Melbourne apartment boom goes ballistic (again!)

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  1. Thats great news, as the prices do decline over the coming years there will be a great glut of affordable (hopefully) housing for both Gen Y buyers and renters who want to live in or around the city.

    • Hopefully they’ll be reasonably proportioned, so you can fit more than 3 days worth of food in the pantry!

  2. Maybe like China’s ghost towns ( in miniscule) –they are hoping, “if we build them, they will come…………………………..”

    • Actually thinking about it ………….. they probably will, Chinese buyers desperate to park their cash in “something solid” ………. or buy a bargain when our property market deflates significantly.

    • But they will come.

      They will leave Perth and Darwin if they aren’t in mining.

        • Rusty Penny,

          If China has a hard landing and If the miners leave Perth and Darwin due to a severe downturn, they’ll certainly be ‘cashed up’ and might even ‘invest’ heavily if Melb. property, if it’s seen to be good for a bargain or two– who knows?

          Lots of ‘if’s’, time will tell.

          • Yeah, being unemployed they’ll have so much time on their hands to search and find bargains. Sounds like a winner to me……..

      • This comment below the article is gold!

        Based on a actual events, “When Robert Met Harry” is a tale of an accessible journo with a penchant for bullishness, and a leveraged property developer always keen to talk his book (What the rising dollar means for property, July 3). There’s Chinese buyers, parachuted Singaporean investors, and a shock Melbourne oversupply. Free from the shackles of independence, Robert captivates audiences with his political lobbying for eased zoning regulations masquerading as business insight. Remarkable, 4 stars.

  3. Here in North of Adelaide (5095), there is a construction boom!.. Dont know why, because stock on the market aint moving here anyways!

    • eh I’ll just rent it for below market price since I’m sure they’ll be trying to recoup some income on it

  4. darklydrawlMEMBER

    Wow… those charts are just stunning. Mind you it does support the evidence I see around me in Melbourne. There are apartments going up in many suburbs I commute through. I keep wondering if / when / how they will move them.

    Mind you I would imagine that many of these developments would need X% of pre-sales to get financed(?).

    Why you would pay $500 K for a 1/2 bedroom apartment (just like a thousand others nearby) doesn’t seem to make much sense to me. Then again, much of the Melbourne property market I struggle to make sense of…

    • The Patrician

      re the X% presale question

      as we explored the other day, some developers (HRH) have there own finance don’t need the presales.

      A quarter-built HRH 564 apartment tower in Bris CBD is effectively 15% presold after selling off the plan for nearly 2yrs.

      • The Patrician

        More insight into the HRH business model….fascinating stuff

        “Apartment billionaire Harry Triguboff was surprisingly candid at a lunch held by the American Chamber of Commerce last October.

        He told the audience he was able to pay “very little tax”.

        “I keep a lot of my properties. And if you keep them and there’s capital gain it’s beautiful,” he says “You don’t pay tax. I don’t lease them so I don’t pay tax on the rent, but I get depreciation.”

        He paid tax on apartment sales but that’s where the land banking came in.

        “You have to buy lots of empty land,” he said. “You keep the land and it brings you no income, so you claim it against your tax.”

        • The Patrician

          So on his own admission he banks a significant number of the apartments he builds and hoards large amounts of vacant land to avoid paying tax.( …and I’ll guaruntee he’s not the only one doing it)

          Sounds like part of the answer to the housing supply problem lies right there.

    • StanGoodvibesMEMBER

      Why would you pay $1.4 million for a townhouse in central Melbourne??? You’ve all gone stark raving mad

  5. Must admit that I’m amazed at the number of new developments I see here in Melbourne. Not just in the usual places (CBD, Docklands, etc.) but in almost every shopping village. It looks like as soon as a shop shuts down, it’s developed and turned in to an apartment complex.

  6. If you were a developer in the Melbourne market, and have had the benefit of many months of statistical figures showing a market ‘downturn’, would you build today? Only if you thought you could sell what you built, and I’d guess that’s exactly what these chaps are seeing ….demand, in 12-18 months time.

  7. Very little of this development is being focussed on domestic demand. It just isn’t there.

    The middle ring suburbs are starting to see quite a number of 3/4 story blocks, comprising 30-60 apartments. The Chinese love to park cash there, although a Chinese friend did suggest we weren’t in favour at the moment.

    Guys who try to compete with this in the domestic market get burnt. I know one who did a beach front 4 townhouse development in a bayside suburb. 12 months after completion, two are ‘sold’ which actually means the developer and his brother moved into them and the other two which were originally advertised at $1.7m are languishing at $1.25m with multiple agencies. They don’t seem to have the foreign marketing links to attract those buyers.

  8. These figures are somewhat concerning but building approvals do not necessarily translate into actual construction. There is some evidence to suggest that construction is in decline in Melbourne (and has been since the beginning of this year). Declining construction activity is an indicator that developers are not proceeding with construction once approval has been obtained. Hence, forecasting supply in the future based on the recent surge in approvals may be a case of “counting your chickens before the eggs have hatched”.

      • Yes, when the economy and proprty prices are growing strongly (as they have been over the past 15 years), approvals and commencements do tend to follow closely. I’d be interested to see what happened in 1989-94 (i.e. the last time Australia had a recession and property prices took a hit).

