Melbourne cbd growth

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wll6568

Okay, so I have an apartment in north east side of cbd which is a one bedroom apartment, close to 70sqm with balcony, with a car park. But then heard about all these talks of oversupply of apartments in inner city area as if it's going to be the end of world in the next two years in cbd and just making me very emotional.

I guess i bought it more because I like the apartment, it's quite spacious, right on the busy location, as well as it's got a car park with seperate title. I am just not sure how big the impact will be when these new stocks come into the market? There were these oversupply talk years ago and you don't see cbd apartments prices falling at all, in fact they gone up about 10% compared to two years when I was looking. Plus if I look around suburbs, they are all full of apartments projects, townhouse projects, not just the cbd.

I guess it still depends on the actual property itself as well as the price you bought it at? If it's a good property I guess the value could hold on tight? Not to mention a lot of these new apartments are soooo small, and haven't even got a car park. And they are like 10-20% more expensive than mine.

What's your thoughts on cbd growth? I am not expecting to make huge gain from the capital within short term, as I said I bought it cause I liked it and wouldn't mind to live into it at some stage, but again I wouldn't want the price to fall dramatically in coming years....
 
CBD statistics are deceptive because of the large amount of stock being added year on year - ideally you need a price history for a particular property. With OTP IP purchases the buyer nearly always loses money-wise - rents are over-estimated and outgoings under-estimated. When it comes to established properties you may make some money but won't ever make a fortune. You do though know the market rent, actual outgoings and net income so can put a proper value on this and hopefully this will rise in line with inflation/wages. This is more likely to be the case with larger apartments with car parking.

For myself, as previously recited, I bought an apartment in Central Equity's Bourke Street City Point OTP in 2000 for about $420K and sold it for the same amount in 2007 to buy my present PPOR. Had I sold a year or two earlier I would have lost $50K. But when it came on the market again two or three years later it was priced at $570K - don't know what the actual sale price was, but the person who bought off me would have made a nice CG by buying when he did and not OTP. This said, there are better buys elsewhere.
 
There hasn't been a major correction because the oversupply is drip fed slowly to the market by the developers who can afford to hold onto the excess stock. Another way that they keep values up is by not negotiating on sale price but instead offering rebates and rental guarantees to influence purchasers to take the deal.

Big business knows how to make stats look appealing. Essentially, with 24,000 dwellings scheduled to be released over the next two-three years there has to be substantial population increments to maintain capital growth otherwise prices have a lid on them for the short-mid term.

The good news is, even though population growth stalled over the GFC Melbourne, since 2000 has been growing at around 2%/annum.

IF, and it's a big IF, Melbourne continues to grow by 2% per year the city will be bigger than Sydney by 2037; and Melbourne will reach 8 million people by 2050.

So I guess if your plan is to hold onto the property for another 24 years or so and IF the population continues on trend you'll be fine.
 
70sqm for a one bedder and you're worried, are you kidding me? If it's decent it should maintain its value so you should have little reason to be worried. Most 2 bedders these days aren't even that big. All that supply will affect prices in the short to medium term but 20 years such big spaces in the CBD will be rare.
 
Yeah, that's why I bought it... but when all media turns back point fingers at cbd, u will feel like it's really going to be end of world, lol... And yes, 70sqm includes balcony, the balcony is about 17sqm.
 
If you look long term once all the supply is absorbed, you will be left with a highly residential CBD which I think is very unique. How many CBD's in the world have such a high number of residents? Most live in the surrounding suburbs. Only one I can think of is New York, which is much more vibrant because of it. Compare NYC to London (CBD, not greater London) - they are two similar cities but people don't live in London, they only go there to work. In NYC however it's very normal to see every day Joe Blows walking a dog through Wall Street, or a lady pushing a pram on the upper west side, or whole families with kids walk out of a building. In any other city the only people living there are the extremely rich (because there's not much residential at all in the CBD), or young professionals. Obviously melbourne doesn't resemble NYC in many ways and I'm not trying to say it's the same thing but in terms of residential vibrancy, I think it will make it a fun place to live especially when all the services and retailers begin aligning themselves with their needs.
 
