A 1 bedroom 1970s apartment with 1970s kitchen has to be at the bottom of the totem pole as far as desirability is concerned. I'm sure the area your apartment is in is nice, but there are nicer areas, more central locations, bigger apartments, newer apartments etc.
$550k is and was the median price of all apartments in Melbourne in both December 2019 and now. So the general market for apartments seems to have stayed still and not gone backwards. ($550k not just 1 bedroom apartments; it's all apartments.) That yours has seemingly gone backwards by a significant amount suggests you overpaid.
FWIW, the median sale price for 1 bedroom apartments in December 2019 was about $450k and now it's about $400k. So you paid $100k over the median and are now getting offers $50k over the median.
It's almost like it's possible to make poor investment choices no matter the type of investment.
Are you going to hold yourself accountable and admit overpaying during the peak mightâve been a poor decision?
Why are people being such enormous dicks to OP?
Theyâve graciously taken everyoneâs advice, explained where their mindset was at when they purchased, and havenât said anyone is wrong or anything.
This comment is so freaking dorky.
âARE YOU READY TO ADMIT YOU FUCKED UP?!? HUH!!â
Youâre grouse. Get new tenants into the place and hold on to it as long as you can afford the mortgage.
Selling now is just locking in your loss, owning and paying the mortgage down is just paying more equity into the place.
Market probably turns up a bit even for apartments in the long run!
Because a lot of people in this subreddit have a chip on their shoulder.. they didnât buy all these years .. and this story right here absolves them of that questionable decision.
No, wasnât having a go at people overpaying, or even saying that people were. My comment was more about how difficult it was for us as FHBuyers to get into the property market, when properties were routinely selling at auction at much more than the stated price guide.
Well, I believe Iâve said 2 or 3 times in this thread that we overpaid, and I think itâs obvious that was a poor decision, otherwise I wouldnât be asking strangers on the internet for their advice.
Nope, it was the belief that property only goes up.
Iâd suggest renting if the market is more suitable to that, unless you have something you think may offer better gains over the period, however it is harder mentally to eat the loss and ignore the sunk cost fallacy.
It happens. I lost a heap of money on a gold coast town house in the 90âs. Was forced to sell as I had a tenant who didnât pay rent for 6 months and then stole all my furniture and tried to sell it at cash converters.
I was only on $32k at the time and it was bleeding my dry with no rental income coming in.
I offloaded it and carried the loss forward.
I looked at the most recent valuation for it and found that had I kept it, today it would be worth $500k. I bought it for $130k in 1995, so the annual growth over 29 years would have only been a little less than $13k.
In other words, taking the loss back in the 90âs was preferable to prolonged misery. You have to know when to cut your losses, and youâll have a sizeable capital loss that can offset any future gains you might make.
I don't believe you deserve to be downvoted OP.
You made the best decision you could at the time, that is OK.
It's a hard thing to wear (bad financial decisions).
I signed with a builder that went bankrupt and it cost me crap loads.
Iâm sorry my dude but I think you definitely overpaid. One bedroom stock in south Yarra is unlikely to go over $450k. Unfortunately apartments donât grow like land.
I made a similar mistake trying to use an apartment to build equity. I did end up making it work in my favour though. Bought a one bedder in armadale. I held onto it for ten years. Was able to charge sufficient rent that it basically paid off the mortgage. So I got the entire apartment without really having to put any money into it myself other than the deposit. After ten years I was only able to sell it for $30k more than I bought it for. Thatâs a long game strategy though. But it is a way you can make record high rents work for you.
Same for me in Brisbane. Bought off the plan in 2015, build was finished end of 2018. Lost $40 k from time of purchase to settlement date. The apartment has only now just recovered back to purchase price. Maybe $5-10k over purchase price in the past 6 months.
Agreed, but at the time off the plan were increasing significantly in price from point of purchase to settlement. Unfortunately, during the build period, the same area had a huge amount of developments that all settled at the same time driving down the price as there was a flood of new apartments in the market. I will never buy off the plan again.
I donât know why anyoneâs surprised, what reason do apartments have to appreciate ? New apartments come
Online and continually devalue the others around it which are degrading. The land underneath might be appreciating, but itâs not like you can knock down your portion of the building.
Good to live in, terrible investment
Units sure as hell appear to be appreciating value here in Sydney. Seeing art deco blocks going up 20-30% since COVID times. Nearly doubling in value since late 2000s.
Any general comment cannot obviously apply to every single situation, highly unique places with interesting characteristics are obviously going to buck the trend, but by and large that does not apply to the majority of the market. A place doubling in Sydney over a 15yr period is not much to phone home about when itâs grown at 1/2 the rate of everything else surrounding it in the same period.
A rising tide lifts all boats as they say, and Sydneyâs rise it akin to a tidal wave as compared to the other capital cities
Units can temporarily appreciate due to low supply, something that can be resolved at any time.
Townhouses (without body corporate) and houses permanently appreciate due to land being finite.
These prices will drop, apartments are for living in. The strata and lifestyle. The current trend is only due to insane population growth. Over borrowing is sad, these threads are going to be full of "everyone told me to just buy now and not wait" in a couple years time while they sit on -300k depreciation and no way to sell and break even.
Look at china to see how it plays out.
Only terrible investment at current buy-in prices. The yields are low because itâs too easy to borrow money and buy. Itâs definitely possible that yields can go higher if prices/rents adjust.
I remember when I moved into Southbank / Melbourne nearly 2 decades ago and looked at apartment prices. They hadnât moved from the price they were a decade earlier. If memory serves me correct they were around 500k back then, so after 30y theyâre now valued at maybe 700k, oof.
Inflation alone would require it to be 1.1M
Oh sorry Iâm asking what the difference between an apartment and a unit is. I didnât think there was one and use them interchangeably maybe thatâs wrong
If it helps itâs a three bed two bath with views of Broadwater and out to ocean. Has a big balcony overall I think dimensions of the unit are about 170 sq m. Itâs in Southport so not a highly desirable area
So typically a unit is referred to as a ground level building thatâs typically but not always connected to other units on a shared block. More like a small house, half of its price is usually the land price.
Apartments are typically referred to as one of many that belong to a single building, a low set of apartments might be a 2 story building with perhaps 3-4, a large bustling may have more than 100. The amount of value in the price of the apartment that is land vs building cost scales with how many apartments make up the building.
In a 40 story tower with > 100 apartments, most of the cost is a depreciating building cost. The land is already zoned for dense residential and as such the price gains are much more limited.
Units on the other hand can be knocked down and replaced with a higher density apartment building which represents an increase in land value purely from rezoning.
The gain was the whole property price less deposit. Being OP has suggested rents covered all outgoings.
Thatâs the old school way of property investing.
If you're planning on buying a PPOR house at some point in the same market then you're better off selling the apartment and buying a house ASAP. Forget what you paid for it, it's irrelevant. Look at comparable sales and set your expectations there.
The reason why you should sell is simple. Single bedroom apartments will never appreciate as much as larger family oriented apartments and they will never be anywhere even close in appreciation to standalone houses (or even duplexes/town houses). So if the apartment does go up in value the longer term objective PPOR will have gone up by a lot more leaving you even further behind.
Apartments are good to live in, not as investments. Perth currently has apartments going way over their value and I feel for all the people paying stupidly high prices.
VIC Land tax reducing the number of interested investors. Thereâll always be first home buyers but they wonât be the ones throwing out amazing offers.
Higher than before, Dan Andrews reduced the land value threshold that lots of apartment holders are now having to pay land tax where they previously haven't
Kinda amazing how many donât read what you wrote and stick the boot it.
Sorry this has happened to you.
It would have been easy to get lost in that market at the time. There are hundreds trying to offload their places right round the bay - even parts of Melbourne are coming off boil - seems many thought it was never going to stop too.
Hopefully you can recover and get on to greener pastures asap!
Go prove the haters wrong
Yeah, and the market for buyers for studios and 1 BR apartments is very small too, since everyone would outgrow it very quickly. Hence the steep drop in price.
We have a two bedroom apartment that we bought two and a half years ago and updated with a new bathroom and kitchen. We would likely lose money if we sold and have just rented the property out to move interstate and are getting almost $200 more per week than the apartment last achieved due to a combination of the rental prices at the moment and our renovations. We plan to hold for as long as we can, and while we didn't want to be landlords, our circumstances have made this the best option for us. The rent covers the mortgage (for now - four months left of low rate bliss!), and we are out of pocket for maintenance, strata, rates etc. I keep reminding myself how fortunate we are to be on the ladder, even if it feels like we are at the very bottom.
