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.