CBD micro-apartments have had a bit of coverage in the local press lately (mostly negative), but it got me interested in Melbourne city apartments generally as investments. I thought I'd enquire here as to what it's like to own a city apartment, what are some of the pitfalls and potentially unforeseen expenses?
My strategy is a buy-and-hold, positively geared one, aiming for high yields and low maintenance. My budget would be up to about $350,000. I quite like the idea of living in the city too, and such an apartment could give me that option in the future. I've noticed elsewhere on this forum that student accommodation isn't highly regarded as an investment, largely because of vacancy for much of the time, but it appears that many non-students occupy city apartments year-round. Vacancy rates appear to be low, but there has been some suggestions that an imminent increase in stock could change that. The residential population of Melbourne's CBD has swelled immensely in the last 20 years, and I could see it going further, now that it has good amenities such as supermarkets. Body corporate fees seem to vary wildly, depending on whether there is a pool, gym or concierge, is the extra money worth it? Does anyone have views regarding the relative attractiveness to tenants of no- or communal laundry facilities and interior ones? What are the rates and Land Tax like? Are plumbing and electrical fixes especially expensive? Are city estate agents any good at finding tenants? Are newer buildings significantly cheaper to maintain than older ones?
I've done a bit of research already but still feel a little cautious of the unknown. Thanks.
Hi Andy
The most important word in your post was "micro".
It is tricky to finance a dwelling that is of less than 50m2, so unless you're up for funding a huge deposit, it isn't an attractive option.
In order for a property priced at $350k to be cashflow positive, the weekly rent is going to have to be somewhere around $450+ per week.
Indeed you are wise to be wary of property in big buildings where there are hundreds of others apartments just the same. All owners will be in constant competition with each other for tenants and buyers, which inevitably has to result in discounting.
Tread carefully. The city apartment topic has been asked about and answered several times on the forums, and we are not fans of them.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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Regardless of size, however don't buy small apartments. There are around 4000 apartments coming out of the ground in the cbd, docklands and Southbank. What this means is that we are likely to see values fall over the next few years. Plus with an over supply we cold see rents also reduce. The other side of this is that if you buy an off the plan apartments you may well find that the valuations also come in low.
Mot of the growth will be in inner city areas but not in the CBD.
I see steady solid growth in Melboure and strong growth in Brisbane but stay out of the city.
Nigel Kibel | Property Know How
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I'd agree with you on the growth in Melbourne Nige, but not so much for Brisbane. Being a QLDer myself I've seen how volatile it can be. It always seems to be the first to go up and the first to go down… Not to mention the fact that Brisbane has markets like the Gold Coast in it. Home of the marketers and spruikers which start these bubbles in the first place. Melbourne on the other hand, has a great infrastructure, growing population as well as a growing demand for inner-city living. Still, in my opinion, someone would be better off buying in an area with reasonable square-footage, within expansion grounds of the city. Wait for the rat-race to come to you and don't be caught fighting over shoddy micro apartments with cheap ammenities and below average yields. Real estate is a get rich slow game, play it that way!
Interesting comments about Brisbane. I know that the banks have dumped quite a lot of property on the market. However I would have thought that given the inner city market is undervalued compared to other eastern seaboard state that property was under valued and due for growth.
Nigel Kibel | Property Know How
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