I think things will plateau for a while. What are your plans for the money? It might be best to cut your losses. The truth is that apartments are not the stepping stone to a house that we all think. I know because I made that mistake myself and held on for too long waiting for the market to pick up (an opportunity cost). Now Iâve sold the apartment and have a fixer upper house in a nice outer suburb and already I can see itâs a much better investment.
An apartment is also a good investment - itâs just an investment in lifestyle rather than purely financial. When you âinvestâ in a house in the outer suburbs, you just pay for that investment in time (through longer commutes in many/most instances and less convenience) instead of money.
Time is the ultimate opportunity cost. Weâre always spending it and itâs impossible to save it. We also donât know when weâll run out, and because we age its scarcity is much greater than what we all think.
When you buy an apartment in South Yarra, youâre buying the opportunity to live in South Yarra. A nice, wealthy suburb with heaps of amenities and infrastructure and a lifestyle that most in Melbourne would covet. Thatâs still wealth. What do you give up is growth in nominal wealth, because you couldâve taken that Money and invested it elsewhere. But then youâre not living in South Yarra. Perhaps youâre living in Truganina. You effectively âboughtâ the opportunity to live in South Yarra with the opportunity cost of where else you couldâve put that money plus the money you lose by selling the apartment. Probably a bit steep for your liking, but thatâs how markets work sometimes.
Before deciding to sell itâs worth working out how much you owe, what youâre interest payments are, what you could get renting it (drop this by 10-15% because you donât want to bake in historically high rents into your model), what your equity is, and if you could refinance that mortgage into a house somewhere. Youâre unlikely to make back that 100k over the long run, but you could leverage yourself into a house in the outer suburbs with cash flow helping you pay both mortgages and then in however long, way down the track, youâve bought yourself a nice 1 bedder weekender apartment in south Yarra. Just something to think about.
Let's talk about opportunity cost then shall we.
PPOR capital gains are tax free. So, it's very logical to buy a PPOR with maximum capital gain potential possible.
Apartments offer little or no capital gain, so not only do you lose out on capital growth, you miss out on thay juicy tax benefits while also paying huge sums of money in strata. It's the worst case scenario.
Yes but when your PPOR goes up in value, so does every other house. So unless you have multiple houses or are going to sell your house in say Melbourne and move to another city/country with considerably cheaper property, youâre not really gaining much. Youâre just selling one house to live in and buying another in the same or another similarly priced market.
It depends what youâre buying. Maybe the buyer wants to buy another apartment. Plus they had the gain of a better lifestyle over that period - swings and roundabouts đ€·đ»ââïž
Itâs only logical if the present discounted benefit to yourself of those (assumed) capital gains is greater than the opportunity costs, both present and future, of purchasing that freehold property. And those opportunity costs include interest payments, depreciation of structure, maintenance, where else you could have put your mortgage payments and, crucially, lifestyle.
I live in and have a mortgage on a 2 bedroom apartment in a suburb like OP. I live 15 minutes from work and never have to drive anywhere. Im right in the thick of one of the most vibrant, wonderful cities in the world, with infrastructure and amenities at my doorstep that would make others living in comparable cities jealous. Iâm on 145k a year and my mortgage plus OC fees are comparatively so much lower than if I had levered into a freehold property I have so much fucking disposable income Iâm able to take myself on an annual holiday overseas each year, go out each weekend, and put a decent surplus into my SelfWealth portfolio.
But then again, I couldâve levered myself to my eyeballs and bought a shack in Seaford, and been a mortgage slave.
As I mentioned, the cope is strong.
You made a bad financial decision and are desperately trying to justify it.
You should have leveraged yourself. Your other investments need to earn dollar for dollar plus the tax difference to equal ppor capital gain.
Apartments work as a rented investment property where the yields are strong and extensive costs are all deductible.Â
Yeah it's best to buy something with a land component, where you can afford to. For the same price ($550k) you could have gotten a brand new built freestanding house on 500 sqm of land at Alkimos on Perth's northern fringes close to beaches back in 2019 with loads of features and inclusions.
That sold recently for $780k!!
I have the same regret as you, choosing Geelong over Perth at that time. A lot less headaches in newer houses too after having bought a 60s built.
9/10 times apartments end up selling for a loss if they are off the plan ones, where the builder has a collosal profit margin and people are sucked into buying brand new.
It's odd that a unit in a boutique apartment complex in a blue chip suburb with loads of heritage overlay restricting supply (assuming this is Melbourne?) and low strata (assuming 70s built means no gym or swimming pool) is selling at a loss.
I think you overpaid for that one in 2019. Tough luck. Chalk it up to experience when buying your next property, perhaps consult a buyers agent.
This is why I'd choose a unit in Brighton, Toorak, St Kilda East, Richmond, Albert Park over say Footscray or Southbank.
Yep we deliberately avoided new apartments or anything with a pool/gym/lift etc. Itâs in South Yarra on a quiet tree-lined street a quick walk from the river, library, tram and oval etc. We thought we had done well but yes we definitely overpaid.
Buyerâs agents arenât magic - they wonât save you much money but will help you locate properties (particularly off market) and can liaise with sales agents on your behalf if youâre moving interstate, donât have time etc.
True. I think regardless of where you buy it's best to do your own research. Study the area extensively, set hard limits and always be prepared to walk away.
You really don't need a buyers agent, but I see so many of my friends getting roped into H&L packages on postage stamp sized blocks in the middle of woop woop or off the plan high rises, simply because it's new and shiny.
That being said, in Melbourne it's turning into a buyers market. We bought our PPOR last week. Most suburbs went down in price in the last 12 months. I predict it'll be the same trend for the next 1-2 years.
Lots of people who bought during the pandemic are now selling due to interest rates and land taxes rising. Lots of people are rolling off fixed rate loans to and are being hit with the mortgage cliff.
If OP can hold for the next 2+ years somehow, that's probably going to get him the best result in this situation. I do think eventually the tides will turn again.
I saw a video recently, if you buy a titled land (350 - 400 sqm) on Melbourne's West (Werribee/ Truganina/ Tarneit) ~ **$350k**
And build a brand new house 4-2-2 house with a reputable builder with some added inclusions, driveway, landscaping and curtains/ blinds (in this market) - **$500k**
**That's $850k for the complete thing.** No way in hell it'll actually sell for that much (forget making a profit) once it's built. You can pick up something like that on the market for $700k-750k.
South Yarra has been building tank loads of new apartments in tall buildings over the last decade. Heritage overlay isnât overcoming that itâs probably one of the most developed suburbs in inner Melbourne
Nothing wrong with buying for lifestyle. Indeed I would say that is the most important factor in buying a PPOR. If you were not that interested in capital gain then it doesn't really matter, or at least cannot complain about it.
Would you have preferred to buy on the outer fringes of Melbourne and given up living well just so your house can accumulate in value? Is your house serving your lifestyle or are you sacrificing your lifestyle for the benefit of your house?
During COVID our values and perspectives really changed - living close to the city wasnât as much of a priority. Weâre now renting in a different state in a coastal town and loving it. Would love the capital gains however for a PPOR and to avoid that sinking sense of failure⊠đ
Sounds like an option at the moment might be to become a long term rentvester. Be a landlord whilst being a rental slave at the same time. The two can cancel each other out. You might find over time that the property recovers some of its value. When rates go down some confidence might come back into the market.
Or just cop it, take the cash and buy a place with land in your new location. The latter is probably financially more sensible if you can write the loss off as a property with land will appreciate faster than your apartment.
Google shows Geelong median went from 720k to 1,000,000 over the last 5 years compared to alkimos 375k to 585k. How did you fail buying in Geelong but not alkimos?
Thanks for the reply. Weâd like to buy a PPOR house eventually. At least we can negative gear, I guess, which helps at tax time, but itâs not nice feeling watching similar apartments going for $75k under what we paidâŠ!
if the apartment is covered by rental income, you have the luxury of choosing when to dispose of it.
The issue is when it keeps eating away at your cash flow as you generously subsidise your tenant at the expense of your own lifestyle. If you are negative gearing. you are making a loss every year on a property that is not going to make you anything when you sell it. Under those circumstances, whatâs the reason for keeping it? Investors only negative gear when the capital growth outweighs the ongoing losses.
Donât be afraid to ditch a poorly performing asset just because you have sunk all these costs into it. Get some financial and tax advice and work out your exit strategy.
