Buying apartments in Melb and Syd in the coming years

Many expect apartments in Melbourne and Sydney to significantly drop in value in the coming year or more.

Since this drop is significantly contributed by the policies enacted to deal with COVID-19, this drop is somewhat artificial.

Do you see buying apartments once prices freefall to be a sensible investment strategy?

Or do you perceive excessive risk?

 

If you're in a strong position to buy, then it's the perfect time to buy. But apartments will always be higher risk compared to houses in general.

 

Define apartment here.

 

A living quarters in a building with multiple living quarters where you share walls/ceiling/floor with 2 other neighbours at minimum.

 

Yeah, but a 40 year old 3 level 6 pack with no lift in a medium density suburb 20 kms from cbd is very different from a new 50 storey highrise in the cbd.

 

Well happy to hear your opinion on both of these types? I assume you think one is going to be good and one is not going to be good?

 

IMO there are two (simplifying) classes of apartment: those which have something special about them (e.g the ones in my building: large, good quality, north-facing, permanent views) and so have a PPOR appeal (80% OO in this building) and the cookie-cutter one and two bedders built to excess in Melbourne. The latter are one step away from commercial properties, with the value being nothing more than a reflection of the net income they will deliver, which will be a function of demand (think vanishing foreign students), rents (incomes going nowhere for a few years?) and outgoings (which should be covered by strong sinking funds, but in 20-30 years?). But what's the appropriate return in an era when people are prepared to lock money up in long term government bonds delivering next to nothing?

 

The answer is possibly. But for, say, every price range >600k or so, you could buy houses instead of apartments. imho houses with land and no body corp would be safer. For small investors, as opposed to if you could buy the whole building or something, this would be safer.

Though if you had to buy apartments, the smaller the block, cavity brick construction near amenities and transport would be better than CBD.

 

If you must here are the things I will consider myself

3:1 ratio between house median price vs Apartment median price.

Art Deco building with No more than 20 or less occupants.

walkability score of the suburb 70+ ( shops, cafes, transport, etc. )

No to 2000+ units and newly built.

Capital Growth of the suburb no less than 8% average for the last 10 years.

 

No, just no.

Would you let a family member buy? I would not.

 

What about the mentality change that could happen in regards to contagious viruses and urban density?

Personally, I wont be looking to live in a city any time soon, though anecdotal evidence of 1 is hardly a trend.

 

Melbourne I would prefer house. You can go south east and get house for same price. Over supply of apartment and many development is in pipeline so it will take long time before you see CG.

 

Also stay away from apartment which contains Aluminium cladding. It is highly flammable and many council issuing orders on strata management to replace them. It is very costly process. Many towers in Sydney and Melbourne got flammable Aluminium cladding. Read about Melbourne's Lacrosse building issues

 

Not sure if there has been much of a mentality change, I dont think even pre-covid many would choose a 2 bed shoebox apartment over say a nice house in the inner middle ring. But many still do live in CBD apartments and rent CBD apartments (talking about locals here), and it all seem to come down to price and convenience. At the price range of CBD high rise apartments say 400-500k (I am just focusing on highrises here as older brick walk ups near the city are well beyond that price range now and rightfully so), what are the other alternatives in melbourne or sydney at that price range?? you would need to buy very far out in areas lacking many of the walkable amenities the inner CBD area provides, not to mention a drastically different rental return profile.

So I don't think many people are comparing apples with apples when it comes to apartments in general i.e. not point comparing a high rise vs a $1m house in the suburbs.

The other part of the equation is do people actually desire to live close to the CBD? I am wrestling with that myself whether to sell up and move beachside as neither my wife or I need to be close to the city for work if not for our kids attending a nearby public school. But time and time again, I see especially the younger generations being naturally drawn to the big cities because thats where the overwhelming jobs, schools, entertainment, restaurants and social opportunities are. Just look at new york and tokyo for example, the density is crazy but people continue to flock there, must be doing something right.

 

Agree in general, sky rise apartment are no good. Would there be a point where you would buy? E.g. if prices collapse so much due to developers going broker and lack of overseas demand, and the apartments are 30% cheaper, would you then? What about 40, 50%? Probably not after Gold Coast in 2009, but interesting question

 

Just curious, what makes sky rise apartments 'no good'? I don't disagree or anything, I'm just new to the game and want to know why people say this.

 

There will be tens of thousands of apartments to be built in the future.
they are the end product - no further development possible.

the only thing unique about apartments is the top floor.

if I have to buy apartments (i.e. bargain opportunities) I will aim for the top floors.

but generally I won't touch them.

 

Everything has a price and apartments can be great low maintenance cash cow and give you access to a location/suburb that you'd have no business getting in. But as with any property there will be bad and good ones, just the same with townhouses and houses (yes townhouses and houses do go down in value too!).

Apartment living can be desirable if the location is spot on and the alternative is a 2 hour commute to work. I know many who live in very nice places with breathtaking views, I often envy the convenience and how they can just lock up and leave and not worry about the garden/breakins etc. Those very few that have been built with liveability in mind rather than rental stock have generally done ok, and have recently been able to find tenants quite quickly (at slightly reduced rents but still high enough to remain positively geared)

I am also encouraged by the lack of interest in apartments, may be able to find a gold nugget. One man's trash is another man's treasure

 

I have to correct myself, I like apartments if they are in Mahattan, below 95th street....

elsewhere I have never seen a billionare / multi millionare who wants to call an apartment home.