'Don't buy a Melbourne apartment off the plan' says burnt buyer

An article from the AFR:

Anyone clued in on the Melbourne market please chime in.

I wonder how this will impact on the wider Melbourne market. Given that lending criteria is now beginning to tighten and supply is increasing rapidly, then unit/apartment prices would be expected to fall.
Cheaper apartments would satisfy the demand for accommodation. I would also expect a fall in house prices, mostly due to the lost demand, increasing apartment supply and restricted lending.

What are you seeing on the ground?

Cheers

 

OTP apartments have always carried the risks risks described regardless of location. Inner Melbourne is oversupplied, has been for a very long time now and that's not going to change any time soon.

OPT prices don't necessarily always follow the market. Developers often create their own market through their own marketing, such as limited releases or marketing to out of town and overseas investors. It's when compared to the rest of the market that they fall in value, vs the value they were marketed at.

 

Glad to see the investor in the story ended up being able to reinvest and did well in the Sydney market. I wonder how she afforded the deposit on the Sydney property if she couldn't raise funds to settle on the Melbourne property?

The Melbourne market is becoming increasingly polarised. Real estate in sought after areas (ie with prominent schools, select entry schools) and with established infrastructure will continue to be highly contested. Quality Terrace homes and large family homes in such areas will continue to be sought after and priced accordingly.

Quality, well designed and well located apartments will also do well. Older style apartments will continue to be an entry point for first home buyers and investors.

The areas I'm watching, which are close to the CBD are still achieving high prices.

 

Places like Moonee Ponds and Northcote would not be considered as inner Melbourne? What are your thought on apts in those areas?

 

Melbourne market has been polarised for the past 4-5 years and will get even more.
On one side you have the likes if gw, Glen iris, etc ie the eastern and southeastern inner - mid going off...on the other hand you have southbank/Docklands apartments, which have hardly moved in the last 4-5 years. Supply has killed the cg in the CBD apartment market and it's not just otp, even established Hi rise apartments have barely moved.

 

Off the plan always comes with risk - even within markets that are rising. Take Canberra for instance. The market for detached homes in established suburbs is performing strongly - whereas the market for new/off the plan units is very weak.

The worst valuation result I've seen was for a Melbourne off the plan purchase a couple of years back - it was valued $80k less than purchase (it wasn't a huge purchase price either - I think it was around $600k)

 

We received some info from a NAB presentation recently and the banks have no idea where the finance behind 70% of the apartment developments in Melbourne city has come from.

The implication was that 70% of high rise development is being paid for in overseas cash

 

you dont need changing arpa laws to experience the same sort of low valuation issues faced by this lady,

its normally buyer beware, however, she did what was right and followed the rules and still got burnt....

 

I heard this too...the split is 70 %foreign capital and 30% locally sourced funds.
That was for establishedCBD apartments. Could be higher for OTP.

 

Hi,
I have seen the OTP market being hammered at the moment. I had two clients who bought apartments and there have a couple of things that made the purchase a) not worth it and b) great lesson for all of us.

I had one client where the advertised size of the apartment was not the actual size, no lender wanted to touch it unless the customer had a 30% deposit.

Another one i had a few lenders value the property allot less vs when it was purchased.

 

The title is a bit misleading as it should read "dont buy in melbourne CBD and surroundings". Dont see them growing any time soon. Other than that there are areas that has a lot of potential for off the plan or established units.

 

Happening in Sydney, Melbourne, and Brissie.....lot of people not being able to settle...just not in the news yet. It will come though...what were they thinking...much safer to buy an existing product and safer....and much cheaper.

Sydney is the one to watch....

 

You forgot Perth, massive oversupply of apartments, developers building shoe boxes and not all OTP is equal.

As Jingle mentioned Melb OTP apartments, good layout, smallish complex, good locations are fetching great prices but they are more unique/boutique apartments.

MTR