[Melbourne] Thoughts on apartment as first home/investment?

Discussion in 'Where to Buy' started by 7smurfs, 12th Jan, 2012.

  1. Deltaberry

    Deltaberry Member

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    That's right. Some key risks I see with these sorts of investments are:

    - it is not a mainstream market (while Asians are by and large very rich due to sheer population, when in Australia that is still not a mainstream market --> it's like saying no Chinese food chain will ever get as big as Boost Juice in Australia simply because it's not mainstream. Simple)

    - the way the currency is, it works against this sort of market at the moment

    - there's minimal demand from PPOR/first home owners and a lot of people are investors (not to mention a very narrow market of investors). If you need a 5% yield, the next buyer needs a 5% yield too

    At the end of the day, these concerns can be easily mitigated if supply is kept below demand. But from all accounts, that certainly doesn't seem to be the case. That's why you need to select quality apartments that people aren't building - now that's where demand exceeds supply.
     
  2. shooey

    shooey Member

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    Hi all,

    Came across this thread while doing a bit of reading.

    I'm actually in the same position as the OP.

    Looking to purchase an apartment in South Yarra, Chapel Street as a investment, but would definitely consider moving into later down the track as it actually appeals to me; 2 rooms, 1 car, great view, gym, pool, location etc.

    Had the apartment valued and it came in at $30K under the asking price. Now lets say I did knock that $30k of the price, I'm slightly worried that apartment prices in the area might drop due to the number of new developments.

    Unsure if I should hold off or not..

    Any advice?
     
  3. matto_

    matto_ Member

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    I assume original advice still holds. There has obviously been a bit of cooling already, but there could be more.
     
  4. 7smurfs

    7smurfs Member

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    I would say no to this apartment as an investment mainly due the large body corporate fees associated as you've listed facilities such as gym, pool etc, However you will need evaluate the return from current rentals also as this may offset the body corporate costs.
    .................................................................

    Thought I might as well update you all on how I progressed based off your advice back then :)

    First thing I did was catch up with Aaron_C and got my finances sorted(highly recommend!).

    3 months later in April after intense research and getting out there every weekend... ended up purchasing a larger than average sized apartment in Armadale with the configuration 2 BR /1 bath / 2 carparks for a great price!

    Fast forward to now, I've been living in it since July and have grown quite attached to it, even though I know I need to move out of it (after the 6 month period) to kickstart start my investment mind again.

    So with that, I'm now at the early stages of looking at IP2 in St Kilda, Prahran, Hawthorn! Excitement of buying IP 2 is looming :D
     
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  5. Patsy

    Patsy Member

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    Congrats

    So great to read your update 7Smurfs, the power of networking information whether it be via a forum such as SS, seminars, mags, books, google, blogs, pods etc works. You did your DD and it seems even in a doom and gloom media frenzy of uncertainty you have made an educated choice which has given you confidence, wish you every success finding your next IP and hopefully I won't be far behind you, been researching for nearly 12 mths and now almost :eek: ready to take the bigger step, your sharing of your experience and the responses of those more 'senoir' in investing has given me the confidence to get on with it, as most of the responses/advice is right on track with my own opinions from what I have gained in researching I think I need to stop stalking Foxtel and SS and take the plunge :D
     
  6. Weasil007

    Weasil007 Banned

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    From Property Observer 25-10-2012:

    Would you consider a $24k drop in 12 months a bit of cooling? I would not rush in here!
     
  7. turk

    turk Member

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    Weasil

    Absolutely disastrous 12 months, median prices off 6%.

    When would you rush in, how do you pick the bottom?
     
  8. Jake Milne

    Jake Milne Buyer's Agent (Vic)

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    If you're looking at those areas I'd suggest this preference:

    1. Hawthorn
    Option one:
    Type: 2b Apartment
    Price: High 4's to $500k
    Example: http://www.realestate.com.au/property-apartment-vic-hawthorn-111755147

    Reasoning: 10 year moving average for capital growth in units is 7%. 3 year growth is 14.9%. Hawthorn has many growth propellants such as; good private schools, university, diverse economy, strong shopping precincts, great transport.

    Option two:
    Type: 2 bed Villa unit
    Price: $500k
    Example: http://www.realestate.com.au/property-unit-vic-glen+iris-111706883

    Reasoning: Villa units in Hawthorn are hard to come buy but offer exceptional potential for future growth. The demographics of the area support an influx in future demand for villas as more baby boomers look to downsize. The best buy will be something close as possible to Glenferrie. Failing this neighbouring suburbs such as Camberwell and Glen Iris have more of this type of stock also at a lower stirke point.

    2. South Yarra

    Option One:
    Type: 1 or 2 bed Apartment
    Price $500k
    Example: http://www.realestate.com.au/property-apartment-vic-south+yarra-111997515

    Reasoning: South Yarra has a 10 year CG record of 6.5% for units and a 3 year movement of 15.8%. The area has a strong young professional demographic, plenty of lifestyle features and a busy business sector. Couple those features with South Yarra's proximity to the city, botanical gardens and Yarra River the ares will continue to see demand in the future. Medians for 2 beds in the area are in the mid 500's so a 1 bedroom would open you up to better quality properties. Either is a good choice though and if you select a property that ticks all of the boxes you can expect double digit growth over the long term.

