WA CBD apartments in Perth - NO GO?

What's the general opinion on small 1br apartments in and around Perth CBD? (including East and West Perth). It seems that some apartments in small developments around 10-15 yrs old are going for well below $200K, they seem very conveniently located and decent quality. It seems like prices have come down a lot already - although how hard is it to find a tenant, and what's future supply going to be like? I'm interested in the CBD area because I might use it for a while before renting it out later. Thanks.

 

Well usually they're that cheap for reason. So I imagine it would be difficult to find one that would perform above averagely.

 

I'm guessing it would depend on how much you bought it for and body corp?

Have you run some numbers?

 

Like you I have thought about these $200k apartments. There are lots of them. I wonder if there is any capital growth potential it's not like they are in short supply.
I would look at ones with a parking bay.
Is it worth spending a little more?
V705/9 Victoria Avenue Perth WA 6000 - Apartment for Sale #129286830 - realestate.com.au

 

Looked at an apartment in this complex a few years ago. They have come down a lot but body corps were very high from memory.

 

How easy are they to sell when its time to move on.
Your probably also very limited when you want to sell to a owner occupier, how many couples in Perth would buy a small one bedroom apartment

 

Am I correct in saying that the bedrooms only window is to the living area and not to the outside world?

 

I bought an older 2 beddie in west Perth for 310. currently rents for 330/week. Strata is 700/ quarter. Internally it was well kept.
Rental supply is tightening in desirable areas.
I used to live in west Perth in 2013 so thought this was a bargain.

 

Yes.

 

Plenty of supply coming in in the next 3...5...10...15... 30 years! It is the CBD in a City with plans to significantly increase its inner city housing.

BUT, you won’t be picking up that new stock for $200k! So arguably it is a different market.

 

Thats very depressing. The room will look like a cell.

 

The old, "I want to live there and have an investment" is a tricky one. What compromise(s) are you willing to make on location? Would 5, 10, 15 min train commute be something you'd consider? Does the budget hold firm?

In short $200k does not get you too much. However, there is an investment philosophy of Deep Value. You could argue some principles apply to real estate:

1. The cheaper the property is, the more people who can afford it. Theoretically, it should be in greater demand - the bell curve is your friend.
2. Underperforming assets may "converge to the mean." For example if a suburb is out of flavour, eventually the prices of surrounding areas should drive the price.
3. Structural changes to Buyer demographic may encourage a favourable repricing of old apartments. This can be seen in more mature property markets.
4. Below replacement cost.

These all seem a little too theoretical to place a $200k bet. So answering your question in another way, I thought, what would I do with $200k?

• I'd firstly consider how the Strata Titles Act is changing in Western Australia. Some of the laws relate to how a strata title property can be wound up. I'd suggest looking at urban fringe areas in complexes on large parent lots of land, not too many other strata owners and where zoning would allow more units to be added to the site.
• I'd try to keep to a single level or double storey dwelling height. Pay close attention (or getting a professional) to look at the ongoing maintenance of the whole strata complex. Many 1960s properties start to have issues with the exterior surfaces and this can be costly.
• It would be great to check out the strata and confirm where the expenditure goes and if there is a reserve fund.

As always there is heaps to talk about, but hope that helps to some degree before I go off on too much of a tangent.

 

Why someone with a job in the city needs to pay rent when you can buy below 200k?

 

Really? You can't understand why?

I know lots of people that live in the city or at least very close by. Most of them are average or above average earning professionals.

Most of them rent. The ones that own their apartments aren't buying the $200k ones.

 

There are many new Apartment Complexes coming up both in East and West Perth, 1 Bed 1 Bath starting at 370++ and 2 Bed 2 Bath for 500++ . These come with amenities and strata fees apprx $500 - 700 per quarter. How does this look from an investment standpoint, I am looking for buy initially as an owner occupier and would have to relocate if my employer wants me to go somewhere else.
Worst is over for Perth apartment market: Finbar

 

"Finbar" builds and sell apartments. Best for them to talk up the market for their product.
That article is from Feb 24 2017
"He said this would result in a steady absorption of apartment stock available in the market this year with supply pressures building in 2018"

You are aware of current State Governments plans for various large apartment blocks in strategic areas of Perth metro area?

 

Many people on here will tell you NOT to buy CBD apartments. Generally I would agree with them, but if you are looking to live there it may not entirely be an investment decision.

I would stay away from developer stock, it's like buying a new car, as soon as you take it off the shelf, I'd argue it devalues. There reasons why developers keep their prices high, include:

• Protecting valuations on the other properties sold in the complex. This is very true if there are still pre-sales to settle. There is a range of tricks they do to keep the list price high while loading incentives into the contract.
• FHOG grants are more attractive on new builds but this is more prevalent in house and land territory.
• Channel/overseas buyers are often sold stock. To get FIRB approval the stock needs to be new and channel selling can often have lots of commissions loaded into the asking price. If it is not locally selling at a price, they still can be selling stock to offshore buyers, they are just paying high sales commissions to move it - this way the project looks to be 'selling.'

What I'd target:
- Complexes with low levels of amenities (pools, spas, lifts, common area etc.)
- Seek properties that aren't brand new (5-10 years old) as this way you can look at adding value with a cosmetic tidy up.
- A focus on size and an extra car bay if it is within the budget.
- Most of the things are hands off with apartments, but you can control how well you buy, in a hyper competitive sales market (and motivated vendors) you'll be able to secure deep discounts to market value - get it below replacement cost.

Hope that helps

 

Nope I am not aware, I'm just a newbie trying to figure things out

 

Thanks for your inputs...

 

Apartment blocks need a sinking fund from day 1 to cover future planned maintenance.
The "Administration" or Strata fee covers day to day expenses eg pool cleaning etc and minor repairs eg light globes in common areas etc.

I found this with Google. https://www.advancedinspect.com.au/tcwp/wp-content/uploads/2017/05/SinkingPlan.pdf

New or old apartment blocks should have a ongoing maintenance plan. In this case about $6k per year per unit

From what I see most new Apartment blocks (for sale) this ongoing sinking fund cost seems well hidden in selling advertisements. When factored in on top of monthly repayments to me many start to look expensive but ymmv
Also Google finds that a large number of new apartment blocks have builder faults needing repairs. Often lawyers are involved yet another cost for owners