Melbourne apartments havenât moved since 2010. Sorry but when i hear the word âblue chipâ i know you got sucked in by marketing. South yarra is overcooked with apartments
Apartments can be a great way to get in the property ladder and a steady income stream with little care in the future. We bought our 2 bed 2 bath in Brisbane within the 10k radius from the city in mid 2021 for 385k. It was 4 years old at the time, and so a no brainer for us, however, we did lots of research on the area and the Apartments in the area, counted in the Olympics and general growth of the property and forecasted best and worst scenarios to see if we could afford repayments in the worst case scenarios. We froze our rates for 4 years at~2%. Our target is a potential selling date right after the Olympics hoping for a good profit at the end. However, Apartments in the same area are selling now for 600k+ which now allows us to use equity to buy our second property, and we are in the process of finding s good bargain hopefully again. I guess it takes a combination of due diligence, timing and lots of work to get a foot in the market that can allow you to move further steps in. Id say you lose some, you win others so persevere and plan for the worse! Remember, the market is speculative and can tank any time, just plan carefully so you can weather the incoming storms! One thing though, i didn't know but it turns out in Queensland you can buy management rights to apartment blocks, which sucks because you endup having to pay high body corporate fees to cover the salaries of useless managers...
I think there are some exceptions. My BF and I bought a 2br art deco apartment for 415k in 2015. We sold in 2022 for 685k. (Melb, inner burbs).
Around the same time, our Friends bought a 2br in a 70s block in Brunswick East. They also sold in 2022 and made about around the same percentage gains as we did.
So apartments can do well. Obviously not as much as a house, we would have loved to have bought a house, but just couldnât afford it at the time (and canât now, due to interest rates). At the time, the art deco apartment was a really lovely, liveable compromise.
Maybe itâs the 2br thing. Scarcity of the deco and the desirability of Brunswick. I donât know how we did so well, especially considering the comments here. Youâd think it was the stupidest thing in the world to buy an apartment.
If you donât need the money, just sit on it. Youâd still be getting good rental returns and I think there will be stronger demand for small, neat 70s blocks in a few years once people realise some of the body Corp feels the new apartments charge is really restrictive.
As long term renter, briefly plucked by the gods into my own home before being plonked back down into the rental swamp, I always preferred neat, well kept 70s blocks. Windows you can open. Hallways that didnât smell like cooking, and fittings/services that are long past their growing pains stage. Good luck!
Don't get me wrong though, there are horses for courses - the location and lifestyle of apartment living does have some big upsides, however they're not a great investment in the same way that a detached building on land is
Apartments are a lifestyle choice, rarely a good investment, can always build up, canât build more land
The drop sounds bigger than normal, maybe try a different agent
Apartments have always had slow growth in Melbourne from what I have observed. It is possible that you overpaid for the 1 bedder. There has been a lot of apartment developments near the city. My property hasnât grown much at all since I purchased it 10 years ago. The suburb has seen a lot of buildings developed. My apartment has two bedrooms and a study. Bathroom and ensuite, and seperate laundry. The rent has gone up, more so in the last two years. I anticipate that things will improve in the future.
The land tax isnât major and doesnât break the bank, mine was around $900. I donât think this is a major issue. It is higher if you own a house.
Melbourne is a bad for property investors. Speaking from experience but also all the recent media coverage.
Even if you are not an investor, they are a large chunk of possible buyers so not having access to as many of them affects your prices
This is good news for future buyers, but not if you already own a place.
We bought an apartment 5 years ago as our PPOR. We knew it would not make money and would possibly decrease in value over time but itâs exactly where we want and does exactly what we want. Almost identical apartment sold for $140k more than the sale price about 6 months ago and apartments in the building are consistently selling for more than they originally sold for off the plan but thatâs not usual. The rent you can get for them is bonkers. Apartments are rarely an investment if youâre living in them.
Sadly you might need to cut your losses and sell. An expensive and painful loss, but that type of property in Melbourne isn't increasing anytime soon given how weak the investor market is.
Apartments generally do not go up in value since itâs the land that appreciates. In fact, because of depreciation and increasing repair costs, they will go down.
People buy apartments for rental income.
One- and two-bedroom apartments in Melbourne and the inner suburbs are sliding backwards, unless they are really something special. Vendors expectations are not in touch with reality. Most auctions draw no bids and pass in at the bottom of the price guide, then relist for -15 to +15% at the top of the guide. They then sit there for months or they return to the rental market.
Buyers don't have the borrowing capacity to pay 2019 prices and investors also know they will be paying higher land taxes, so the interest is subdued.
There are no capital gains in Melbourne apartments. Buy for lifestyle, for the kids or for negative gearing. Not for gains.
People are focused on houses because they want the land and downsizers normally want two beds as a minimum so I think youâre needing first home buyers, many of whom have been priced out as interest rates have increased. There are also a lot of apartments being built and people are often drawn to those that have facilities, maybe they get caught out later by body corp fees. Your unit Iâm sure is great but you might just have to take the loss this time and move on, or youâre just going to have to hold on but who knows how long it will be before you make any money on this.
[Realestate.com.au](http://Realestate.com.au) has shown prices in south yarra for apartment have dropped over the past years, good time to buy now I think with the expectation it will go up again soon. Richmond has been booming on the other hand. Your other mistake is that you bought a single bedroom. My freind bought a single bed apartment in south yarras 12 years ago an recently sold. he made no money back on it except on the rental income.
Been happening in our area too but houses as well. They just arenât selling. Auctions being passed in, people just donât want to pay the insane prices anymore. Only the overseas investors will pay it.
Rent it out. Use the equity in the apartment to put into your PPOR mortgage and get as much negative gearing as possible. If you have to sell, try to offset any capital loss with capital gains to offset tax.
cut your loss and move on..think of the opportunity costs you are and will be missing by holding on to this.. apartment is good for stable cashflow via rentals, but terrible for capital gain, unless itâs very niche or thereâs sth unique ab it I guess.
Iâd say go ahead with selling it vacant. You may have better luck.
Thinking about your potential buyers, a tenanted apartment with a long lease will only appeal to investors and only if the gains are good. Doesnât sound like they are. A vacant 1BR will appeal to some FBH looking to get started. Youâll exclude anyone looking for a place to grow into so really itâll only be younger people, singles, couples with no kids, starter home etc type buyers. A smaller pool for sure but theyâre out there and need to live somewhere.
Good luck!
I recently bought a one bedder in Southbank with bay, Yarra, and city views for $370k, when the original owners bought it off the plan for $515k in 2016.
Melbourne CBD brand new apartment selling at 550k for 1br , 650-700k for 2br , I assumed it is due to the increase in construction cost. It may be good time to buy a pre-owned apartment as they are much cheaper for some reasons
Itâs strange how apartments in Melbourne perform relatively badly, but they are actually (in most cases) good investments in Sydney.
OP - Iâm sorry to hear about your situation, but in perspective, you have only owned it for a couple of years and the market moves up and down. If you are prepared to hold it for the long term, Iâm sure youâll see some price appreciation but query if you would get a better return on capital elsewhere.
Keep in mind, the last 10-15 years have been an anomaly in Melbourne apartment prices due to the huge glut of new stock hitting the market.Â
This might not be the case in future, these developments take a lot of money and time to get through.
Can you just keep renting it out? I bought a 2 bedder (technically one bedroom but mezzanine level which was styled as a second bedroom), 1 bath 1 car park in south yarra back in 2007 for $477k and sold it in 2021 for $652k. (We rented it out, then lived in it for 6 years and then gave it a huge facelift for sale.)
Noting it had EXORBITANT body corp fees upwards of $10k per annum, which impacted the pool of buyers willing to take that on. I know half the building still has the same daggy interiors but maybe you could look at tarting it up a bit (without over capitalizing) and maybe attract a higher rental income?
Thanks for your comment. We totally can keep renting it out. Itâs just that the mortgage is more than the rental income and even though we can get some back at tax time I donât like the feeling of not being in the black. Also I donât feel GREAT about the way the economy is going so am hoping to cut down on our debt load. But also donât want to lose too much on selling as it does represent our FHOG so once thatâs gone itâs gone. Some great opinions on this thread though (including yours) so that will give us a bit to think about!
Last I saw they had built flats on every available piece of land in the eastern suburbs, there was a time when they were talking about a glut, might be true still. It is impossible to get any unbiased information about the property market, just insane
Yup. The bank has a mortgage over both and you may not need a deposit on the second purchase if your equity in total is 20% or more of the total of the two
They say if youâre buying property you should hold for at least 7-10 years. I had a similar experience buying a one bedder in Brisbane. In the first couple of years it ended up dropping $70,000 from what I paid. Iâve thought about selling, but felt it owed me so have hung on. Good thing because prices are going up now and, with the Olympics coming, should continue to do so. Youâre property sounds like a good one, so maybe hang on for a bit if you donât need to sell it. But as others have said, units never go up as much as houses.
