TOO MANY TOO SOON

There will be an oversupply of new apartment developments in Manningham, particularly on Doncaster Hill, if the current number pre-selling ever get off the ground A glut of apartments will drive down prices and pose a problem for investors who would be relying on the value of their property to increase by the time development reaches completion. Both these issues mean……..

………….their investment will lack scarcity value, one of the factors that help increase resale value. Unfortunately, since 2009 the average asking price for an apartment on Doncaster Hill has remained static, in fact, to hold prices at their present level, some developers are including a high percentage of tiny apartments to compensate, preferring to sell on affordability rather than value for money.

Much of a development’s budgeted selling price is spent on marketing and selling costs which means the investor must pay well over the underlying value.  Some developers are providing a rental guarantee to entice investors who might be more focused on their cash flow than worried about vacancies. The problem is these rental guarantees are built  into the purchase price, which is another cost that inflates the apartment’s already premium price. Once the guarantee expires, (usually for one year), the rental income reverts back to the going market rate, which is usually lower than that offered in the guarantee.

While the surge in apartment pre-selling overseas might be encouraging developers,  the long lead up times between council approval and achieving the sales quota requirement and completion (typically three years for high rise apartments) means that the banks and overseas investors could be exposed to the risk of a protracted downturn as apartment projects could still be under construction, en masse, long after the market has turned Sour.

2 Responses to “TOO MANY TOO SOON”

  1. Synstrat says:

    Why would anyone want to purchase an apartment in a high rise tower that hasn’t been built?. Why would anyone risk paying a deposit which could be tied up for one or even two years, depriving you the opportunity to purchase elsewhere if the project was to fail in that period? And if it did proceed, how can you predict the valuation of your purchase 3 years down the track or whether you could raise the shortfall in the amount your lending authority would lend you if valuations had dropped when the project was completed?.

    Synstrat

  2. Havelock says:

    Apart from the lack of capital gain and poor resale prospects, the biggest issue that besets apartment owners and takes first-time high-rise dwellers by surprise is the problem of noise, it is the most common and varied complaint. Noise is accepted to be the fastest growing type of pollution in modern cities, and its effect on our mental and emotional health has a direct influence on our physical well-being. Exposure to noise has been linked to sleep deprivation, annoyance and health issues such as hypertension and heart disease. Living in a very small apartment is difficult enough and with excessive noise penetrating through windows, floors, ceiling, walls, doors and even through water pipes the experience can be extremely unpleasant. And even with adequate noise control mechanisms you will find noise issues in apartment living may still arise. Noise irritation is not just from people in an adjoining apartment. The building and external environment can be a rich source of noises, the types of noise that can drive you batty.
    Havelock

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