jerrybee said:
If you look long term once all the supply is absorbed, you will be left with a highly residential CBD which I think is very unique. How many CBD's in the world have such a high number of residents? Most live in the surrounding suburbs. Only one I can think of is New York, which is much more vibrant because of it. Compare NYC to London (CBD, not greater London) - they are two similar cities but people don't live in London, they only go there to work. In NYC however it's very normal to see every day Joe Blows walking a dog through Wall Street, or a lady pushing a pram on the upper west side, or whole families with kids walk out of a building. In any other city the only people living there are the extremely rich (because there's not much residential at all in the CBD), or young professionals. Obviously melbourne doesn't resemble NYC in many ways and I'm not trying to say it's the same thing but in terms of residential vibrancy, I think it will make it a fun place to live especially when all the services and retailers begin aligning themselves with their needs.
Click to expand...
Yeah but only after say 15 years
 
- There is an oversupply
- Not that many people want to live in apartments
- It relies heavily on overseas student and backpacker market
- If you bought quality apartments, you could make money (eg if you bought Mercy Hospital, the new Spring St development)
- If you bought mediocre developments (eg Upper West Side, QV) you may lose money (depending on when you bought)
- I have first hand seen people lose money (lady bought 2-bedder QV for $680k a while back, couldn't sell for $600k recently). During the same time I bought a double storey house 1km away from QV, for a little less, now worth around $1m.
- I've also seen people make money (folks have had CBD apartments they developed that used to sell for 80k and they sell for $500k now)

Despite being a former small-time developer (yes my father developed CBD apartments long time ago) and curret landholder, I don't want to develop any land into residential apartments. Because it's actually the wrong thing to do by the city and by Melburnians, and it's a race to the bottom - both in terms of quality and profitability.

Yes jerrybee is right - you could make money in 15 years when the population is 5.5 million. You can also make millions by buying other things in 2 months.
 
Deltaberry said:
- There is an oversupply
- Not that many people want to live in apartments
Click to expand...

I agree, but you cant get a 250-600sqm block in teh cbd with a backyard!! so either people move 10km out and be a little inconvenciened, or stay in the city apartment and be convenient

Deltaberry said:
- There is an oversupply
Despite being a former small-time developer (yes my father developed CBD apartments long time ago) and curret landholder, I don't want to develop any land into residential apartments. Because it's actually the wrong thing to do by the city and by Melburnians, and it's a race to the bottom - both in terms of quality and profitability.

Yes jerrybee is right - you could make money in 15 years when the population is 5.5 million. You can also make millions by buying other things in 2 months.
Click to expand...

so are you just going to leave it untouched?? if you can develop into residential and be low quality and profitable, then I dont see a problem with that unless you think its better gains from holding for another 10 years or so
 
Deltaberry said:
- If you bought mediocre developments (eg Upper West Side, QV) you may lose money (depending on when you bought)
- I have first hand seen people lose money (lady bought 2-bedder QV for $680k a while back, couldn't sell for $600k recently). During the same time I bought a double storey house 1km away from QV, for a little less, now worth around $1m.
Click to expand...

What's QV? I always like to put a 'face' to the name.
 
Ah I see, it's a modern development:

http://www.qv1melbourne.com/

When I thought "Queen Victoria" I imagined a really nice art deco classic (something like this http://www.realestate.com.au/property-apartment-vic-melbourne-115083583), and was wondering why he was comparing that with UWS:)

Yeah UWS and buildings like it are nasty, no matter where in the world they are. I can't believe this is what they're passing off as a living room in a TWO bedroom apartment...I can't believe that's what they consider a living room!:

http://i1.au.reastatic.net/456x342/...9230138f38cbae950d577cc0e6dad9147f22/main.jpg

There's almost no scenario in my mind where something like that goes up. Yuk.
 
TMNT said:
I agree, but you cant get a 250-600sqm block in teh cbd with a backyard!! so either people move 10km out and be a little inconvenciened, or stay in the city apartment and be convenient
Click to expand...

I know. I'm saying I think most people would still prefer to be 10km out.

TMNT said:
so are you just going to leave it untouched?? if you can develop into residential and be low quality and profitable, then I dont see a problem with that unless you think its better gains from holding for another 10 years or so
Click to expand...

It's just about risk-reward. While there could be some profits in there, such a large scale development may also lose a lot of money especially if the people doing it are not tier 1 developers of that nature (ie not the Grocon family etc). Not my call anyway - it's my folks who are even more conservative than me, especially at their age.

I just don't see the need to exhaust the option value of land to take on such a huge risk, when holding it will probably on the balance of probabilities net equally significant, but far lower risk capital growth (most said land have gone up 6-7x in value).

Perhaps if the land was bought recently and there's lots of debt to it, it'd be a different story - and that's only because one would have bought with the view of deveoping the land in the first place.
 
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