I think if rates get cut like the tv keeps saying Melbourne apartments will go up in price. Theyâre pretty good value compared to every other state now.
Vic Labor has done their best to shaft small time investors at the affordable end of the housing market and then go on claim that there is a rental crisis. Who wants to buy a small unit in a nice suburb only to see it lose 10% of its value?
Just hang onto it.. rent it out and when you need the cash sell it. Hopefully by then you are closer to purchase price but maybe even the equity from the mortgage being paid does enough.. or cut ya loses.. I work in real estate (not as an agent) in brissy and Iâve seen an apartment sell for 1.6m 18months ago, now sell for 3.2m.. itâs in the Woolstore but it was completely original.. nothing outrageously incredible. It blew my mind. You honestly canât pick em. Anyone that says they can is a liar. Hahah. The agents I work for donât even know whatâs going on half the time.. they are all honestly just winging it.. throwing shit on the wall and seeing what sticks⊠itâs wild.
Sounds nice, renovate the kitchen and keep renting it out. Property prices move up and down over a short duration and offers can vary dramatically due to nothing more than the weather. Itâs far from a perfect market for price discovery.
The rule of wealth creation is buy things and keep them.
Yarra apartments are yield not growth. The mass introduction of cheap apartment's after yours was built brought your value down.
What did your price guide say?
I bought an apartment. Going to rent it out once I can afford another one to move into. Luckily it's malvern right near caufield uni so ching ching.
And as investors allways say, you only lose the money if you sell.
Property is a long term investment.
You shouldn't let short term fluctuations worry you, otherwise you might need to consider more conservative assets like cash in saving accounts
We never wanted to be investors. We just wanted to get on the property ladder, then sell for a bigger PPOR. We still want that PPOR so short term fluctuations do matter as it affects our ability to buy đ«€
Doesn't really matter as you're buying and selling in the same market. As you said, you're not in it to make a quick buck, don't be too stressed by what they market is doing
PPOR house market vs apartment market is different though due to historical growth and stigma. If those 2 things changes then yeah don't worry about it...
But in the long term time frame there might be a further gap between PPOR house and apartment value if OP holds. Or there might be a bull run on apartments that will overtake house values and OP can buy a PPOR house.
Option 1 seems more likely right now, and making a decision now will be a long term investment.
The good thing is OP will most likely have paid off most of their mortgage and will some more money to spend compared to most FHB.
Seems like OP does want to eventually from above comments hence my comparison.
But you have a true point, units, 3 bed apartments and town houses are more than enough to live in with family and will still be more affordable whilst this need to own land is still around.
Depends.
If it's your PPOR, then it doesn't matter. Market movement doesn't affect you as you won't be selling anyway.
If it's your IP, then you need to make a call whether you want to wait for a turnaround, whenever that is, or pull out now and invest in something else that has better growth potentials.
Vic govt through absolutely brain dead moves are driving away all the investors from the state, which will severely cut their revenue. First Home Buyers do not have the same amount of money to throw around as investors.
And then they'll complain about how they are drowning in debt and don't have the funds to host Commonwealth Games or even build an Airport Link (even Perth has one now!)
Not true.
The moves in property have overall increased revenues to the state.
Prices stagnating and property investors exiting the market is good for society, bad for investors though (including myself)
Edit: also airport link is being held up by the airport, they don't want to lose their carpark revenue. State and Feds are very keen to make it happen
I agree that Melbourne as a society will be better off for these moves deterring investors. I want to live in the city where people can own a home and not be chewed up and spat out like Sydney. Apartment prices in Melbourne are quite reasonable and whilst not a great financial investment it can be a great home for someone.
Very suburb dependent in Melbourne.
My suburb is still below pre COVID levels for housing (5-10% down) with most stock going unsold, but two suburbs over is a trendy gentrifying area where prices are above pre COVID and stock moves quickly
I'd disagree - FHBs get stamp duty exemption, and if price continues to fall it means less money coming in via stamp duty as more and more investors are leaving the Vic market as they lose confidence.
Reduction in % of investment means reduction govt makes through land tax.
Keep in mind only 30% of people in Australia are actually renting. Not everyone can afford to buy a house even if the price goes down 20-30% in an extreme case. Single mothers, pensioners, migrants, DV victims or people with disabilities (given the long waiting list for public housing)
And when it keeps dropping and it does drop that much, it'll devastate a lot of middle class investors like us. And the wealthy will swoop in and pick them all up driving the prices up again.
From the governments perspective it's a balancing act.
Yeah it's a complex environment, budget papers over the next few years will tell if it has worked or not.
Overall, given the scramble for cash by the state government a huge amount of modelling is done to try and increase revenues overall, any changes in tax regime are very thoroughly prosecuted by treasury (public service is basically leading fiscal repair, not the pollies).
As an investor I'm bummed, but overall for my kids and other young people I reckon the property gravy train needs to be reigned in. It's massively distortionary, and the tax treatment of property in Australia is outrageous compared to the rest of the world
Depends on what their intervention prioritization aim is: more tax revenue or more affordable housing. I have a feeling they might be risking more affordable housing for purchasers but not for renters maybe long term.
1bedders are always a tough investment and now none wants to buy in Melbourne because of the changes to laws and taxes. You might be better off making it air bnb. May as well try to hold onto until market conditions improve.
There is no housing crisis, but there is an expectation crisis. Younger people want a 4-bedroom detached house in a desirable suburb of a metro area for 500K. They won't settle for an apartment!
My advice to you OP is to hold on if you can. It's just paper loss. You only lose for real if you sell.
A 1 bedroom 1970s apartment with 1970s kitchen has to be at the bottom of the totem pole as far as desirability is concerned. I'm sure the area your apartment is in is nice, but there are nicer areas, more central locations, bigger apartments, newer apartments etc. $550k is and was the median price of all apartments in Melbourne in both December 2019 and now. So the general market for apartments seems to have stayed still and not gone backwards. ($550k not just 1 bedroom apartments; it's all apartments.) That yours has seemingly gone backwards by a significant amount suggests you overpaid. FWIW, the median sale price for 1 bedroom apartments in December 2019 was about $450k and now it's about $400k. So you paid $100k over the median and are now getting offers $50k over the median.
Yes absolutely I believe we did overpay. Low rates and a heated property market made us do it đ
Lol at âadult childrenâ in your post followed up by âbut low rates and a heated property market made us do itâ in the comments.
LMFAO
Haha. The âmade us do itâ was tongue in cheek. I obviously mean âgrown childrenâ - in their late 20s early 30s.
Keep it for when you have your own "grown children" and they need somewhere central to live (and so they can move out).
It's almost like it's possible to make poor investment choices no matter the type of investment. Are you going to hold yourself accountable and admit overpaying during the peak mightâve been a poor decision?
Why are people being such enormous dicks to OP? Theyâve graciously taken everyoneâs advice, explained where their mindset was at when they purchased, and havenât said anyone is wrong or anything. This comment is so freaking dorky. âARE YOU READY TO ADMIT YOU FUCKED UP?!? HUH!!â
Thank you. Aussie Rules is indeed grouse.
Youâre grouse. Get new tenants into the place and hold on to it as long as you can afford the mortgage. Selling now is just locking in your loss, owning and paying the mortgage down is just paying more equity into the place. Market probably turns up a bit even for apartments in the long run!
Because a lot of people in this subreddit have a chip on their shoulder.. they didnât buy all these years .. and this story right here absolves them of that questionable decision.
I think because OP was having a go at all the people overpaying when they themselves seemed to have overpaid
No, wasnât having a go at people overpaying, or even saying that people were. My comment was more about how difficult it was for us as FHBuyers to get into the property market, when properties were routinely selling at auction at much more than the stated price guide.
Well, I believe Iâve said 2 or 3 times in this thread that we overpaid, and I think itâs obvious that was a poor decision, otherwise I wouldnât be asking strangers on the internet for their advice.
If you overpaid then the property value hasn't really plummeted then has it.
Well, if we hadnât bid $550k, then the final person at the auction we were bidding against would have. So the market was there at the time.
Not sure why youâre so keen to twist the knife on OP? Theyâve accepted they overpaid, feels like your comments are just spiteful
Nope, it was the belief that property only goes up. Iâd suggest renting if the market is more suitable to that, unless you have something you think may offer better gains over the period, however it is harder mentally to eat the loss and ignore the sunk cost fallacy.
Yep, totally, we really thought that it would just go up or at least hold value. The opposite has been a hard truth to swallow.
It will. If you hold on to it long enough.
