Melbourne CBD - received offer over ~28% what I paid in 2012...sell or hold?

Sounds as if the place is ticking along nicely. Should be at least neutrally if not positively geared, so not costing you anything to hold, except possible opportunity cost.

Unless you have a better use for the money that a sale would release, I would hold on the basis that the property is attractive and a bit unique, not simply a small dog box on an area with thousands of similar places.

And if you live nearby, you have a perfect Airbnb option of you choose to go that way.
Marg

 

Why would you sell this? The doom and gloom about Melbourne apartments is mostly nonsense. Be sure to keep the rents at current market value.

 

I would hold if you can afford to. You will walk away with too little if you sell. After you factor in stamp duty and selling costs you will have hardly made a profit. I'd wait and see how things are in 10 years.

 

How is it nonsense? A study published last week showed 60% of new Melbourne apartments sold at a loss over a period of more than 5 years (since 2011). Oversupply and malaise in the apartment sector of the market isn't "doom and gloom" and dismissing it as such is unhelpful. Right now CBD apartments are an asset over-exposed to inexperienced investors. Apartments are disproportionately targeted by people on lower incomes and by non-residents. Rapid construction is increasing supply and as new apartments approach settlement, a rising number of owners and developers can't move them on, making discounting a real risk. Established houses, in contrast, are mostly targeted by families looking to own - so aren't as exposed to changes in market sentiment. If prices do correct, houses are far more likely to weather any hiccups, as owners have a very different risk threshold.

 

Hey @jaybean, i understand how you feel. My advice is, it depends on your financial ability. If you are financially strong, and this is just one of the many holdings you have, i'd say leave it there. It's a great asset to hold. The more tiny boxes they are building, the more valuable these old assets are. I am in love with all these heritage apartments, and have been to countless auctions of these. You have to be physically there to see how crazy some people are to get them. With yours, i see big potentials... I think $450K is too cheap to sell.... after all the costs.

However, if you own only a few and you definitely want to cash out and put that money on somewhere more potentials, then just sell it, it's a good time to sell. But the problem is, it's almost same expensive elsewhere.....

 

Sounds like they want it a lot, add 10k to their offer and tell them to take it or leave it. Personally, I would be offloading.

 

Which means 40% sold at a profit. Only 1 or possibly 2 of those years (since 2011) could be 'over 5 years' so again a very dubious study. There are some people hurting with apartments, but there is no 'Melbourne' market, with instead, many smaller markets within...some doing very well.

 

Perhaps, but if you're a buyer and there are thousands of apartments on offer you're still competing in a loose market. Apartment owners risk getting caught by developer discounting. Capital growth in the apartment market in Melbourne has been rapid, but so has development. I agree there are fewer large apartments available, but they aren't that hard to find - there are 50-odd listed in just the suburb of Melbourne and hundreds more in surrounding suburbs. Personally, I think the likelihood of future growth is limited, and is outweighed by the benefit of selling now at a solid profit. I do acknowledge though it's got an edge over other apartments.

 

No, it isn't a dubious study - it was published in the last week by BIS Oxford Economics, a highly reputable firm. You not liking the findings doesn't render it "dubious".

 

I agree with Gockie; hold.

The thing that stands out to me is how APRAhensive turned your serviceability on its head, so one (slightly unpopular) option is to pay down some principal where cashflow allows so that you can sooner be in a position to jump on a new investment.

 

I agree. I was in a similar position back in the day and sold my Melbourne cbd apartment and reinvested proceeds into more OO tightly held Brisbane suburb with more land. No complaints so far.
Oversupply of cbd apts killed cg... And will continue to do so. You are not just competing with your building in particular - rather similar stuff on docklands, Southbank etc. And the body corporate must also be fairly high for what you have.
Does depend on your goals of property and what else you plan to do with the sale proceeds should you sell..
Maybe engage a re agent to see what it can list for.. If it is indeed the 28pc above you think it is.. May not be. Have you received an offer for 28pc more or is it based on what you think you will get?
Also, if you are after cf which you say is long term goal, obviously there are other assets and markets eg Brisbane or even non property that are high yielding (just as much if not more) and I would think have better cg prospects than what you have.

 

It's a niche apartment, can see why it's increased. I'd be holding on also, they're not making anymore of these so you're in a unique position and all the owners in the building is a great sign.

 

I like the building design very much. Interior is okay. Ample natural light would be good. If I can hold without costing me much in my portfolio I will hold. Nice apartment for AirBnB. Oh, they don't build these anymore.

 

- All the ones in massive supply are modern boxes, one and two bedders. They are completely different niche than yours, can't compare like that.

- Sunlight or no, it doesn't matter, because photographers can make it looks so nice. Most people who walk into your apartment will be enlighted by the ceiling height and spacious size and the unique double storey layout.

- Most people who bought these apartments are different audience than those lending to buy OTP boxes. These are more mum and dad who reside in suburbs, have massive wealth and equity and only see these as collections. Chinese or students won't touch these products because they like those new fancy OTP.

 

ok, so, that comes to about 6% net rental yield.
Not too shabby, not great either. What do you think the CG portion will be? I would say MAX 4% pa. ( for the next 5 years, maybe a bit more after that once supply gets absorbed, assuming BRICS money funding these are still the main sources of capital and these numbers hold- its over 50% at this point), taking total returns to 10% pa. This is i would think best case scenario. Again not too bad, but i would think there are better investments out there that offer higher yield or cg potential or both in combination.
Yes, this will have less competion from new and even existing ones in high rises ( which this is not), but there will definately be some - especially given its a 1 bedroom.

 

Ok

So you've got a nice apartment , in a good central position which isn't a standard apartment in a generic block .

Good yield

High level of OO's

No vacancies ?

Melbournes still going up at this stage .

There's always talk about unit oversupply in Melbourne , but you're not talking about docklands here .

Someone's put out an article saying the property market's going to tank ....big yawn , what's new .... sorry , that a lot of properties are selling below purchase price , but yours isn't one of those , so that sounds like for the central area you've made a good buy

YOU CANT BUY ELSEWHERE IF YOU SELL THIS ....

Why sell ?

Cliff

 

so there you have it @jaybean ..a mix of opinions. Doesnt look like there is any definitive answers based on consensus at this point...