Cash-strapped property investors dump apartments

With prices and rents diving, property investors are dumping their shoe-box apartments, according to new data from Domain:

Domain data shows that between the four weeks to May 17 and the four weeks to June 14, apartment listings rose by 27 per cent in Melbourne and were up by 15 per cent in Brisbane and 37 per cent in Perth.

New apartment listings jumped by 43 per cent in Adelaide and were up by 4 per cent in Canberra.

Domain’s senior research analyst, Nicola Powell, said the trend could be a sign investors are moving on.

“The shift seemed to be concentrated in Sydney at the moment. Perhaps we are starting to see some investors choosing to offload their property because of the disruption in the rental market,” Dr Powell said.

“If landlords can’t weather this COVID-19 storm, can’t secure a tenant and can’t get that cashflow through this period, we could see an increase in apartments coming onto the market as investors try to sell up.”

Seriously, who can blame them?

Rental vacancies are soaring across inner city areas:

Investors are also caught in a pincer between falling property prices and rents. They are also facing an vortex of headwinds, including:

  • Widespread job and income losses;
  • Collapsing immigration and international student numbers;
  • A flood of supply as the large apartment construction pipeline is completed and Airbnbs are dumped onto the long-term rental market; and
  • The expiry of emergency income support and mortgage deferrals from late-September.

The logical think to do is to sell before the situation gets even worse.

Pass the popcorn…

Leith van Onselen
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Comments

    • We can’t build concrete and steel high rise without them falling apart, how keen will investors (or anybody) be in buying an Australian designed and built 40 story wooden high rise?

  1. PaperRooDogMEMBER

    Those savvy investors finally catching on, must be the second wave that has opened their eyes that it’s going to be long drawn out period of low growth. They obviously never read DoctorX comments.

      • I can’t imagine how the RBA will ‘halt trading’ although I know that’s on the cards.

        If I am in trouble and need to sell my IP’s (note plural), then wtf do I do if trading is halted?
        Who will pay all the out-goings when I can’t? Govt buys all these too!!????

        Jeez, where does this all end?

        • If I am in trouble and need to sell my IP’s (note plural), then wtf do I do if trading is halted?
          Sell to one (or more) of those foreign bunk share criminal syndicates that mike mb keeps posting about. They would happily hand over a suitcase full of cash, fill your IP(s) with 12 or so cash-in-hand fake students, front it with a temporary worker lead tenant and pocket $2000 a week cash in hand whilst putting bogans out on the street.
          mike mb writes clearly and you should have been paying attention like me!

      • that halt would crash the price because off the book sales would still happen just with settlements in more distant future

        none can stop someone from putting a signature on the contract so such halt would reduce number of buyers but not number of seller which would crash prices much much faster causing panic that would feed onto itself

        • Lord Winchester EntwhistleMEMBER

          Colour my misinformed, but they could put a halt to PEXA transactions and/or stop changes in title, beyond paper changes to account for family law/court orders/deaths.

          • but that’s my point … such ban would not prevent people from selling and cash buyers from buying
            contracts could still be signed with official title transfers delayed by few months
            none can prevent people from signing sales contracts without destroying the very fabric of the legal order

            just imagine what would happen to prices in such situation where quite a few still must sell and very few are buying

      • Excellent. Just the rumour spreading around about RBA stepping in to stop you selling will get the ball rolling. FOGS .. “Fear of getting stuck” with the property should start some panic selling. I like it.

      • It will be only 10%in MSM because ‘they’ will doctor the numbers and stop reporting…. so only those who are trying to sell will know what the real numbers are, then the sh*t hits the fan….

      • I’ve noticed that going to kick tyres on a few properties in my Melbourne suburb – RE Agents talk up their vendors ‘listening to the market’ e.g. slashing price, but properties we saw in April are still there with more cobwebs on the ‘For Sale’ signs.