It happens. I lost a heap of money on a gold coast town house in the 90âs. Was forced to sell as I had a tenant who didnât pay rent for 6 months and then stole all my furniture and tried to sell it at cash converters. I was only on $32k at the time and it was bleeding my dry with no rental income coming in. I offloaded it and carried the loss forward. I looked at the most recent valuation for it and found that had I kept it, today it would be worth $500k. I bought it for $130k in 1995, so the annual growth over 29 years would have only been a little less than $13k. In other words, taking the loss back in the 90âs was preferable to prolonged misery. You have to know when to cut your losses, and youâll have a sizeable capital loss that can offset any future gains you might make.
Wow. Sorry this happened to you. Well done on making the right call for you.
I don't believe you deserve to be downvoted OP. You made the best decision you could at the time, that is OK. It's a hard thing to wear (bad financial decisions). I signed with a builder that went bankrupt and it cost me crap loads.
Thank you for this, much appreciated. So sorry to hear about your builder.
Iâm sorry my dude but I think you definitely overpaid. One bedroom stock in south Yarra is unlikely to go over $450k. Unfortunately apartments donât grow like land. I made a similar mistake trying to use an apartment to build equity. I did end up making it work in my favour though. Bought a one bedder in armadale. I held onto it for ten years. Was able to charge sufficient rent that it basically paid off the mortgage. So I got the entire apartment without really having to put any money into it myself other than the deposit. After ten years I was only able to sell it for $30k more than I bought it for. Thatâs a long game strategy though. But it is a way you can make record high rents work for you.
10 years for $30k gain? Wtf
Well it did pay off its mortgage
Same for me in Brisbane. Bought off the plan in 2015, build was finished end of 2018. Lost $40 k from time of purchase to settlement date. The apartment has only now just recovered back to purchase price. Maybe $5-10k over purchase price in the past 6 months.
new off the plan are always massively overpriced. In Brisbane especially, your 70s and 80s blocks in suburbia have exploded in value the last 5 years.
Noticed a 70s near me that sold for $460k a few months ago. Up from around $350k in the past 5 years. Around 4km from the city.
Agreed, but at the time off the plan were increasing significantly in price from point of purchase to settlement. Unfortunately, during the build period, the same area had a huge amount of developments that all settled at the same time driving down the price as there was a flood of new apartments in the market. I will never buy off the plan again.
me too. just below purchase price aftr 10 yrs. good rent though
I donât know why anyoneâs surprised, what reason do apartments have to appreciate ? New apartments come Online and continually devalue the others around it which are degrading. The land underneath might be appreciating, but itâs not like you can knock down your portion of the building. Good to live in, terrible investment
Units sure as hell appear to be appreciating value here in Sydney. Seeing art deco blocks going up 20-30% since COVID times. Nearly doubling in value since late 2000s.
Any general comment cannot obviously apply to every single situation, highly unique places with interesting characteristics are obviously going to buck the trend, but by and large that does not apply to the majority of the market. A place doubling in Sydney over a 15yr period is not much to phone home about when itâs grown at 1/2 the rate of everything else surrounding it in the same period. A rising tide lifts all boats as they say, and Sydneyâs rise it akin to a tidal wave as compared to the other capital cities
Only in high demand areas. Places like Blacktown aren't seeing any growth at all.
Units can temporarily appreciate due to low supply, something that can be resolved at any time. Townhouses (without body corporate) and houses permanently appreciate due to land being finite.
These prices will drop, apartments are for living in. The strata and lifestyle. The current trend is only due to insane population growth. Over borrowing is sad, these threads are going to be full of "everyone told me to just buy now and not wait" in a couple years time while they sit on -300k depreciation and no way to sell and break even. Look at china to see how it plays out.
Only terrible investment at current buy-in prices. The yields are low because itâs too easy to borrow money and buy. Itâs definitely possible that yields can go higher if prices/rents adjust.
I remember when I moved into Southbank / Melbourne nearly 2 decades ago and looked at apartment prices. They hadnât moved from the price they were a decade earlier. If memory serves me correct they were around 500k back then, so after 30y theyâre now valued at maybe 700k, oof. Inflation alone would require it to be 1.1M
Hrm, our gc unit was 785 in 2018 and is now worth 1.45-1.55M. Not too shabby
Is it a unit or an apartment ?
What is the difference?
Are you asking what is the difference between an apartment and a unit ? Or why does it make a difference ?
Oh sorry Iâm asking what the difference between an apartment and a unit is. I didnât think there was one and use them interchangeably maybe thatâs wrong
If it helps itâs a three bed two bath with views of Broadwater and out to ocean. Has a big balcony overall I think dimensions of the unit are about 170 sq m. Itâs in Southport so not a highly desirable area
So typically a unit is referred to as a ground level building thatâs typically but not always connected to other units on a shared block. More like a small house, half of its price is usually the land price. Apartments are typically referred to as one of many that belong to a single building, a low set of apartments might be a 2 story building with perhaps 3-4, a large bustling may have more than 100. The amount of value in the price of the apartment that is land vs building cost scales with how many apartments make up the building. In a 40 story tower with > 100 apartments, most of the cost is a depreciating building cost. The land is already zoned for dense residential and as such the price gains are much more limited. Units on the other hand can be knocked down and replaced with a higher density apartment building which represents an increase in land value purely from rezoning.
Better than negative 30k
Previous purchaser also made $32k when selling to us and theyâd held it for 9 years. Thatâs the way it goes with units.
Hoo boy
Given how much you pay the bank in interest itâs not really a gainâŠ
Thatâs right. The only reason we held onto it was because the rent was covering the entire mortgage and out of pockets.
The gain was the whole property price less deposit. Being OP has suggested rents covered all outgoings. Thatâs the old school way of property investing.
Brisbane 5 years apartment outstrips homes in gains. This land belief is fading swifty .
If you're planning on buying a PPOR house at some point in the same market then you're better off selling the apartment and buying a house ASAP. Forget what you paid for it, it's irrelevant. Look at comparable sales and set your expectations there. The reason why you should sell is simple. Single bedroom apartments will never appreciate as much as larger family oriented apartments and they will never be anywhere even close in appreciation to standalone houses (or even duplexes/town houses). So if the apartment does go up in value the longer term objective PPOR will have gone up by a lot more leaving you even further behind.
Very good point. Thank you.
Apartments are good to live in, not as investments. Perth currently has apartments going way over their value and I feel for all the people paying stupidly high prices.
Me too đ
Bad times for them in 5 years
VIC Land tax reducing the number of interested investors. Thereâll always be first home buyers but they wonât be the ones throwing out amazing offers.
Is the land tax that high on apartments?
Higher than before, Dan Andrews reduced the land value threshold that lots of apartment holders are now having to pay land tax where they previously haven't
Kinda amazing how many donât read what you wrote and stick the boot it. Sorry this has happened to you. It would have been easy to get lost in that market at the time. There are hundreds trying to offload their places right round the bay - even parts of Melbourne are coming off boil - seems many thought it was never going to stop too. Hopefully you can recover and get on to greener pastures asap! Go prove the haters wrong
Thanks! Appreciate the encouragement.
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Very good point.
Yeah, and the market for buyers for studios and 1 BR apartments is very small too, since everyone would outgrow it very quickly. Hence the steep drop in price.
Right!? Itâs a beautiful apartment in a beautiful suburb!
Maybe they don't want to be paying your mortgage, strata and rates for you
We have a two bedroom apartment that we bought two and a half years ago and updated with a new bathroom and kitchen. We would likely lose money if we sold and have just rented the property out to move interstate and are getting almost $200 more per week than the apartment last achieved due to a combination of the rental prices at the moment and our renovations. We plan to hold for as long as we can, and while we didn't want to be landlords, our circumstances have made this the best option for us. The rent covers the mortgage (for now - four months left of low rate bliss!), and we are out of pocket for maintenance, strata, rates etc. I keep reminding myself how fortunate we are to be on the ladder, even if it feels like we are at the very bottom.
I think things will plateau for a while. What are your plans for the money? It might be best to cut your losses. The truth is that apartments are not the stepping stone to a house that we all think. I know because I made that mistake myself and held on for too long waiting for the market to pick up (an opportunity cost). Now Iâve sold the apartment and have a fixer upper house in a nice outer suburb and already I can see itâs a much better investment.
An apartment is also a good investment - itâs just an investment in lifestyle rather than purely financial. When you âinvestâ in a house in the outer suburbs, you just pay for that investment in time (through longer commutes in many/most instances and less convenience) instead of money.
Oh thatâs a good point. Never thought of it like that, thanks!
