I like the area, though. Long term it will be great (when its finished)…
There are much better places to buy for investment, but as I said its a nice spot, close to everything and if you want a new property close to the city, and are smart with your purchase you could get a great price from a motivated vendor… You may have to have a lower rent for 5 – 10 years until the area is in demand and for serious investors, this may just not make financial sense.
Then again, many investors buy with their hearts and not their heads. Some just buy and hope for the best! [laugh2]
Dev* [kid]
Was there on the weekend checking it out.
The company i talked to, manage 2000 units, and hold less then 1% vacancy rate.So it seems quite easy to rent out.
But not very attractive with a 3% Net return.
Would have to say, its definitely a place i would like to live.
Cheap and easy way to transfer money overseas.
http://www.tranzfers.com/refer.asp?r=jarred_spriggs%5Burl%5D%5B/url%5DI agree with jspri. The docklands is currently great for renters with fairly poor returns for owners. (This may change over time as supply dries up but at the moment its a renters market).
Brand new 1 bed apartments from $250 and 2 beds around $300+. Great area to rent I say..
Should clarify, those figures in my previous post were rents per week, not sale prices.
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