Melbourne Apartments – Is now the time to buy?
Melbourne apartments went through a surge in prices in the last 10-15 years.
Will prices continue to rise as sharply as they did before or dip?
In general, Melbourne apartments can be generalized into these segments:
Different classification of melbourne apartments
CBD, Southbank, Docklands, St. Kilda road, also in some areas in South Yarra – Apartments found in these areas tend to be high-rise, usually more than 25 floors. Most are single block developments but lately there has been a trend where developers are building multi-block developments on larger floor plates with hotels, commercial and retail all in one location. Developers often use unblocked views at the time of marketing as selling point. Many investors, particularly non-resident investors invest in these developments because they feel that ‘they cannot go wrong investing in Melbourne apartments in or just on the fringe of the CBD’. In the case of Southbank, foreign investors like the suburb’s proximity to the CBD and the Crown Casino.
Inner city suburbs within 10km - These apartments are classified as boutique apartments and are restricted by height. The height of these developments is usually capped by the tallest building in the local council. These apartments came about due to gentrification – the process where older houses on larger blocks of land were acquired, torn down and transformed into higher density living areas. Some of these blocks may also be warehouses which were previously zoned as ‘commercial’ and applications had been submitted zoning to be changed into ‘residential’ by private developers for apartments to be built.
These developments are very popular with local residents because of its proximity to amenities such as restaurants, cafes, schools and supermarket.
Melbourne apartments that are located near to schools, especially private schools historically had good capital growth as the demand for these apartments from parents wanting to stay within the vicinity to qualify for entry to such schools is always high.
Looking to invest in Melbourne apartments ?
If you are looking to invest in Melbourne apartments, what should you be looking at? Let’s look at the benefits and pitfalls of each category of Melbourne apartments.
While many high-rise apartments in the city have got views, assuming they are unblocked at the time of being marketed, they face higher competition because of the number of units in the same development. Lately, hordes of Melbourne apartments in the CBD have been launched and sold off-the-plan. Many of these developments will be built with very small ratio of carparks to units and in some cases without any carparks at all. The irony is that most Australians drive and more importantly, I haven’t known anyone living in Australia without a car. What most marketing agents tend to tell their clients and prospects is that if you live in the CBD, you are close to your work place hence there’s no need for a car.
But what happens on weekends? How do you go out of town to meet your friends? Are your friends all confined to the CBD or within walking distance from the CBD?
Allow me to provide you with the best advice – Never buy Melbourne apartments without carparks, period.
In a recent report compiled by economists of HIA, it was reported that the supply situation of apartments in Melbourne city(confined within the Melbourne postcode of 3000) will reach a surplus of nearly 2,000 by the year 2020 according to an annual medium built-rate. (The built rate is a number derived from a modeling analysis).
For most of the boutique apartments within 10km of the CBD, nearly all have one carpark per unit in the development. The density is lower and competition for tenants is not as intense as those in the city. These developments do not come equipped with pools and gyms hence they attract lower body corporate fees and that increases the returns for investors.
Whether you are buying Melbourne apartments in the city or in inner city suburbs, do bear in mind the supply situation at any given time. At any given time with an unusually high supply of apartments completed, there will be a longer ‘soak-up’ period which would mean loss in rental income and opportunity costs.
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