  2. Surface Paradise alone has 775 properties for sale today on realestate.com.au not to mention other websites and or private sales so it’s most likely over 1000 properties. Some buildings you now see a who group of apartments, maybe from one owner been dumped onto the market, especially the crap that’s under 200k that has high body corp, council fee’s and most likely shared water meters. A number of them are around the 135-160K mark, like a mobile phone you get the place cheap (actually still not that cheap) but end up like mobile phones paying for high subscription costs which are those fees. I have seen places going for 150K but the yearly fee’s for corp/council/water are up to 15K a year. So how do you sell an apartment that you can’t airbnb which has such high fees. If you are an investor with this type of setup you are truly screwed as you must pay those fee’s. Even if many of these places were now half the sales price it’s the fee’s that still make many a bad investment.

  3. This is just asset revaluation based on a broader/better asset pricing model by the community. Everyone (investors, renters, FHBs) has just realised that the dog boxes sold as apartments are not fit for purpose in a pandemic.

    No one would want to be stuck in one of those window-less, flammable boxes for weeks, with thousands of others, who are possibly infected with a highly contagious virus. With the virus spreading through the HVAC or piping.

    Suddenly, a house in the fringe suburbs with a backyard, and WFH seems like a great idea.

  4. I’ve noticed quite a few properties (mostly units) for sale around where I live as well. Might just be a bit of a backlog release from the period when you couldn’t go an open house but it is enough to notice for sure.

    • happy valleyMEMBER

      If they raise lending rates, will the banks raise deposit rates or just keep the endless r.pe of depositors running and pocket the increase?

          • An acquaintance of many years asked me last year when I was going to turn 50, which was noice, because I’m getting awful close to 60.

            I can only assume that my boyish good looks are due to a life of virtuous living and regular church-going.

  5. happy valleyMEMBER

    So, IP specufestors are effectively pulling the pin and saving the banksters having to do it. SFM had better open those international borders quick smart as we’re going to need lots of vibrants to reignite the population/property price ponzi – let it rip.

    • Yeah but then people can see the second wave in Vic. The penny’s just dropped… I know that the mentality out there is “this too shall pass.. a couple of months of discomfort and back to the old ways we go”.. and the Vic second wave will be a moment of “oh.. so we really cannot let people in swathes come into the country without a shutdown”. That’s a hard message if you relied on that to retire.
      Having said that, I do know those who take a “Property is a 30yr investment and may go up and down in that period.. nothing to worry about”.
      These people will need to see a 50% down across a multi-year period to pause for thought. When they see others buying a house for hundreds of $ks less and mortgage rates rising, and prices still falling, they’ll panic then. But they’re last to panic and hold the bag till the end. They haven’t really seen or gone out of their way to educate themselves of other crashes to see it c0m1ng. These people may even provide a bit of a last backstop on prices..

  6. there is no a single reason to hold onto those investments and many to sell
    – prices are not going to rise significantly any time soon while these PIs make investors constantly bleed
    – IRs are not going to reduce nor will rent rise either so bleeding is not going to get any smaller with time
    – strata and other costs are only going to rise as the building ages
    – risk of finding a significant defect is a constant threat

    price of a typical $500k investments needs to grow by 3% per year just to offset ongoing losses

    who panics first panics the best

    • Reus's largeMEMBER

      It is going to be the toilet paper saga all over again, where the buyers are the TP, the smart ones sold before the rush the rest of the sellers are going to be fighting over the few buyers there are and it will be a race to the bottom for prices as the panic sets in.

  7. This is the last chance for retired or just retiring boomers to sell and they know it. Only 15 years or less of the golden years so not enough time for another credit boom cycle. Time to cash in your chips and get out.

    • Yeah – if you’re 70 now your ability to use the cash to fun stuff will only be available for a limited time, that is likely to expire before the next boom.

  8. Mining BoganMEMBER

    Surely by definition they must be sold to be dumped. These babies ain’t sellin’.

    Temporarily mis-owned may be a better description.

  9. Pretty Boy Floyd

    Ultimately this will be a VIC and NSW problem. The rest of the country will soon close their borders to VIC followed by NSW as it takes off there.

    I can see property booming in WA especially.

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