rent control apartments



From: Jongping Tia


I am a novice investor looking at buying a property in Pyrmont. I am however a little concerned about a rent controlled apartment building which I have been told will be springing up opposite within the next year. I believe it is called "CITYWEST" or "CITY HABOURSIDE DEVELOPMENT". Does anyone know anything about it and whether it has affected property prices in the past? A little help would be greatly appreciated.

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Reply: 1
From: Yuch .

Hi Jong Ping,

As far as I know, the banks don't feel that comfortable lending to inner city properties. You'll find that most of the lenders will only do 70%, ie you'll have to pull the 30% out of your own pocket.

Regardless the capital growth, you may be better off using that 30% deposit somewhere else.

If you still think it's a good investment, then I suggest you do your due diligence first. You can get the historical property prices data from APM and also you can obtain the estimated growth for each suburb from Residex. Compare the sale prices before and after the new project "CITY HABOURSIDE DEVELOPMENT".

~ The secret to success is to start from scratch and keep on scratching. ~
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Reply: 1.1
From: Michele B

Interestingly, a bank mgr told me his bank is now only lending 50% on new inner city apartments here in ADL. After all, there are now so many, and granite/stainless steel fitouts have a half life of what? Five years maybe?

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Reply: 1.2
From: Terry Avery

I was under the impression we did not have rent control in Australia. The
definition of rent control is that the local or state government freezes
rents and limits increases to the CPI adjustments. Do you mean that the
apartments are owned by a government body which sets the rent? Is it housing
commission? If so do they have criteria for who can rent such as low income
earners? If the latter is the case then your renters probably wouldn't fit
into that group anyway and therefore the building is not competing with your
IP. What is the area like overall? The state and federal government have
policies to distribute low income housing amoung normal income properties so
that they don't create housing commission slum areas. By doing so the poor
will be less stigmatised but people's prejudices being what they are may
lead to people selling at fire sale prices in the belief that other poor
will follow or bring trouble and crime to the area. There is probably little
rational basis for this and by selling at fire sale prices they make it self
fulfilling as lower income people can now afford to buy in that area. Look
at the area and gather data on it. If it is growing then the apartment
shouldn't affect your capital gain unless there are multitudes of rent
controlled apartments in the area.
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