Melbourne inner city apartment owners are feeling the pain with some being sold for up to 24 per cent below their off-the-plan purchase price.
Apartments in Melbourne’s CBD, Docklands and Southbank are front and centre of concerns about oversupply after many were bought by vendors from property investment companies or spruikers.
The Australian Financial Review cites one example of a one-bedroom apartment in the Site One Complex at 757 Bourke Street having an asking price of between $290,000 – $319,000 after being bought off-the-plan for $380,000 in 2009.
Bruce Warburton from Greg Hocking Real Estate spoke to AFR Weekend about apartment investors getting burnt in the current market conditions.
“We’re seeing this a lot, often where the vendor has bought the apartment through an investment channel or through a spruiker,” he said.
“The worry is for vendors with negative equity who are forced to sell.”
“When they sell they crystalise that loss. When they own it, with the current low interest rates they can hide that loss and rental return is still good.”
Last year WBP Property Group did a study on off-the-plan sales in response to the growing number of sales dipping below the purchase price at settlement.
The study featured nearly 1800 off-the-plan sales in Victoria between 2009-2015 and found that half of all off-the-plan properties were valued at a minimum of $1000 less than the purchase price. The average loss was $40,000, or 9.4 per cent.
Andrew Lean from Pagan Real Estate spoke to AFR Weekend about selling off-the-plan inner city Melbourne apartments in the real estate market once they were built.
“The off-the-plan market is a bit of a false market because you have the stamp duty savings and depreciation for investors,” he said.
“When it’s re-sold its real market value is based on other comparable properties in the market.”