Areas close to city over supply of apartments?

Hi we have 2 IPR's one in Kensington and the other in North Melbourne. Both are in 70's style blocks, one has been fully renovated, the other semi. Both have 2 bedrooms of good size with large kitchen.

Both are in nice quiet streets with majority being older style terrace housing and close to facilities / parks / schools / transport etc.

How do people feel the value will hold up in the long term given all the new apartments and developments being built? For Kensington we paid $418,000 in Aug 2010 and recently had agents out to look at selling one said 450 which may have been optimistic and the other said high 300's low 400's..

I know some people want new and shiny and investors want to buy OTP and get the stamp duty savings etc but the new apartments seem to be getting smaller and smaller. One of the agents said ours is the size of an equivalent 3 bedroom in new development. The other thing that puts me off is the build quality of some of these and the exorbitant body corp fees for all the facilities.

Are these new developments dragging prices and rents down, or encouraging more growth into the area? I had always invested on the premise that if you bought in a good area close to the city, facilities and public transport then it should be a reasonable prospect for long term growth. Have always done well with the PPOR's in the outer burbs, currently in Ivanhoe. Should have bought the block next door for $520k a few years ago and whacked 3 townhouses on it which is exactly what someone else did and made some good money. A 3 bed townhouse in our street 5 years old sold for $855,000Didn't have the funds at that time to build though.

The other issue is for Kensington the rents seem to be dropping with the competition from the new developments.

I think we originally started at $350 and are now down to $320. Should we sell or hold onto for long term? I'm inclined to hold on given what the agents are saying.
slow rental market

I am also finding the rental market to have slowed significantly.
I purchased a house in Seaford on a large block (1100 sqm dual occ potential).
The house has been completely refurbished and presents as new now.
I have had it listed for about six weeks and steadily dropped the price from 430 to 420 and now 395.
It is in a great location for a family home, close to sporting grounds, school, freeways etc.
This has never happened to me before!
I personally think the suburbs that actually contain these large developments will suffer as far as capital growth and rental yield on apartments.
However, apartments in the other inner areas that don't allow the large tall developments will not suffer in the long term, as people will still seek to live in apartments but not in the ghost town areas of docklands etc.
I think we originally started at $350 and are now down to $320. Should we sell or hold onto for long term? I'm inclined to hold on given what the agents are saying.

The million dollar question - personally I am extremely concerned about oversupply in 'certain' areas in the long term. The fundamentals are right as you say, close to the city - promimity to transport etc, however, apart from population growth what else is gonna pop the price up. Kensington has been heavily promoted in recent years and maybe overpriced, even in the short term if there is a correction this should rebound over the long term. If you are losing based on purchase price - I would hold. Re rentals - whats your unit against others available in the area in the same size apt and 2br for example. As the fact that you have dropped price could be due to the fact that others are cheaper (as you know for sure).

Funnily enough according to RP Data Kensington has an average unit price that has increased during 2014 - particularly in october and only 1.2% in 2013, however 2011 and 12 saw drops of 7.1% and 3.1% respectively which aint good.

Personally I wouldn't invest in Kensington or Nth Melb but that is me.

Cheers Ivan
0 capital gains if not capital loss; terrible yield after body corporate and share of council rates.

Sounds like a recipe for financial freedom (ie bankruptcy).
What do you mean deltaberry? We are also trying to hold for long term capital gain. Surely these have to go up eventually given proximity to the city. There is only so much land to build on in those areas.

Kensington does seem to be picking up lately, Macauley Road and surrounds are thriving.

Both are in nice quiet streets with no high rise and older period style houses

Thankfully both are now rented, so will see how we go. We have just done a lot to the Kensington property to make it more attractive to tenants so hope it remains that way.
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