12 months ago I wrote a piece called “The Unit Trap” which discussed the possible pitfalls of unit oversupply in concentrated areas. A year later we can see the result of this oversupply, as well as the benefits of undersupply in others (such as Manly for example) and how they have flourished.
For more than 3 years I’ve been warning about pockets of the Australian property market that have approved far greater numbers of apartments for construction than the underlying demand from tenants requires.
Without this information in hand, unsuspecting time poor investors have trusted glossy artists impressions, inflated rental projections and ‘cherry picked’ statistics, locking themselves into unconditional contracts and often totally unaware of the issues that loom on the horizon. Many even had a ‘nod of approval’ from their banks, only to find that as settlement day approaches the bank either no longer has interest in supplying the finance, or requires a much bigger deposit that first expected.
However, those who were a bit more informed benefited from the flip side of this scenario by identifying the suburbs with low apartment stock coming on to the market, low vacancy rates and quality infrastructure; these suburbs have stormed forward. An example being Manly, recently named one of Australia’s most sort after apartment markets, with a median price increase of more than 20% in the last 12 months.
And it’s this level of data and statistics that my team and I are constantly crunching to make sure our clients (as well as ourselves as I personally head into acquisition phase in 2017) are not caught with a bad investment. To hear first hand where I believe the best markets for investment currently are claim your free seat at our next Stone Investor meeting now.
When it comes to overheated CBD unit markets, valuations are also a very important consideration in the process of entering a good investment. Investors are increasingly becoming confronted with valuations well below their purchase price, leaving them with the added burden of ‘topping up’ the difference from their pocket.
A recent CoreLogistic Settlement Risk Report highlights ongoing concerns about the likely effect of increasing levels of oversupply as new stock floods the market.
If we compare the capital cities, it becomes evident that most of the (apartment) stock in Melbourne, Brisbane and Perth is located in inner-city (within 10km radius of the city). Taking a look at Sydney, the new unit supply is more geographically diverse.
Cameron Kusher - CoreLogic
The good news is that my research is currently showing several strong, safe and reliable property markets with attractive yields providing opportunity for savvy investors to take advantage of the RIGHT type of investments. To learn which property types and locations will provide the best chance of investing success, click here to claim your complimentary seat at our next Stone Invest Meeting now.