Research Reveals Capital City Apartment Values Plummet

[arashi87]

Values in Melbourne and Sydney are falling by up to 20 per cent in the time between purchasing off the plan and buyers receiving the keys.

Researchers are human based thus bias opinions can happen. According to my own eyes, this is just not happening in Sydney and Melbourne off-plan apartments... However "WBP Property Group" (i don't know them but they're property valuers) states

44% of apartment *purchases in the most populous cities are below the sale price at the time of completion

The above statement is a bit exaggerated don't you guys think? We all know the risk of buying off-plan is during bank valuation, the figure is "a bit" below the actual purchase price, HOWEVER, it is not happening in the current economy! So, how accurate are these guys?

It's always the confusion between supply vs demand ...

 

[sanj]

do you have the link? depending on the period etc it could certainly be true

 

[Deltaberry]

According to my own eyes, this is just not happening in Sydney and Melbourne off-plan apartments...

This happens all over Melbourne. Not sure what you're looking at. Not so much Sydney.

 

[arashi87]

do you have the link? depending on the period etc it could certainly be true

http://m.afr.com/p/business/property/off_the_plan_apartment_values_plunge_N1sLYmFWGhuZ9t6oiklEhK

 

[see_change]

Will also depend on where and the timing in the market .

My daughter , who is buying an OTP unit in Dee why showed me this article in a panic. It also stated that in certain areas OTP buys went up from purchase to completion.

A quick look at RE.com.au showed her that comparable units to hers are at least 10 % and maybe even 15-20 % higher than the price she's paying.

Cliff

 

[arashi87]

Will also depend on where and the timing in the market .

My daughter , who is buying an OTP unit in Dee why showed me this article in a panic. It also stated that in certain areas OTP buys went up from purchase to completion.

A quick look at RE.com.au showed her that comparable units to hers are at least 10 % and maybe even 15-20 % higher than the price she's paying.

Cliff

Yes I panicked too when I saw this article but couldn't figure out how they concluded such statement, any where in Sydney right now is not declining in valuation ... I have OTP too myself ... Haha

 

[sanj]

How do meritorious apartments fare with regards to capital growth? Is it subdued like with say central equity in melbourne? I believe they're building something in the region of 40 or 50% of Sydney apartments atm which may have an impact on the stats

 

[MTR]

But this is all about timing as Seechange has mentioned. I don't think it would be a great time to buying this OTP product as the market has been running hot for too long now. Don't want to be the last person holding the baby.

 

[belvoir]

This is true for apartments that are marketed to asian investors. Reason being is that they are 20%+ on comparable new stock but garner the higher price due to the marketing budget and contacts of the agents. Generally we don't hear about the falls in valuations because there are no valuation because they are being purchased with cash or 50%+ deposits.

It becomes an issue when local developers try and market to local investors at say approx 5% under these asian targeted developments. Sure they look cheap compared to 'those' other developments but they are setting a false market.

This is the issue of valuations even when the market is rising. Wait till it reverses and the valuers PI is at risk, you will see slashing of valuation prices across the board.

 

[Deltaberry]

In Melbourne, most of the Upper West Side apartments sold probably last year? A 2-bedder 1 bathroom for $500k, with government benefits. I wonder if you can sell a second-hand Upper West Side apartment for $500k any more given it's no longer new and the government benefits are gone.

In the same time, many existing homes in metropolitan Melbourne would've gone up 50% if not nearly doubled in value if bought well.

Doesn't really matter. At the end, some people like to make money, some people like to be parted with money. For there to be winners, there needs to be losers.

 

[antistar]

The thing about Melbourne cbd apartments is that there is a massive difference in demand and value from street to street and from building to building.
Any apartment north of bourke st and west of elizabeth street has limited chance of major growth. Even some of the older good quality buildings over there like Republica and Melbourne terrace have stagnated / dropped in value. The boutique developments in the east end are holding up well as well as anything on spring street.
The real value in Melbourne cbd apartments is within the unique properties / the conversions and one off rooftop properties. They are out there but rarer than hens teeth

 

[Intrinsic_Value]

In Melbourne, most of the Upper West Side apartments sold probably last year? A 2-bedder 1 bathroom for $500k, with government benefits. I wonder if you can sell a second-hand Upper West Side apartment for $500k any more given it's no longer new and the government benefits are gone.

.