Time is the ultimate opportunity cost. Weâre always spending it and itâs impossible to save it. We also donât know when weâll run out, and because we age its scarcity is much greater than what we all think. When you buy an apartment in South Yarra, youâre buying the opportunity to live in South Yarra. A nice, wealthy suburb with heaps of amenities and infrastructure and a lifestyle that most in Melbourne would covet. Thatâs still wealth. What do you give up is growth in nominal wealth, because you couldâve taken that Money and invested it elsewhere. But then youâre not living in South Yarra. Perhaps youâre living in Truganina. You effectively âboughtâ the opportunity to live in South Yarra with the opportunity cost of where else you couldâve put that money plus the money you lose by selling the apartment. Probably a bit steep for your liking, but thatâs how markets work sometimes. Before deciding to sell itâs worth working out how much you owe, what youâre interest payments are, what you could get renting it (drop this by 10-15% because you donât want to bake in historically high rents into your model), what your equity is, and if you could refinance that mortgage into a house somewhere. Youâre unlikely to make back that 100k over the long run, but you could leverage yourself into a house in the outer suburbs with cash flow helping you pay both mortgages and then in however long, way down the track, youâve bought yourself a nice 1 bedder weekender apartment in south Yarra. Just something to think about.
The cope is strong here... Apartments are a terrible financial investment, period.Â
Hardly. OP seems to have a much better handle on opportunity cost than you do.
Let's talk about opportunity cost then shall we. PPOR capital gains are tax free. So, it's very logical to buy a PPOR with maximum capital gain potential possible. Apartments offer little or no capital gain, so not only do you lose out on capital growth, you miss out on thay juicy tax benefits while also paying huge sums of money in strata. It's the worst case scenario.
Yes but when your PPOR goes up in value, so does every other house. So unless you have multiple houses or are going to sell your house in say Melbourne and move to another city/country with considerably cheaper property, youâre not really gaining much. Youâre just selling one house to live in and buying another in the same or another similarly priced market.
The same applies when you sell you apartment, except you are now well behind as you have to earn the difference to have the same buying power...
It depends what youâre buying. Maybe the buyer wants to buy another apartment. Plus they had the gain of a better lifestyle over that period - swings and roundabouts đ€·đ»ââïž
Itâs only logical if the present discounted benefit to yourself of those (assumed) capital gains is greater than the opportunity costs, both present and future, of purchasing that freehold property. And those opportunity costs include interest payments, depreciation of structure, maintenance, where else you could have put your mortgage payments and, crucially, lifestyle. I live in and have a mortgage on a 2 bedroom apartment in a suburb like OP. I live 15 minutes from work and never have to drive anywhere. Im right in the thick of one of the most vibrant, wonderful cities in the world, with infrastructure and amenities at my doorstep that would make others living in comparable cities jealous. Iâm on 145k a year and my mortgage plus OC fees are comparatively so much lower than if I had levered into a freehold property I have so much fucking disposable income Iâm able to take myself on an annual holiday overseas each year, go out each weekend, and put a decent surplus into my SelfWealth portfolio. But then again, I couldâve levered myself to my eyeballs and bought a shack in Seaford, and been a mortgage slave.
As I mentioned, the cope is strong. You made a bad financial decision and are desperately trying to justify it. You should have leveraged yourself. Your other investments need to earn dollar for dollar plus the tax difference to equal ppor capital gain. Apartments work as a rented investment property where the yields are strong and extensive costs are all deductible.Â
Yeah it's best to buy something with a land component, where you can afford to. For the same price ($550k) you could have gotten a brand new built freestanding house on 500 sqm of land at Alkimos on Perth's northern fringes close to beaches back in 2019 with loads of features and inclusions. That sold recently for $780k!! I have the same regret as you, choosing Geelong over Perth at that time. A lot less headaches in newer houses too after having bought a 60s built.
Would have loved land, but we wanted a place close to where we worked and wanted to live. Never wanted to be investors.
9/10 times apartments end up selling for a loss if they are off the plan ones, where the builder has a collosal profit margin and people are sucked into buying brand new. It's odd that a unit in a boutique apartment complex in a blue chip suburb with loads of heritage overlay restricting supply (assuming this is Melbourne?) and low strata (assuming 70s built means no gym or swimming pool) is selling at a loss. I think you overpaid for that one in 2019. Tough luck. Chalk it up to experience when buying your next property, perhaps consult a buyers agent. This is why I'd choose a unit in Brighton, Toorak, St Kilda East, Richmond, Albert Park over say Footscray or Southbank.
Yep we deliberately avoided new apartments or anything with a pool/gym/lift etc. Itâs in South Yarra on a quiet tree-lined street a quick walk from the river, library, tram and oval etc. We thought we had done well but yes we definitely overpaid.
Buyerâs agents arenât magic - they wonât save you much money but will help you locate properties (particularly off market) and can liaise with sales agents on your behalf if youâre moving interstate, donât have time etc.
True. I think regardless of where you buy it's best to do your own research. Study the area extensively, set hard limits and always be prepared to walk away. You really don't need a buyers agent, but I see so many of my friends getting roped into H&L packages on postage stamp sized blocks in the middle of woop woop or off the plan high rises, simply because it's new and shiny. That being said, in Melbourne it's turning into a buyers market. We bought our PPOR last week. Most suburbs went down in price in the last 12 months. I predict it'll be the same trend for the next 1-2 years. Lots of people who bought during the pandemic are now selling due to interest rates and land taxes rising. Lots of people are rolling off fixed rate loans to and are being hit with the mortgage cliff. If OP can hold for the next 2+ years somehow, that's probably going to get him the best result in this situation. I do think eventually the tides will turn again.
I saw a video recently, if you buy a titled land (350 - 400 sqm) on Melbourne's West (Werribee/ Truganina/ Tarneit) ~ **$350k** And build a brand new house 4-2-2 house with a reputable builder with some added inclusions, driveway, landscaping and curtains/ blinds (in this market) - **$500k** **That's $850k for the complete thing.** No way in hell it'll actually sell for that much (forget making a profit) once it's built. You can pick up something like that on the market for $700k-750k.
South Yarra has been building tank loads of new apartments in tall buildings over the last decade. Heritage overlay isnât overcoming that itâs probably one of the most developed suburbs in inner Melbourne
Nothing wrong with buying for lifestyle. Indeed I would say that is the most important factor in buying a PPOR. If you were not that interested in capital gain then it doesn't really matter, or at least cannot complain about it. Would you have preferred to buy on the outer fringes of Melbourne and given up living well just so your house can accumulate in value? Is your house serving your lifestyle or are you sacrificing your lifestyle for the benefit of your house?
During COVID our values and perspectives really changed - living close to the city wasnât as much of a priority. Weâre now renting in a different state in a coastal town and loving it. Would love the capital gains however for a PPOR and to avoid that sinking sense of failure⊠đ
Sounds like an option at the moment might be to become a long term rentvester. Be a landlord whilst being a rental slave at the same time. The two can cancel each other out. You might find over time that the property recovers some of its value. When rates go down some confidence might come back into the market. Or just cop it, take the cash and buy a place with land in your new location. The latter is probably financially more sensible if you can write the loss off as a property with land will appreciate faster than your apartment.
Google shows Geelong median went from 720k to 1,000,000 over the last 5 years compared to alkimos 375k to 585k. How did you fail buying in Geelong but not alkimos?
You can get apartments with good land value
Thanks for the reply. Weâd like to buy a PPOR house eventually. At least we can negative gear, I guess, which helps at tax time, but itâs not nice feeling watching similar apartments going for $75k under what we paidâŠ!
if the apartment is covered by rental income, you have the luxury of choosing when to dispose of it. The issue is when it keeps eating away at your cash flow as you generously subsidise your tenant at the expense of your own lifestyle. If you are negative gearing. you are making a loss every year on a property that is not going to make you anything when you sell it. Under those circumstances, whatâs the reason for keeping it? Investors only negative gear when the capital growth outweighs the ongoing losses. Donât be afraid to ditch a poorly performing asset just because you have sunk all these costs into it. Get some financial and tax advice and work out your exit strategy.
Ouch. Yes. Thank you.
'At auction'. Well there's your problem.
At that time all inner city sales were auctions.
Your apt would only be interesting to investors, and they are put off now by taxes,etc. I don't see a FHB interested in anything less than 2 bedder.
Tenant in there would be an issue for me. I think youâll see more interest without a sitting tenant.
Yup two things that make me look no further are curently has tenants and call agent for price.
