Could We See a Rise in Apartment Prices this Year?
There’s a general consensus amongst buyers in the market and people in the industry that apartments are bad investments…. And who can blame them really, from a capital growth perspective they haven’t performed well for years, they can be riddled with issues when it comes to build quality (combustible cladding anyone?), and body corporate fees and special levies can be a costly ongoing problem to manage.
But that hasn’t always been the case....
When I (Tabitha) bought my first property years ago, like a lot of first home buyers in my position, I purchased an apartment. Even though everyone told me not to. Solid advice yes, but it overlooks the fact that I, along with many other first time buyers, was young and broke.
It was a basic brick inner city apartment and I ended up holding it for seven years, deciding to sell around 2012. Just as I put it on the market, a lack of housing stock drove the price of apartments up, netting me a neat little return of 20 percent on my original outlay. Not huge, but certainly not bad for a first investment… and an apartment at that too!
Since then, we have seen very little growth in apartments across the board. However, the particular market conditions that gave me a welcome compounding capital growth rate of 3.6 percent year-on-year have returned.
Just as in 2012, Melbourne’s population is growing faster than developers can build houses, which is driving up demand for alternative housing options - apartment living! A quick glance at data on Victoria’s Big Housing Build indicates that these conditions look set to continue.
We estimate that apartments could return as a dependable investment option over the next five years. Not all apartments though, how we feel an apartment (or any property for that matter) is likely to perform long term is dependent on following our tried and true fundamental guidelines to buying A-Grade real estate.
Key factors to look for when apartment shopping to protect your investment;
1970s brick blocks with common area and garden surrounds
Minimum 2 bedrooms, ensures you increase your buyer pool when it comes time to sell or lease out
‘Walk Up’ blocks with stairs connecting floors instead of lifts, to keep body corp fees down
Buy in an established area, as close as you can to the CBD, close to schools, shops and public transport.
Low density block, 15 apartments or less.
If you’re considering an apartment purchase, let’s chat!!!
Get in touch to find out where your next (or first) purchase should be!