    Richmond & South Melbourne are still good but the above are better in my opinion.
     
  9. Jake Milne

    Jake Milne Buyer's Agent (Vic)

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    I could pick suburbs in every state that have similar patterns over the last 12 months.

    Don't be brainwashed by media trying to sell stories. Melbourne isn't one big market; it's made up of hundreds and thousands of smaller markets that march to their own beat. Some areas have dropped significantly while others have grown over the last year. They all contribute to the overall market figures.

    Painting a large city with a single brush stroke just shows your lack of understanding... sorry.
     
  10. Weasil007

    Weasil007 Banned

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    Hi Jake, no need to be sorry, apology accepted :)
    While some areas drop in value others rise, I get that. What I don't get is the fact that if on average the value of property in an area (say Melbourne) is in decline doesn't this mean that of the total number of properties sold in this period more properties have dropped in value than risen? It would appear that these hundreds of thousands of smaller markets are marching backwards :confused:
     
  11. Weasil007

    Weasil007 Banned

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    I can't pick the bottom, no one can, but....I 'd rather pay and additional 5% in purchase cost from a proven bottom than buy in say 10% prior to the actual bottom of a cycle. We are not there yet and talk of rushing should not be bandied about in this market :)
     
  12. Jake Milne

    Jake Milne Buyer's Agent (Vic)

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    Your right; it means property prices have fallen more than grown overall.

    Melbourne has three different over saturated markets at the moment. The CBD high-rise apartment market, the outer West and outer North house + land markets. There are other suburbs in negative growth right now but it's those aforementioned that are primarily dragging prices backwards. I'd recommend people do not buy in these areas at all for another 24-36 months.

    With that said, if you buy a quality property in the inner south east, inner east, select suburbs in the inner north and west you'll find that prices have either consolidated and are growing, or have just continued to grow.

    So whilst I agree that people shouldn't just rush in to Melbourne, or investing at all for that matter; people shouldn't say Melbourne is off of the list because of a single overall statistic, or some negative press. The same applies for all cities or regions.

    I have seen a range of properties grow above a rate of 8% over the last year in Melbourne and some even in the double digits. There are fantastic opportunities right now.
     
  13. turk

    turk Member

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    No, your maths is sadly lacking.

    $4 million prpoperty may drop 25%,
    10x$500,000 properties may increase 10%

    which leaves a nett $500,000 drop in prices but 10 properties rising and only 1 property dropping.

    The 1 thing that you are correct about is that you are:confused::confused::confused:
     
  14. Weasil007

    Weasil007 Banned

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    Hi Turk :)

    If you theory is correct then we are in a happy place... this must explain why interest rates keep dropping on the back of record low loan transactions. Imagine how much better off we would be at 0% rates :)
     
  15. turk

    turk Member

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    Not a theory, a very simple fact that seems to have escaped you.

    When units of any group of items are different prices the overall price can go down regardless of whether the majority are sold for a lower price.

    The same applies in reverse.
     
  16. Weasil007

    Weasil007 Banned

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    Let me get this clear..you claim that the drop in average prices we are seeing in Melbourne is the result of an increase in value of lower end properties but a decrease in top end property values hence a lower average? While the maths sticks up how does this play out with the increasing number of homeowners in negative equity positions? :confused:
     
  17. Melbournian

    Melbournian Member

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    In general or having a macro view - the average price of properties victorian wide has seen a drop however they are many micro markets within victoria itself. Many within good infrastructure, demographics and proximity to pubic schools have seen their prices hold up and not drastically drop.

    Like you wouldn't be investing in areas like doveton for example even in good times or bad times. Just like properties in prime suburbs in the south eastern areas tend to sell and grow well above the average growth victoria wide.

    many home owners esp 1st home buyers like yourself i presume bought well into their means. i have a friend a couple both working in sensis who bought a home land package at 650K without a 10% deposit and now paying the repayments through their noise. Both on decent wages but sometimes you have to live within your means. And the company they work constantly have cuts and redundancies being had out.
     
  18. 7smurfs

    7smurfs Member

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    Thanks Patsy! Sure did come a very long way from not knowing what an offset account was :eek:

    The SS community and Aaron_C have been key to building knowledge and even with that I made a few mistakes that I am sure won't arise again in IP2!
     
  19. Weasil007

    Weasil007 Banned

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    Happy to help 7smurfs :D
     
  20. turk

    turk Member

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    Let me help you get this clear.

    The point I made was that your assertion that what you don't get is the fact when an area is in decline that it is possible for more properties to rise in value rather than drop in value.

    Whether this is happening in Melbourne I wouldn't know.



    A question to you that I'm still waiting on an answer to,

    http://somersoft.com/forums/showthread.php?p=963750#post963750

    Agree, we can't pick the bottom.

    How do you, without hindsight, pick the proven bottom?