‘REGISTER YOUR INTEREST NOW!’ scream the adverts for the multitude of apartments springing up in inner Sydney and Melbourne in recent years.
But don’t let the advertising spark a fear of missing out. The proliferation of these generic apartments is good news for renters and new buyers, but bad news for existing owners.
Property industry experts believe the current over-supply of this type of housing, and recent falls in their value, means renters and buyers can shop around to get the best possible outcome.
But so far, not all investors will have come out a winner. The Australian Financial Review this week reported current investors struggling to find tenants with one forced to cut rent from $600 to $525 on a $600,000 apartment in Melbourne’s Southbank.
Australian Property Monitors data revealed falling rental returns across most capital cities in the year ended June 2014, with Darwin, Adelaide and Hobart reporting small increases.
Research by real estate chain PRDnationwide shows that between 2010 and 2014 there was an fall in value in about 40 per cent of sold property prices in South Yarra, Port Melbourne, West Melbourne and East Melbourne in the city of Melbourne, and Pyrmont, Ultimo, Glebe, Potts Point, Paddington and Waterloo in Sydney.
Dr Mardiasmo says the median price of an apartment in Port Melbourne in 2010 was $665,000, while in 2014 it is $560,500.
In Melbourne it was $447,750 in 2010 and in 2014 $470,500. In Sydney’s Ultimo the median price of an apartment was $575,000 in 2010 while in 2014 it is $540,000.
Australand’s Victorian residential general manager, Rob Pradolin, agrees that recent reports of an over-supply of apartments in Melbourne’s central business district are broadly accurate.
“There is a looming over-supply of generic apartments which will hit the rental market over the next 12 to 18 months in Melbourne,” says Mr Pradolin, who is on a Victorian Government-appointed committee looking at devising minimum design guidelines for apartments.
He says many apartments sold to investors are getting smaller and smaller – one bedroom affairs covering 42sqm.
“A lot of them are being built by Asian developers.”
Mr Pradolin says those looking to rent in the next year “are going to have a smorgasbord of choice”.
“You can probably command your own price,” he says of the areas affected by an over-supply of apartments.
“And the price of these generic apartments will continue to come down because there is too much supply. But from a purchasing point of view, well located and designed apartments will hold their value and be a good investment in the longer term.”
Master Builders Association of Victoria chief executive officer Radley de Silva says buyers should take a number of steps before taking the plunge in the current over-supplied market.
“Compare the size of the apartment and the cost to similar developments in the same area, and make sure you get value for your money.”
Know your neighbours
“Ask about who lives in the apartment block. Is every apartment full of students looking to party all night or are there lots of owner-occupiers in the building?”
Do the numbers
“Make sure you know you can afford everything before you sign anything. And look at what the average price growth, vacancy rates, rents and demographics for your suburb is so you know you’re making a good investment.”
Location, location, location
“Is the apartment close to all the facilities and amenities you are after, like public transport, schools, jobs, shops and car parks? Make sure you also understand if other buildings may be built nearby and what impact this may have on you.”
Who will be building this project?
“What is the track record of the builder, developer, architect and sales agent?”
Don’t be afraid to ask
“Ask your developer as many questions as you need before you make a purchase, and inquire if you can negotiate on price. Renters can do the same. Questions can also include asking to view completed apartments or checking in with previous clients.”
“Review the plans for the property and consider the size and features of the layout. Take the plans to the site and familiarise yourself with the layout and views.”
“Study the contract to ensure you are protected against any price rises in construction and make sure there are no clauses allowing the developer to vary the construction of the development. Get proper independent legal advice from a specialist property lawyer before signing anything.”