Melbourne apartments havenât moved since 2010. Sorry but when i hear the word âblue chipâ i know you got sucked in by marketing. South yarra is overcooked with apartments
Apartments can be a great way to get in the property ladder and a steady income stream with little care in the future. We bought our 2 bed 2 bath in Brisbane within the 10k radius from the city in mid 2021 for 385k. It was 4 years old at the time, and so a no brainer for us, however, we did lots of research on the area and the Apartments in the area, counted in the Olympics and general growth of the property and forecasted best and worst scenarios to see if we could afford repayments in the worst case scenarios. We froze our rates for 4 years at~2%. Our target is a potential selling date right after the Olympics hoping for a good profit at the end. However, Apartments in the same area are selling now for 600k+ which now allows us to use equity to buy our second property, and we are in the process of finding s good bargain hopefully again. I guess it takes a combination of due diligence, timing and lots of work to get a foot in the market that can allow you to move further steps in. Id say you lose some, you win others so persevere and plan for the worse! Remember, the market is speculative and can tank any time, just plan carefully so you can weather the incoming storms! One thing though, i didn't know but it turns out in Queensland you can buy management rights to apartment blocks, which sucks because you endup having to pay high body corporate fees to cover the salaries of useless managers...
I keep saying apartments are bad for capital growth and I get down voted to oblivion
You get an upvote from me!
I think there are some exceptions. My BF and I bought a 2br art deco apartment for 415k in 2015. We sold in 2022 for 685k. (Melb, inner burbs). Around the same time, our Friends bought a 2br in a 70s block in Brunswick East. They also sold in 2022 and made about around the same percentage gains as we did. So apartments can do well. Obviously not as much as a house, we would have loved to have bought a house, but just couldnât afford it at the time (and canât now, due to interest rates). At the time, the art deco apartment was a really lovely, liveable compromise. Maybe itâs the 2br thing. Scarcity of the deco and the desirability of Brunswick. I donât know how we did so well, especially considering the comments here. Youâd think it was the stupidest thing in the world to buy an apartment. If you donât need the money, just sit on it. Youâd still be getting good rental returns and I think there will be stronger demand for small, neat 70s blocks in a few years once people realise some of the body Corp feels the new apartments charge is really restrictive. As long term renter, briefly plucked by the gods into my own home before being plonked back down into the rental swamp, I always preferred neat, well kept 70s blocks. Windows you can open. Hallways that didnât smell like cooking, and fittings/services that are long past their growing pains stage. Good luck!
Thank you! And congrats on your real estate gains, thatâs fantastic.
Don't get me wrong though, there are horses for courses - the location and lifestyle of apartment living does have some big upsides, however they're not a great investment in the same way that a detached building on land is
100%. If we didnât want more space (or get chased out by COVID trauma) weâd be there still.
Probably quite a few apartment owners lurking about
Apartments are a lifestyle choice, rarely a good investment, can always build up, canât build more land The drop sounds bigger than normal, maybe try a different agent
Apartments have always had slow growth in Melbourne from what I have observed. It is possible that you overpaid for the 1 bedder. There has been a lot of apartment developments near the city. My property hasnât grown much at all since I purchased it 10 years ago. The suburb has seen a lot of buildings developed. My apartment has two bedrooms and a study. Bathroom and ensuite, and seperate laundry. The rent has gone up, more so in the last two years. I anticipate that things will improve in the future. The land tax isnât major and doesnât break the bank, mine was around $900. I donât think this is a major issue. It is higher if you own a house.
Melbourne has dropped in the last 12 months. Can you rent it out instead?
Melbourne is a bad for property investors. Speaking from experience but also all the recent media coverage. Even if you are not an investor, they are a large chunk of possible buyers so not having access to as many of them affects your prices This is good news for future buyers, but not if you already own a place.
Your investment didnt pay out. Sounds like my stock portfolio.
We bought an apartment 5 years ago as our PPOR. We knew it would not make money and would possibly decrease in value over time but itâs exactly where we want and does exactly what we want. Almost identical apartment sold for $140k more than the sale price about 6 months ago and apartments in the building are consistently selling for more than they originally sold for off the plan but thatâs not usual. The rent you can get for them is bonkers. Apartments are rarely an investment if youâre living in them.
This is just a blatant lie, no Melbourne apartment at least is increasing 170k.
Sadly you might need to cut your losses and sell. An expensive and painful loss, but that type of property in Melbourne isn't increasing anytime soon given how weak the investor market is.
Yeah, just rent it out again. That's about it.
Merci merci
Just wait till the crash next year. Iâm sure some âadult childrenâ will take it for tree fiddy.
*rubs hands*
Hahaha got me.
âșïž
Pretty sure you don't buy an apartment for capital gains within a few years... Give it time
Apartments generally do not go up in value since itâs the land that appreciates. In fact, because of depreciation and increasing repair costs, they will go down. People buy apartments for rental income.
One- and two-bedroom apartments in Melbourne and the inner suburbs are sliding backwards, unless they are really something special. Vendors expectations are not in touch with reality. Most auctions draw no bids and pass in at the bottom of the price guide, then relist for -15 to +15% at the top of the guide. They then sit there for months or they return to the rental market. Buyers don't have the borrowing capacity to pay 2019 prices and investors also know they will be paying higher land taxes, so the interest is subdued. There are no capital gains in Melbourne apartments. Buy for lifestyle, for the kids or for negative gearing. Not for gains.
People are focused on houses because they want the land and downsizers normally want two beds as a minimum so I think youâre needing first home buyers, many of whom have been priced out as interest rates have increased. There are also a lot of apartments being built and people are often drawn to those that have facilities, maybe they get caught out later by body corp fees. Your unit Iâm sure is great but you might just have to take the loss this time and move on, or youâre just going to have to hold on but who knows how long it will be before you make any money on this.
Hold. The type of apartment you own is quite rare along the Yarra river.
[Realestate.com.au](http://Realestate.com.au) has shown prices in south yarra for apartment have dropped over the past years, good time to buy now I think with the expectation it will go up again soon. Richmond has been booming on the other hand. Your other mistake is that you bought a single bedroom. My freind bought a single bed apartment in south yarras 12 years ago an recently sold. he made no money back on it except on the rental income.
Been happening in our area too but houses as well. They just arenât selling. Auctions being passed in, people just donât want to pay the insane prices anymore. Only the overseas investors will pay it.
Got 80 grand in 13 years for a 1 bedroom in Melbourne. Had to paint it and put new carpet in to sell it. Was lucky to get it.
With the cost of building I think potentially apartments will rise on interest rate cuts but we'll see
Rent it out. Use the equity in the apartment to put into your PPOR mortgage and get as much negative gearing as possible. If you have to sell, try to offset any capital loss with capital gains to offset tax.
cut your loss and move on..think of the opportunity costs you are and will be missing by holding on to this.. apartment is good for stable cashflow via rentals, but terrible for capital gain, unless itâs very niche or thereâs sth unique ab it I guess.
Iâd say go ahead with selling it vacant. You may have better luck. Thinking about your potential buyers, a tenanted apartment with a long lease will only appeal to investors and only if the gains are good. Doesnât sound like they are. A vacant 1BR will appeal to some FBH looking to get started. Youâll exclude anyone looking for a place to grow into so really itâll only be younger people, singles, couples with no kids, starter home etc type buyers. A smaller pool for sure but theyâre out there and need to live somewhere. Good luck!
I recently bought a one bedder in Southbank with bay, Yarra, and city views for $370k, when the original owners bought it off the plan for $515k in 2016.
Melbourne CBD brand new apartment selling at 550k for 1br , 650-700k for 2br , I assumed it is due to the increase in construction cost. It may be good time to buy a pre-owned apartment as they are much cheaper for some reasons
Itâs strange how apartments in Melbourne perform relatively badly, but they are actually (in most cases) good investments in Sydney. OP - Iâm sorry to hear about your situation, but in perspective, you have only owned it for a couple of years and the market moves up and down. If you are prepared to hold it for the long term, Iâm sure youâll see some price appreciation but query if you would get a better return on capital elsewhere.
Thank you!! Appreciate the compassionate response đ
Keep in mind, the last 10-15 years have been an anomaly in Melbourne apartment prices due to the huge glut of new stock hitting the market. This might not be the case in future, these developments take a lot of money and time to get through.
Very good point, thanks!
Can you just keep renting it out? I bought a 2 bedder (technically one bedroom but mezzanine level which was styled as a second bedroom), 1 bath 1 car park in south yarra back in 2007 for $477k and sold it in 2021 for $652k. (We rented it out, then lived in it for 6 years and then gave it a huge facelift for sale.) Noting it had EXORBITANT body corp fees upwards of $10k per annum, which impacted the pool of buyers willing to take that on. I know half the building still has the same daggy interiors but maybe you could look at tarting it up a bit (without over capitalizing) and maybe attract a higher rental income?
