Another week another report of Melbourne’s highrise apartment boom causing significant market indigestion.
The latest installment comes from The AFR’s Michael Bleby who today notes that some apartments in central Melbourne are being resold at discounts of up to 30%:
Not all units have fallen in value, but analysis of a handful of transactions shows many apartments have failed to hold their value between original purchase and resale, typically a few years later…
The figures point to a downturn in prices and demand for investor buyers of apartment dwellings.
“Generally speaking, you’re going to get a worse outcome if the apartment doesn’t appeal to owner-occupiers and only appeals to an investor,” said Matthew Baxter, a director of valuation firm Opteon…
Meanwhile, settlement risks are rising:
If banks value properties for less or cut the loan-to-value ratio they will offer customers, buyers are forced to pay more at time of settlement. If they cannot pay more, they may be forced to sell into a weakening market.
The CoreLogic numbers add to separate figures compiled by valuation firm WBP showing half of 1,794 properties purchased off-plan between December 2009 and August 2015 had been revalued below their purchase price.
The below chart shows that there were 21,207 highrise apartments approved in Victoria (read Melbourne) in the year to January 2016:
Moreover, the number of highrise approvals currently is nearly three times that of the mid-2003 peak when the Docklands/Southbank boom first took-off.
Unfortunately, Melbourne’s economy – which has gone all in on the housing/population ponzi – is now highly reliant on the building of dog boxes for sale to foreign investors and migrants (mainly international students).
Such a strategy is like a dog chasing its tail. Once the building boom ends, so will the economy’s momentum.
