Syd/Mel CBD Apartment market reportedly in decline

[Aceyducey]

Note this is mostly based on auction results!

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FYI:
Source: www.homepriceguide.com.au (02) 9339 8200.

CBD Apartment Market Update
There is now solid evidence the CBD apartment markets in Sydney and Melbourne are in decline, with the latest sales results released by the Home Price Guide from the June Qtr recording falls in these two cities.

Median apartment prices sold by private treaty in Sydney fell by 4.4 per cent during the June 2003 quarter to now stand at $409,000. This the second straight quarterly decline. In the March 2003 Quarter, Sydney CBD apartment prices also fell by 2.5 per cent.

In Melbourne, median CBD apartment prices sold by private treaty fell sharply by 10.3 per cent during the June 2003 quarter to now stand at $287,000. This follows a 3.8% rise during the March Quarter. Apartment prices sold by private treaty are now lower than where they stood in June 2001 where CBD apartment prices stood at $299,000.

In both the Sydney and Melbourne markets, the overriding issue has been a flood of new stock onto the market, especially in Melbourne. Unit approvals hit an all time high in Australia in 2002 and the consequences of this development are now being felt.

The increase in supply, combined with falling demand for units following warnings of oversupply, has created a ‘double whammy’ for which there appears to be no light in sight. Given that it takes up to 18 months from approval to complete an apartment development, many buyers who have recently committed to off-the-plan unit purchases could eventually face a capital loss on their properties when it’s time to settle on those properties.

Elsewhere, the problems don’t appear to be as severe with the Brisbane, Adelaide and Perth CBD apartment markets all rising during the quarter.

Home Price Guide
National Property Market- Units June Qtr 2003

City........Med (1-3/03)..Med (4-6/03)..Qtrly Mve..Yrly Mve
Sydney.......$335,000......$280,000......1.4%.......10.8%
Melbourne....$280,000......$283,000......1.1%........4.8%
Canberra.....$232,000......$240,000......3.4%.......15.9%
Brisbane.....$190,000......$198,000......4.2%........8.5%
Gold Coast...$201,000......$211,000......5.0%.......15.9%
Adelaide.....$151,000......$161,000......6.6%.......27.0%
Perth........$150,000......$160,000......6.7%.......14.3%
Darwin.......$167,000......$172,000......3.0%........7.6%


Source: www.homepriceguide.com.au (02) 9339 8200.
Copyright Australian Property Monitors 2003. Based on provisional auction results reported to APM as at 13 August 2003. Properties sold with an undisclosed price are excluded from the median price calculation.

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Cheers,

Aceyducey

 

[Cosmo]

Well at least there’s a good lesson to be learnt here. Once an area looks good the developers get in there and overdo it as usual. It’s all part of the cycle.

IMHO free standing houses for investments are typically a far better proposition than high rise units, ALTHOUGH the clued up amongst us will soon see some distinct opportunities coming out of this.

 

[Kevmeister]

I agree land content is king, so high-rise apartments are disadvantaged from the outset (although if you take Melbourne Docklands apartments, for example, the land they are built on is still worth a mint).

I think the triple whammy comes from some of these developments being bought in the majority by investors. Like on 60 minutes the other week when the Meriton boss said 85% of his apartment stock was sold to investors.

This creates a market environment like the sharemarket, where investors start getting antsy if a small decline in value occurs, and market sentiment is much more likely to unsettle things. Contrast this to an area which is heavily owner-occupied, who don't take anywhere as near as much notice how much their home is worth year-to-year, because they ultimately need somewhere to live regardless, and will simply delay selling if necessary.

For investors it's purely a numbers game and if the numbers are not stacking up they sometime lose their nerve and get out.

 

[Amarantha]

This substantiates my own observation. I've been looking at the (very) inner city Melbourne apartment market, and when I first started I saw many places selling at ridiculous prices much higher than expected, and despaired of ever being able to afford one. Lately they seem to be selling at much more reasonable prices, and more of them are passed in. Those which are subsequently advertised for private sale often remain on the market for some time. I have new hope of being able to afford a place in my chosen location As long as the prices don't rise again before my lease ends and my deposit gets big enough.

 

[hwd007]

I think the CBD apartment boom has actually helped hold prices of other more traditional unit dwellings down. This means to me that these types of dwellings have more growth potential than we realize, once investors become more savvy and stop buying inner city apartments in droves. Admittedly others will see opportunity and dive in at lower prices.

I think the investor market making up much of the new demand segment is relatively naive and thus it could take another 6 to 12 months of investor bad experiences and negative publicity for this segment of the market to wake up.

Thus I still see opportunity to buy traditional units in flats offers good growth potential inven in Melb and Syd in the right locations at the right prices.


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[see_change]

While some vendors will get a rude shock when they try and get their finance in time for settlement , many will hold for a while before the reality of negative gearing drives them bonkers...

In my experience the some of the best bargains in the current cycle came closer to the up turn , rather that at the begining of the down turn. People don't like to admitt they're wrong, and some take a lot of convincing.

See change