Well, Melbourne CBD has certainly done a turnaround

Discussion in 'Property Market Economics' started by jaybean, 17th Oct, 2017.

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  1. jaybean

    jaybean Well-Known Member

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    Let me preface this with: I'm not trying to hype it up or calling it anything more than it is. Yes, almost anywhere else would have and still is a better place to invest, but for those interested, I have some positive news to report.

    I own a one bedder I purchased in 2012 for $360k in heritage building. Things were good at first, but by about 2014-2015, due to the oversupply, things were looking pretty grim for a while there. Prices were flat or declining, and the rental market was tough. I think the longest I went was about 6-8 weeks without a tenant.

    Fast forward to today. A neighbouring apartment, much worse than mine, sold for $520k. And I just put mine on the rental market on Saturday, and got 2 really good applications today for $450pw. I expected things to be like they were a few years ago - weeks and weeks of nothing, then a call from the agent suggesting me to drop the rental price, then again, then again and again.

    Now it looks like an oversupply has turned into an undersupply due to higher than expected immigration numbers:

    No surplus after all: Melbourne population surge means apartment shortfall – BIS

    Generally I take these articles with a grain of salt but I'm seeing the evidence first hand through sale and rental prices.

    The whole thing is a bit surreal. I thought I was screwed but it's turned around so much more quickly than I expected. I thought it would take 8-10 years to absorb all the stock but within just a few years it's stablised. Wow.
     
    Last edited: 17th Oct, 2017
  2. The Y-man

    The Y-man Moderator Staff Member

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    Nice - whats the annual outgoing on it?

    The Y-man
     
  3. JDP1

    JDP1 Well-Known Member

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    Not really...(title is a bit misleading) you have a unique apartment that differentiates itself from the high rises. It was always slated to do reasonably well.
    For those who own standard cbd, Southbank and docklands high rises apartments are still in trouble. These have not shown organic growth and won't in the foreseeable future given well documented supply issues, not to mention sky high body Corp fees and a huge reliance on BRICS buyers.
     
  4. jaybean

    jaybean Well-Known Member

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    Fair enough. I guess more in my case, being caught up in the same / similar asset class is what was working against me. Kind of like apartments affecting townhouses.
     
  5. Lawrence Barnes

    Lawrence Barnes Well-Known Member

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    That's a good point you make. The unit is in a heritage building, possibly art deco?, just goes to show if you buy something a little bit special it will hold it's value at the least and more likely go up as you are now seeing. I assume it was a small block of units as well.
     
  6. ATANG

    ATANG Well-Known Member

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    Certainly i realised too. Some of the impressive sales lately:

    2br, 1bh (2nd br is pretty much a study anyway)
    302/390 Little Collins Street, Melbourne, Vic 3000 - Property Details
    Listed $680k, auction went high, sold for $820k!

    1br, 1bh, 1cp
    108/33 Spencer Street, Melbourne, Vic 3000 - Property Details
    Sold $1.1m

    1br, 1bh
    101/258 Flinders Lane, Melbourne, Vic 3000 - Property Details
    Sold $770k

    As for modern stocks, it really depends on vendor's luck i think. There are some very average two bedders sold in high six, but some similar sold for 5ish. Those small shoe boxes will continue to stay flat anyway, but the more there are, the better the unique ones will perform, i think. CBD market always need lots of research and careful picking.

    Rent has always been good and rising though.
     
    Last edited: 17th Oct, 2017
  7. melbournian

    melbournian Well-Known Member

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    I think as long as your apartment is well located. it shouldn't be an issue. The apartment market is too many segments.

    The worrying thing about this art deco ones are if you are in an area that high rises will be coming up. you will get a lot of overshadowing in the long run.

    I never had any issues with rental in Melbourne CBD. I am not sure if you recall in 2009 they had auction rentals back then
     
  8. melbournian

    melbournian Well-Known Member

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    you are right - only the student apartments are the ones that are flat

    Docklands - as much as ppl bag it isn't like Brisbane apartments - they still sell. and million dollar listings prices too. There is a reason why the TV show block had features in Melbourne apartments in South Yarra, South Melbourne, Port Melbourne all selling for multi million dollar prices. even re-sales of the TV show block apartments in South Yarra and South Mlebourne experienced capital growth.

    upload_2017-10-17_14-9-30.png

    Also southbank off kavangh st - 400 plus sold in the first week out of 1000+ apartments. There were large number of ppl lining up to buy and agents waiting out. I personally was surprised as I didn't think much will rock

    upload_2017-10-17_14-11-12.png

    upload_2017-10-17_14-10-46.png

    like I said a 1 bedroom docklands apartment will outperform a property in the low socio-economic part in some parts of australia (in terms of combined rental + growth) per year.
     
