VIC Carnegie, Melbourne 2 BR new apartment advice

Hi everyone,

My wife and I are testing waters with our first investment in Melbourne. We are living in PPOR in Sydney(Purchased in 2015). We are planning to buy a new apartment(going to be completed in Q3 2018).
The apartment total living area is 68m2, has a courtyard around 35m2. 400m walk from station. we are paying 620k. 62k deposit(10%) will be from the equity of our PPOR. (We have separated the loan for the deposit). We have around 50k savings now and either plan to refinance PPOR before settlement to use the equity for loan deposit or save more and use the savings.
This is our first investment and our plan is to use the growth in our PPOR and Carnegie apartment for future investment(Possibly in Brisbane).
I am asking your kind advice whether the strategy we are following is correct or not?

Thanks in advance

 

Mate I live near Carnegie and there is a lot of new appartments going up all over there and Dandenong road as well as a lot around Glenhuntly. I Would be having a look at how many new appartments are coming up for completion as there could be way too much similar stock at the one time. Ultimately you have to do your own research but an appartments round that area is not what I would be buying right now.

 

Hi
Here are thw iaaues that i see with your plan:

1. Apartments
2. Time of buying.
3. Area targeted.
4. Investment amount.

I would suggest you to check areas where you can buy a house for lower amount. Maybe move to outskirts for buying a house or move to brisbane to reasonable amount on buying a house.

Regards

 

From personal experience I would avoid apartments as I have known over 10 people have bought and only 1 has had any significant capital gain (It was an extreme higher end apartment directly opposite the shrine in a signature apartment block)

My other friends are not complaining because these things are usually cash flow neutral after negative gearing benefits but are more nothing investments and not worth managing/holding. Keep in mind many of my friends got building grants and duty concessions which are no longer available for investors in apartment blocks (so at least they pocketed these amounts)

I know Box Hill and Carnegie are different suburbs but both do have an oversupply of apartments (everywhere does but if I had a pick of a place to buy an apartment then probably East Melbourne or an older style one in a good established suburb)

Onthehouse.com.au: Your Home for Property Research

its probably worth less today then the last sold price, the build qualities (both materials and workmanship) especially the lower rise (4 floors and less) are getting worse all the time. Don't be fooled by Miele appliances etc.

 

Carnegie is a high demand area, but there is also a high supply of off-the-plan properties at the moment.

My investor clients are being very picky and preferring townhouses around Neerim Rd, or larger apartments with excellent light and facing away from the train station, where the skyrail is currently going up (ala Chicago).

 

This would be a dead-end purchase IMO. You will likely be waiting a long time to get a 20% increase in price (if ever) to then be able to withdraw enough equity to be able to make another purchase (as you say you aim to do). You could even have negative equity as you are paying a premium for OTP.

The size is also small for a two bedder. I would aim for approx 75sqm internal area as a minimum to appeal to the most number of buyers. The build quality on most new builds also leaves a lot to be desired

 

Agreed - I always suggest to clients to avoid OTP/apartments whereever possible as they suffer the greatest from supply side risk wiping out/reducing capital growth potenital, whilst not having a high enough yield to justify this risk.

If you really like apartments from a personal view for living in - so be it. (even then, buying second hand will usually give you a reasonable discount to the premium of new builds) But if this is a financial decision you have to ask yourself why you would choose to invest in stock which has a long history of poor performance in Australia to the point that valuation companies, banks and all other parties to the transactions are shying away from them.

 

Thanks everyone for your advice. We have decided not to go ahead with buying the apartment. Can anyone suggest us some suburbs to invest with a budget under 600k?

 

There's still the odd house or two that pops up for sale in the Altona Meadows area for about $530-$580k or thereabouts. Most houses in this area are in the mid-high 6's, so anything in the mid 5's is a bargain. Other than this, I'd recommend Werribee. In short, look for an established suburb with rail/major shopping close by.

 

Price for asset type and size seems very average to me..plus throw in the supply issues talked about above.
On the flip side, sounds like a good location with ease of access to public transport.
Nevertheless I think they priced it on the high end of an average deal.
Would you see enough cg to buy elsewhere in the future? For the price to what you get in terms of asset type and size and also where it is in its cycle. Plus high supply...not in the next 5 years.

 

Could only be good news for those already holding this type of product in this market right? Here comes the herd!!!