Report on potential growth of older Melbourne Apartments

Discussion in 'What to buy' started by Ian87, 16th Jan, 2022.

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  1. Ian87

    Ian87 Well-Known Member

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    Hi all be interested to hear your thoughts on this.

    As we all know older style Art Deco and walk up 6 pack style apartments in Melbourne have had pretty poor growth over the last decade. This report by Stuart Wemyss says they are primed for growth.
    This is the kind of asset I would like to buy and live in due to location and architectural style but my finance/investor head says not to because if I do and they don’t grow I could be stuck with it. Rentvesting is obviously an option but finding an apartment with a high level of finish to make it feel the way I want it is difficult.

    What say you? Are they primed for growth? Either way I find both of these links interesting.

    Report here
    Report: Performance review of investment-grade apartments

    Podcast with Michael Yardney here
    [Podcast] An unbiased performance review of investment-grade apartments with Stuart Wemyss
     
  2. The Y-man

    The Y-man Moderator Staff Member

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    IMHO Don't let your lifestyle choices be overly dictated by your investment choices - as long as you can afford it. Get one, live in it and enjoy. Better still, can you rent one? Having a hard time finding tenants for a 2BR (modern, not classic) in Carlton since July... so if anyone rocked up with a 5 year lease offer... :eek:

    The Y-man
     
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  3. Ian87

    Ian87 Well-Known Member

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    Agreed n investment choices v lifestyle. I have thought about renting one but they are generally renovated for renting I.e lower spec etc I love seeing old Art Deco’s with amazing renovations- more similar to what they have in the UL and Europe. A house on a block doesn’t seem necessary for DINKS.

    No tenants since July is tough! You might need to live in and rent out your house!
     
  4. Hamish84

    Hamish84 Well-Known Member

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    No they haven’t. Not compared to newer units.
     
  5. Ian87

    Ian87 Well-Known Member

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    Yes but it’s generally accepted new units are a no go.
     
  6. bamp

    bamp Well-Known Member

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    Have you listed on gumtree? Thats what all the cool kids are doing nowadays, more interest than on realestate.com.au
     
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  7. Hamish84

    Hamish84 Well-Known Member

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    Generally, but always exceptions. There’s many, many micro markets in Melbourne :cool:

    Example, high rise in Docklands and CBD, no good. But there may be examples of boutique apartments that have done well.

    Inner city areas like Brunswick, Collingwood, Fitzroy, Richmond and Chapel Street, some newer units have performed really well (so long as they’re positioned right, have a large floor plan and don’t overlook the concrete walls of adjoining building). PPOR buildings do well. I’m in one of them, have seen 20% growth during the pandemic. But that’s an exception to the rule.

    All that aside, none are as good as houses for capital growth. :cool:
     
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  8. Ian87

    Ian87 Well-Known Member

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    Nice, that is the genera areas and type of stock I am looking at and what is discussed in the article I posted. Many of these types of apartments have got similar floor space as a 2 bed workers cottage but at a considerable discount, obviously no development potential but lower outgoings = better lifestyle and more opportunities to invest elsewhere.
     
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  9. The Y-man

    The Y-man Moderator Staff Member

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    Thanks :) It's the good thing when you get to a decent portfolio that you can afford to have a few empty.

    The Y-man

    p.s. he have a 4 br house vacant too! :eek:
     
  10. HenryC

    HenryC Well-Known Member

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    No doubt the apartment value in Melb now is record low. If this is somethin that you interested in, there's no better timing to get into it now to snap a bargain! In saying that the CG in apartments aren't the same as freehold property so you shouldn't expect that if you are looking at CG. It comes down to your expectation and capability to hold (Starat levy etc)...The apartment cycle took a deep hit during covid and it will take a while to come back up, however I think it will come back up in the longer run...just a matter of time...
    Just like Perth market, it's been quiet for 8-9 years and all of a sudden everyone are jumping into it...
     
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  11. Luca

    Luca Well-Known Member

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    Everyone talking about apartments in Melbourne being at record lows. Any example? I assume good apartments in good location in 6/8 complex selling at less than 10 years ago? I was looking at Heidelberg end of last year and couldn`t find any good deals
     
  12. The Y-man

    The Y-man Moderator Staff Member

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    I agree. Nothing outrageously cheap. Even those for sale amongst the thousands of vacant apartments in the CBD aren't what you call dime a dozen.

    The Y-man
     
  13. Hamish84

    Hamish84 Well-Known Member

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    I assumed the talk of record lows was relative-speaking. Ie, they represent really good value right now.

    I would agree, and am expecting a little boom in apartments (in key trendy inner city suburbs or lifestyle locations) this year. Return of immigration, international students and CBD-based work for some. Plus increased building costs = reduced and/or very expensive new supply.
     
  14. Ian87

    Ian87 Well-Known Member

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    I have found many examples of recently sold very nice older style apartments I.e Art Deco or 6 packs and they have only gone up 10-20% since last sale 5-12 years ago. I don’t mean you can buy a nice apartment for half the last sale price just that the growth has been very flat compared to houses in similar areas so the price differential is much higher than normal.
     
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  15. HenryC

    HenryC Well-Known Member

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    In terms of RECORD LOW, we have to put in considerations and comparisons on the previous purchase price and current asking price.

    Ex: Some off the plan purchasers are having difficulties to settle hence there are numbers of nominations in the market, most of them are willing to lose 10% of their deposit, which means new buyer can secure the property 10% lower than what it used to sell for. Same thing happen to established units, the rental yields are not there and some owner aren't capable to hold and they are willing to take a lost and get rid of it.
    It's hard to time the market perfectly however today prices are definitely lower than what it used to be in the past 2-4 years and you can make your own judgement whether or not it's the good timing to get into it if APARTMENT is something you interested in.
    Hope this helps:)
     
  16. Robbo80

    Robbo80 Well-Known Member

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    You'll need to be picky but apartments that have these qualities should do well especially with how expensive houses are in comparison in some areas.

    - Gentrification potential/rental yield growth
    - Scarcity in position, sunlight, views etc & natural limitations of how many one bedders can be built in area
    - Owner occupier appeal (especially to downsizers and people from Sydney :p) I.e.
    Orientation/liveability, balcony, stairs, safety, parking
    - proximity to PT/amenities and lifestyle areas, walkability
    -TOP PUBLIC HIGH SCHOOL ZONE!
    - quality of tenants - does the complex attract downsizers and young professionals
    - for 1 bedders.. whether single income borrowers in the chosen demographic can easily afford

    However, if you want to be calculating then apartments with zero upgrade/development potential can be valued by their expected future yield net of outgoings and CAPEX. Everyone has different hurdle rates but imo it should be atleast greater than the 10 year bond yield (i.e. the risk free rate) which at present many I believe are not!

    If you don't care about yields then its basically down to demand > supply and the availability of yolo money i.e. like an NFT :)
     
  17. Luca

    Luca Well-Known Member

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  18. Hamish84

    Hamish84 Well-Known Member

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    For starters you’re posting an example of an apartment in Heidelberg. That is not a desirable suburb for apartment living. Hence, that is an astonishingly terrible purchase.
     
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  19. Luca

    Luca Well-Known Member

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    Don`t want to start a back and forward but it is clear to me the value of that apartment which again is not a good deal but definitely not an astonishingly terrible purchase.
     
    Last edited by a moderator: 20th Jan, 2022
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  20. The Y-man

    The Y-man Moderator Staff Member

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    IMHO Heidi is apartmentifying at a hideous rate. Not sure how the flashy new devs are impacting the old ones - eg flooding it.

    The Y-man