  9. russellsmith55

    No surprise. Some of my fellow Melbournians are still shocked to hear we’re down over 10% from peak in average real terms, like house prices have never fallen in the last 50 years.

    Some don’t even believe it and say I’m talking it down because I selfishly want a cheaper house, but will miss out forever because I’ll wait too long.

    Some quickly point out ‘yeh but how far is the ASX down since the GFC started?’ (around 38% in fact, a figure they don’t actually know and I need to point out to them). Because apparently you’re either buying as much property as you can or you’re 100% invested in the stock market.

    So many people still don’t know what’s happening and don’t want to know even now. If Melbourne’s volumes and auction clearance rates are down so low and there are still this many true believers, we must have really hit the affordability ceiling (and not be due only to sentiment like some suggest).

    I was originally thinking wait for a serious bargain and strike. Now I’m starting to think it may not be a good idea at all to buy in Melbourne in the next 5 years. Would be interested what other Melbournians are thinking.

    • If you don’t need somewhere to live, don’t buy.

      I own an investment property in Melbourne (that I’ve held for almost ten years because it still produces a reasonable yield / cashflow) BUT I don’t intend to buy anymore property in Melbourne – finding yield is extremelly challenging and prices won’t go up anytime soon.

    • In addition to your observation, I have a feeling that the buyers in the more ‘well off’ appears to be more knowlegeble for what is happening in the market. It may not be due to they are smarter but just because the amount they are betting on is higher and the ‘small’ monthly changes in the sale price does make a different. i.e. for a 2mil house,2% is 40k. but for the entry level property at 450K 2% is ‘only 9k which the buyer may not be too concern as they think the government ‘already’ paid them 7k.

  10. Not sure which month this would be included in but a residential tower in Melbourne has recently been approved that contains almost 600 apartments. That could cause a spike in the Victorian figures.

  11. Is everything in Melbourne on Sale other than apartments, in the CBD there seems to be a glut of office space, Knight Frank must be loving the business!

  12. What makes these figures so volatile. It’s up one month and down the next. I don’t think we can read much into these monthly figures.

  13. While it’s possible we have another RBA fuelled growth in housing – these are very volatile series (even when seasonally adjusted) and I’d want more than one month’s data before jumping at this shadow.

  14. These series are very volatile, even after seasonal adjustment. I would want a little more data before declaring the end of civilisation as we know it.

  15. In 1983 my landlord offered us (3 professional youngsters) the house we were renting in Albert Park, Melbourne for the horrifying amount of…$70k. ( we were paying $25 p.w. each rent). I saw that very same house for sale last week for $2.7m. But it appears to be exactly the same house as it was 30 years ago..I doubt it’s even been painted! Wouldn’t we all be better off it was still $70k and our associated costs were commensurately so?

  16. Question: If a new apartment costs 550K inc GST, is the property considered to be valued at 550K or 500K? And is stamp duty paid on 550K or 500K?

    Thanks

  17. Don’t know if any worried apartment developers are reading this comment thread, but I’ll put this idea out there anyway.

    The major disadvantage of apartment living is not having enough space to entertain guests, or to provide visitors from interstage/overseas with somewhere to stay.

    One or two apartments within an apartment complex could be made available to be booked for short term use by residents at reasonable rates.

    This would make living in the complex more attractive, making it easier to sell the remaining apartments and/or allowing the developer to sell the remaining apartments for a better price.

    Depending on the size of the complex and the target demographic, there could even be specialized ‘shared’ apartments, such as spaces set up for children to play, areas with excellent sound-proofing so that residents can hold loud parties without annoying their neighbours, areas with top-notch cooking/dining facilities for throwing dinner parties, or areas with state of the art audio-visual equipment for holding DVD and pizza nights or watching major sporting events with a bunch of mates on a big screen — the kinds of things that are easy if you live in a big house, but become difficult if you a living in a small apartment.

    Really, the possibilities are only limited by the imaginations of the developers… which, I suspect, is the problem 🙁

    • The Patrician

      Already happening on a number of those points.

      re mixed short term/serviced apartments
      HRH’s towers contain exactly that.Bris CBD, Floors 1-24 Meriton serviced apartments, floors 25-65 for sale,floors 66-81 “for Harry”. Serves the dual purpose of drip feeding supply onto the market as needed.

      Works for Harry. Well, has so far. Seems horribly exposed to a bust but who cares,… if you have no debt?

      • Seen property bubble and bust in Budapest past 10 years, luckily had sense to buy modest one bedroom in established building (1888) inner city $75k (which I actually live in), but many locals and foreigners (Irish, British, Spanish etc.) got caught up in easy credit and mantra that property always goes up buying new buy to rent (often shoddy plus appearing to be mostly”rented” by fake names on door buzzers etc.) and/or renovating large existing that few locals can now afford to rent or buy (recent years been explosion in short term tourism rentals and private hostels)….former East Berlin very economic too.. keeping my powder dry for Melbourne 2014/5 or thereabouts, 1/2 bedroom flat/apt…..

  18. So guys and girls..help me out! Shelve plans to buy entry level investment apartment in Melbourne? Maybe buy one in Perth instead?? Lol