Thanks for your comment. We totally can keep renting it out. Itâs just that the mortgage is more than the rental income and even though we can get some back at tax time I donât like the feeling of not being in the black. Also I donât feel GREAT about the way the economy is going so am hoping to cut down on our debt load. But also donât want to lose too much on selling as it does represent our FHOG so once thatâs gone itâs gone. Some great opinions on this thread though (including yours) so that will give us a bit to think about!
Is it in negative equity though? Like if you sold it do you then have a debt with no asset?
Not yet! We would cash out with some extra.
Need to weigh up holding costs with the loss then. Probably wonât be any growth for a long while.
1 bedroom for 550k seems ridiculously high even your offers of 435-470 are very high. 1 bedroom brick flats in Richmond are still 3-360
Maybe I should be more positive then! đ
Your place might have something special about it though like a balcony overlooking the river to make it worth the extra 200k
Last I saw they had built flats on every available piece of land in the eastern suburbs, there was a time when they were talking about a glut, might be true still. It is impossible to get any unbiased information about the property market, just insane
Apartments are the worst for appreciation (not in every single cast but mostly)
No such thing as âblue chipâ apartments in Melbourne
Pay as much off as you can and then use the equity in it to buy your next property.
How does this work? You pay it off a lot and use equity as âdepositâ for your next property without selling it?
Yup. The bank has a mortgage over both and you may not need a deposit on the second purchase if your equity in total is 20% or more of the total of the two
I had a 1970s apartment, inner city Perth that I sold for buying price after 10 years.. rental for it almost doubled tho. 2007-2017.,
They say if youâre buying property you should hold for at least 7-10 years. I had a similar experience buying a one bedder in Brisbane. In the first couple of years it ended up dropping $70,000 from what I paid. Iâve thought about selling, but felt it owed me so have hung on. Good thing because prices are going up now and, with the Olympics coming, should continue to do so. Youâre property sounds like a good one, so maybe hang on for a bit if you donât need to sell it. But as others have said, units never go up as much as houses.
Supply and demand, apartments pop up often and newer apartments offer better amenities and facilities etc so older apartments drop in value
Well well well. The investors move out and prices drop. Who woulda thought.
You could rent that for a fair bit though surely? The rental market is insane at the moment. Just wait it out until you at least break even?
I think if rates get cut like the tv keeps saying Melbourne apartments will go up in price. Theyâre pretty good value compared to every other state now.
Yep, it's an apartment small with no land. What else was going happen.
Vic Labor has done their best to shaft small time investors at the affordable end of the housing market and then go on claim that there is a rental crisis. Who wants to buy a small unit in a nice suburb only to see it lose 10% of its value?
Just hang onto it.. rent it out and when you need the cash sell it. Hopefully by then you are closer to purchase price but maybe even the equity from the mortgage being paid does enough.. or cut ya loses.. I work in real estate (not as an agent) in brissy and Iâve seen an apartment sell for 1.6m 18months ago, now sell for 3.2m.. itâs in the Woolstore but it was completely original.. nothing outrageously incredible. It blew my mind. You honestly canât pick em. Anyone that says they can is a liar. Hahah. The agents I work for donât even know whatâs going on half the time.. they are all honestly just winging it.. throwing shit on the wall and seeing what sticks⊠itâs wild.
Sounds nice, renovate the kitchen and keep renting it out. Property prices move up and down over a short duration and offers can vary dramatically due to nothing more than the weather. Itâs far from a perfect market for price discovery. The rule of wealth creation is buy things and keep them.
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Yarra apartments are yield not growth. The mass introduction of cheap apartment's after yours was built brought your value down. What did your price guide say? I bought an apartment. Going to rent it out once I can afford another one to move into. Luckily it's malvern right near caufield uni so ching ching. And as investors allways say, you only lose the money if you sell.
Property is a long term investment. You shouldn't let short term fluctuations worry you, otherwise you might need to consider more conservative assets like cash in saving accounts
We never wanted to be investors. We just wanted to get on the property ladder, then sell for a bigger PPOR. We still want that PPOR so short term fluctuations do matter as it affects our ability to buy đ«€
Doesn't really matter as you're buying and selling in the same market. As you said, you're not in it to make a quick buck, don't be too stressed by what they market is doing
PPOR house market vs apartment market is different though due to historical growth and stigma. If those 2 things changes then yeah don't worry about it... But in the long term time frame there might be a further gap between PPOR house and apartment value if OP holds. Or there might be a bull run on apartments that will overtake house values and OP can buy a PPOR house. Option 1 seems more likely right now, and making a decision now will be a long term investment. The good thing is OP will most likely have paid off most of their mortgage and will some more money to spend compared to most FHB.
Is the op looking for a house? it's also entirely possible for the op to upgrade to a larger PPOR apartment
Seems like OP does want to eventually from above comments hence my comparison. But you have a true point, units, 3 bed apartments and town houses are more than enough to live in with family and will still be more affordable whilst this need to own land is still around.
What about long term declines ?
Depends. If it's your PPOR, then it doesn't matter. Market movement doesn't affect you as you won't be selling anyway. If it's your IP, then you need to make a call whether you want to wait for a turnaround, whenever that is, or pull out now and invest in something else that has better growth potentials.
Vic govt through absolutely brain dead moves are driving away all the investors from the state, which will severely cut their revenue. First Home Buyers do not have the same amount of money to throw around as investors. And then they'll complain about how they are drowning in debt and don't have the funds to host Commonwealth Games or even build an Airport Link (even Perth has one now!)
Not true. The moves in property have overall increased revenues to the state. Prices stagnating and property investors exiting the market is good for society, bad for investors though (including myself) Edit: also airport link is being held up by the airport, they don't want to lose their carpark revenue. State and Feds are very keen to make it happen
I agree that Melbourne as a society will be better off for these moves deterring investors. I want to live in the city where people can own a home and not be chewed up and spat out like Sydney. Apartment prices in Melbourne are quite reasonable and whilst not a great financial investment it can be a great home for someone.
Do you know if prices are softening for houses? Or is it just apartments??
Very suburb dependent in Melbourne. My suburb is still below pre COVID levels for housing (5-10% down) with most stock going unsold, but two suburbs over is a trendy gentrifying area where prices are above pre COVID and stock moves quickly
I'd disagree - FHBs get stamp duty exemption, and if price continues to fall it means less money coming in via stamp duty as more and more investors are leaving the Vic market as they lose confidence. Reduction in % of investment means reduction govt makes through land tax. Keep in mind only 30% of people in Australia are actually renting. Not everyone can afford to buy a house even if the price goes down 20-30% in an extreme case. Single mothers, pensioners, migrants, DV victims or people with disabilities (given the long waiting list for public housing) And when it keeps dropping and it does drop that much, it'll devastate a lot of middle class investors like us. And the wealthy will swoop in and pick them all up driving the prices up again. From the governments perspective it's a balancing act.
Yeah it's a complex environment, budget papers over the next few years will tell if it has worked or not. Overall, given the scramble for cash by the state government a huge amount of modelling is done to try and increase revenues overall, any changes in tax regime are very thoroughly prosecuted by treasury (public service is basically leading fiscal repair, not the pollies). As an investor I'm bummed, but overall for my kids and other young people I reckon the property gravy train needs to be reigned in. It's massively distortionary, and the tax treatment of property in Australia is outrageous compared to the rest of the world
Depends on what their intervention prioritization aim is: more tax revenue or more affordable housing. I have a feeling they might be risking more affordable housing for purchasers but not for renters maybe long term.
Hold.
1bedders are always a tough investment and now none wants to buy in Melbourne because of the changes to laws and taxes. You might be better off making it air bnb. May as well try to hold onto until market conditions improve.
Thanks for your comment! Wonât make it an AirBnb considering thereâs a rental crisis but appreciate the thought
Define your area "near the yarra" covers half of victoria.... "blue chip" is not really a good descriptor
Only singles are buying 1BR and look at the borrowing capacity of say a $100k earner. Family gifting tend not to be used on first step 1BR.
Good point
The Victorian government brought in massive taxes for landlords so any property thatâs popular as a rental is getting sold off, driving prices down.
There is no housing crisis, but there is an expectation crisis. Younger people want a 4-bedroom detached house in a desirable suburb of a metro area for 500K. They won't settle for an apartment! My advice to you OP is to hold on if you can. It's just paper loss. You only lose for real if you sell.
I'm not even close to being a 'younger person' but this is the shittest take I've read in a long time.