Is that with car park or no car park.
If with car park and reasonable size (ie 75sqm or bigger for 2 bed/1 bathroom).

$500k will be fine.
It might not make money over the next few years with lots of supply coming on market, but the owners have little risk of suffering any long term capital erosion.

 

[Intrinsic_Value]

The thing about Melbourne cbd apartments is that there is a massive difference in demand and value from street to street and from building to building.
Any apartment north of bourke st and west of elizabeth street has limited chance of major growth. Even some of the older good quality buildings over there like Republica and Melbourne terrace have stagnated / dropped in value. The boutique developments in the east end are holding up well as well as anything on spring street.
The real value in Melbourne cbd apartments is within the unique properties / the conversions and one off rooftop properties. They are out there but rarer than hens teeth

overall good post, you know the local market.

 

[Deltaberry]

Is that with car park or no car park.
If with car park and reasonable size (ie 75sqm or bigger for 2 bed/1 bathroom).

$500k will be fine.
It might not make money over the next few years with lots of supply coming on market, but the owners have little risk of suffering any long term capital erosion.

No car parks. if you want car park plus another 50k or so. Also the second bedroom doesn't have windows.

Also not 75sqm. More like 58~62sqm.

But hey, some people like to lose money. Why stop them?

 

[TMNT]

The thing about Melbourne cbd apartments is that there is a massive difference in demand and value from street to street and from building to building.
Any apartment north of bourke st and west of elizabeth street has limited chance of major growth. Even some of the older good quality buildings over there like Republica and Melbourne terrace have stagnated / dropped in value. The boutique developments in the east end are holding up well as well as anything on spring street.
The real value in Melbourne cbd apartments is within the unique properties / the conversions and one off rooftop properties. They are out there but rarer than hens teeth

thats like 60% of the CBD!
I agree with your west of elizbaeth st comment,
but not north of Bourke st comment

 

[Melbournian]

the worst areas i would say is CBD - especially those pigeon hole apartments like 40-60sqm. they hardly sell.

Southbank is a no go zone - too many devs and many will overshadow what is already there.

but in certain areas -like elizabeth street there is building like victoria one - nearly fully sold out. In 2 auctions i went, prices were going like 850K for 3 bedders and 750K for 2 bedders.

I only hold 1 apartment luckily so the risk is acceptable for me.

Sometimes luck, timing plays a part in all things. Got a friend who did a dev 3 townhouses in kew (is like nearly 2-3 months and no real offers) which was like next to secondary school on the main street, high end custom finish and wasn't asking for anything extraodinary.

 

[Deltaberry]

Victoria One seems decent quality, haven't looked into it enough. But Jeff Xu seems to build better stuff and tailors towards the higher end, like Victoria One and Sheraton on Little Collins St.

Even his businesses are relatively higher end, say Hutong in Chinatown or Mantong in Crown.

 

[antistar]

thats like 60% of the CBD!
I agree with your west of elizbaeth st comment,
but not north of Bourke st comment

Even more than 60% if you go by number of existing apartments and upcoming developments. A few exeptions aside, most of the apartments in the north west part of town seem to be built for students and a part of super dense high rise towers (upper west, the bradys, franklin st etc). Compare that with the likes of the Georges Apartments, 99 Spring, Herald Sun bldg, Philadelphia, Hero, Cavendish etc in the south east end.
Massive difference in amount of supply and quality of buildings as a overall observation. Naturally there are exceptions on both ends

 

[Intrinsic_Value]

No car parks. if you want car park plus another 50k or so. Also the second bedroom doesn't have windows.

Also not 75sqm. More like 58~62sqm.

But hey, some people like to lose money. Why stop them?

yes well, you have just explained very clearly why.

I can get a two bedroom/1 bathroom + car park in the cbd with sqm at least 75 sqm for under $550k.

If I go to southbank I can get for somewhere between $480-$550.

So why buy a sh**ty 58-62sqm for more than this!!!!!.

So again, my rule when it comes to 'second hand high rise properties' look at the secondary market vs the OTP market.

Its so easy for locals.

 

[Intrinsic_Value]

thats like 60% of the CBD!
I agree with your west of elizbaeth st comment,
but not north of Bourke st comment

I live hear, the Paris end holds much better, and the Paris end starts west of Elizabeth Street.

In fact I would narrow it down further.
Collins street to Lonsdale street, Swanston street to Spring Street.

That's the grid