Effects of large supplies of apartments on existing stock

@Gingin how is that possible lower vacancy on older apartment ?

Is it because:

1. Older apartment rental rate is cheaper
2. Older apartment size is bigger
3. Cheaper rent means more people can rent it as oppose to new apartments ?

 

People may also rather live in a smaller complex rather than a high rise.

 

Not sure the reason. I was renting at the time.lots of new cafes/ shops came in the area as part of the regeneration of the area. Became a more desirable area to live in. More ammenities and the like.more people more demand. But there always is a price point.

 

Massive glut of units coming online in inner Brisbane over next few years, rents and CG will be zero or negative for many years. I would be selling now and putting the money to better use.

 

Without even considering surrounding suburbs, there has been a glut of new apartment developments in the past 12 months with several more to come onto the market fairly soon. Clarence Road alone has had 4 or 5 new developments; as has Payne Street and Nelson Parade.

You will probably find that your apartment would most likely attract a different type of tenant than those newly built - vacancy is therefore likely to be manageable.

The body corp fee is likely to make things tricky, whether you choose to hold or sell.

 

Absolutely, there's many apartments coming online and recently built. They do have a permium on them compared to the older stock, and are generally smaller in size. Build quality is also questionable compared to older stock.

However, people love new things. It's shiny!

There are just so many variables and history to take onboard. As an investment, it's performed quite averagely. Not bad, not great. I've calculated around 2.48% yield once you take outgoings into account, and between 3% and 4% compound growth capital gains.

 

If I remember correctly, land parcels west of the shopping centre was rezoned and streets like Station Road and Musgrave Road are permitted to build up to 15 storeys.

If you don't have anything that catches your eye, might not be a bad idea to hold onto it and see if a developer comes along and offer to buy the block. Good luck

 

@matchsticks That was a part of the equation in buying there to begin with. However, there's still better options for developers. 6 stories vs 2-3; they'd be after the lowset unit blocks instead.

I don't think we'll be seeing 15 story buildings in Indooroopilly for decades.

 

Several houses and blocks of units were cleared to make way for the Shopping Centre's expansion. Go for a drive if you are in the area - there are 5 blocks of vacant land within 20metres of the shopping centre. Those were mostly 5 storey unit blocks from memory.

 

@matchsticks Yeah I live in Indooroopilly. The apartment I own overlooks the vacant blocks. But what were you referencing this to? I still don't think anyone is going to be building 15 stories there for a long time.

Also, considering Indooroopilly recently had it's $450 million dollar makeover, it's not likely to be growing again anytime soon.

 

Word from the ground is - watch this space in the next 24 months. What is happening in Upper Mount Gravatt is likely to be replicated in Indooroopilly. More and more blocks being cleared to make way for new apartment blocks. Several parcels have been recently approached to consider selling up to make way for larger developments - combining several large parcels...

 

@matchsticks That would be a nice development, but who do they approach? Do they approach the unit owners? Or the body corporate? Is there any way to know who they are approaching?

Sorry for these questions but I'm unfamiliar with this kind of situation.

 

@Jerome apologies for the delayed response. Body corporate managers are typically first approached.. the message then gets passed onto Committee members.

 

@matchsticks thanks for that.

As an aside, it wouldn't be a bad time to start a Body Corp Management business with the amount of unit's being built. I've heard on-site management is a pretty good gig too.

 

@Jerome Body corp management is a pretty tough gig - turnover seems fairly high and generally not something I would personally enjoy. On-site managers do get a decent wage; have seen quite a few on cira 100k with a YoY increment factored into their contracts.

 

Probably too much overanalysing. In short, huge supply = difficult to sell, difficult to rent, probably lose your equity if you geared 85-90% if you were in Melb (not sure about Bris, but hear it's the same).

 

Hi Jerome. I too have an IP there. Up on Russell Tce by the school and Centenary traffic jam

Its a 3 bed, 2 bathroom townhouse around 20 years old. Paid low 4's for it last year. BC is $2k a year.

Problem is motorway noise as its 100m away. Hence the price.
Houses in the street are > $1m

Now with those new builds, purchase price and holding costs - i just cannot see how they can compete with us that hold older IPs with lower holding costs.

I feel very comfortable holding and am of the view that the development of Indro as well as clearing up of Moggill Rd since Legacy Way opened can only lead to capital gains over the longer term for astute purchases.

 

I ended up selling the place. The money can be put to better use as an investment, and the upside wasn't worth the downside risk to me.

@yipman If you've got land then it's a no brainer. My situation was that it was a unit in a 6 level building, with a hefty body corp. It's not attractive to investors, because that body corp kills the yield. The capital gains won't be high on a unit, especially with such a large amount of new units entering the market. It's not even very attractive to home buyers, because again, the body corp ensures they're spending 10k+ a year to live there.

Consequently, the person who bought the unit has done so with the intention to quickly and heavily renovate the property. I'm fairly sure, given the speed with which he wanted to renovate the place, that he is not looking to hold the place, but to flip it. Good luck to him. I'd have done similar but I have no experience in these things and I could easily have spent on the wrong places and ended up costing myself more than I'd be gaining.

 

Sounds like you made the right decision.

I am in Perth and we have a chronic oversupply apartments, they are everywhere and they are not selling.

However, the smaller blocks, older units in well located areas are still selling reasonably well.

I think like many have posted probably stay away from that product, its too high risk, sells well in boom times but then so does everything else.

MTR

 

Good to finally resolve this. I live locally and have pretty good contacts / track record of renovating cheap to achieve higher rent / valuation. Happy to help if you find something a little run-down and needs a bit of work.

Brand new 3 bed room units in Indooroopilly are costing as much as houses that requires a lot of work within the area. Crazy as it sounds, units are continuing to sell pretty well and new stock continues to come onto the market. Kenmore is reasonably close by with really good schools and you can still pick up a house with plenty of land at that price point.