  9. jaybean

    jaybean Well-Known Member

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    Mine is a 67sqm one bedder (most one bedders are about 40-45sqm these days), and there are only 71 apartments in the building. For comparisons sake, I think I heard the UWS complex has a couple of thousand apartments. Yikes. And 42 out of 71 apartments in my building are owner occupiers, which has always been a surprise to me. I have a townhouse in the suburbs, in a really family-oriented area and the OO rate in the complex isn't even this high, not even close. Not sure what it is about my building that attracts OO's.
     
    Last edited: 17th Oct, 2017
  10. jaybean

    jaybean Well-Known Member

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    Na it was absolutely in the pits for me when I was renting it out...can't remember when. Around the end of 2014 I think. It was sitting on the market for ages and I had to keep reducing rent. The thing is, the tenant I got back in 2014 only just moved out, so I've been completely and utterly oblivious about how much things have improved over the last 3 years.
     
    Last edited: 17th Oct, 2017
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  11. ATANG

    ATANG Well-Known Member

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    I think timing matters too. Rent market starts tightening around spring, summer time, and gets really quiet in autumn and winter. If you advertised during quiet time, it's definitely going to get less response. And sometimes you have big loads of settlement happening within a few months to get absorbed into the market, that could also affects it.
     
  12. The Y-man

    The Y-man Moderator Staff Member

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    That is flaming massive for a 1br :eek:
    Easily a 2BR these days; and probably + "study"!

    The Y-man
     
  13. JDP1

    JDP1 Well-Known Member

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    and hence the influence of location and points of difference .
    This has been discussed before that apartments with similar points of difference whilst having the location will greatly outperform other apartments nearby that dont have these.
    Its certainly not city apartment oversupply = ALL apartments irrespective ( of location and differentials of features) are poor investments.
    Not that you are suggesting this, but a lot of people certainly do.
     
  14. S.T

    S.T Well-Known Member

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    People keep wanting to move to Melbourne, I wonder when it will slow down...!
     
  15. melbournian

    melbournian Well-Known Member

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    Don't think so - although I left the apartment scene a while back - it can outperform even your fav city.
     
  16. jaybean

    jaybean Well-Known Member

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    The problem is in Australia, if you want a “big” city lifestyle, your choices are limited.

    You have Sydney and Melbourne.

    And each are 1,000 apart.

    Whereas in the US you have dozens of viable cities and some of them are just a few hours drive.
     
  17. S.T

    S.T Well-Known Member

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    Not sure I would call that a problem for a property investor owning property in those cities :)
     
  18. jaybean

    jaybean Well-Known Member

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    I’m not, just explaining why Sydney and Mel are the “only” places to be:)

    Then when it’s time to retire, maybe QLD.

    Perth? I still don’t even know why people go there to be honest lol. Outside of the mining boom, to pretty much everyone I know it’s always been Syd / Mel for work, QLD to retire.
     
  19. JL1

    JL1 Well-Known Member

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    My 2c... its not an oversupply until after the boom. Keep in mind Melbourne has not reached full completion rate yet. the bulk of apartments are coming online in the next 2 years. Key developments such as Australia 108, Ritz, Queens Place, Aurora, that Beyonce tower etc, many of which hold over 1,000 apartments each, are still yet to complete.

    Population growth right now is at a peak. We can firmly say that because A) it is strongly tied to jobs growth, and jobs growth is slowing, and B) recent population data shows that the growth rate is slowing.

    So although the overall number of approvals for number of people is actually very well suited (possibly leaning to an underbuild), the timing is what is important here. if population growth drops back to previous levels, by the time the completions eventuate it will cause an overbuild.

    This is exactly what happened in WA. Around 2013, population growth was peaking at over 75,000 people. Approvals peaked at around 35,000 (2.1 ppl/approval). Melbourne is now 146,000 people for ~70,000 approvals, also 2.1 ppl/approval. The problem for WA was that by 2015 when the completions hit, population growth had dropped to under 20,000 people. So it was nearly 2 completions per new person. I don't expect VIC to be as extreme, but there in lies the biggest risk currently facing the market.
     
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  20. Chabs

    Chabs Well-Known Member

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    It was only earlier this year or so there was a discussion about melbourne apartments.

    You could buy an older place for about 7.5% gross yield, and as it was established, the strata/corp fees etc were not too bad. But apparently most veteran PC'ers who knew Melbourne well were saying steer clear! I was interested in looking then but lost interest. I am a simple man, 7.5% yield in a good area (that is, for long term, not immediate term) with cost of funds at only 4.5% was a no brainer to me at the time..
     
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