Upmarket resales perform best
The Australian Financial Review
12 July 2002
By Brett Foley
Crunch time may be forecast, but those apartment owners who have on-sold some of Melbourne's most expensive apartments have fared well.
Analysis by CHARTER Keck Cramer shows the majority of resales in up-market apartment towers have earned sellers fair capital gains. Allowing for inflation, however, the returns are not as rosy. The flight to quality has continued, and demand for space in Melbourne's top residential towers is unabated. However, secondary locations and generic apartment product have shown little capital growth in some cases. Mirvac's Melburnian development on St Kilda Road continues to set the benchmarks as buyers apparently line up to secure an apartment. TBM Melbourne manager Jenny Gould said TBM had racked up $60 million in apartment resales last financial year, including $25 million in the Melburnian alone. Melburnian apartments had consistently resold at up to 30 per cent more than the off-the-plan purchase price of two years ago, she said.
Ms Gould said the upper end of the apartment market remained healthy because of a lack of quality supply in St Kilda Road properties such as the Domain and St James buildings. "Most of the apartments we are selling [in the Melburnian] are to people who already live there or to people who have friends who live there," she said. Ms Gould said another Mirvac project, Yarra's Edge at Docklands, which is due to open later in the year, had begun to register its first resales. Seven apartments had sold in recent months, all for prices 20 per cent above what the purchasers had paid off the plan about two years ago.
CHARTER Keck Cramer conducted a survey of 3,000 resale apartments between 1992 and 2001 and found capital growth across the board was not as bullish after allowing for inflation. Charter's research director, Robert Papaleo, said the State of the Market - Residential Apartments report showed that buildings in good locations, with quality views and top-class fittings and architecture, were the strongest performers. However, the appraisal showed some of the earlier product produced by prolific developer Central Equity had posted a capital loss since 1992. The City View on Southbank fell 5.8 per cent and its building at 88 Park Street fell 3.5 per cent.
Of oversupply fears, Mr Papaleo said rental demand for new product would be the determining factor in apartment construction. "If investors can't get the expected rental return, they are likely to sell, which could lead to a lot of secondary product hitting the market, which will have a bearing on the amount of new supply that gets built," he said.
Hocking Stuart manager Brett Jarvis said the apartment market had in-built protection against oversupply: "If the apartments don't pre-sell, the project would not get built." Mr Jarvis said several developments had not got off the ground because buyers had not taken to their design or location.
12 July 2002
By Brett Foley
Crunch time may be forecast, but those apartment owners who have on-sold some of Melbourne's most expensive apartments have fared well.
Analysis by CHARTER Keck Cramer shows the majority of resales in up-market apartment towers have earned sellers fair capital gains. Allowing for inflation, however, the returns are not as rosy. The flight to quality has continued, and demand for space in Melbourne's top residential towers is unabated. However, secondary locations and generic apartment product have shown little capital growth in some cases. Mirvac's Melburnian development on St Kilda Road continues to set the benchmarks as buyers apparently line up to secure an apartment. TBM Melbourne manager Jenny Gould said TBM had racked up $60 million in apartment resales last financial year, including $25 million in the Melburnian alone. Melburnian apartments had consistently resold at up to 30 per cent more than the off-the-plan purchase price of two years ago, she said.
Ms Gould said the upper end of the apartment market remained healthy because of a lack of quality supply in St Kilda Road properties such as the Domain and St James buildings. "Most of the apartments we are selling [in the Melburnian] are to people who already live there or to people who have friends who live there," she said. Ms Gould said another Mirvac project, Yarra's Edge at Docklands, which is due to open later in the year, had begun to register its first resales. Seven apartments had sold in recent months, all for prices 20 per cent above what the purchasers had paid off the plan about two years ago.
CHARTER Keck Cramer conducted a survey of 3,000 resale apartments between 1992 and 2001 and found capital growth across the board was not as bullish after allowing for inflation. Charter's research director, Robert Papaleo, said the State of the Market - Residential Apartments report showed that buildings in good locations, with quality views and top-class fittings and architecture, were the strongest performers. However, the appraisal showed some of the earlier product produced by prolific developer Central Equity had posted a capital loss since 1992. The City View on Southbank fell 5.8 per cent and its building at 88 Park Street fell 3.5 per cent.
Of oversupply fears, Mr Papaleo said rental demand for new product would be the determining factor in apartment construction. "If investors can't get the expected rental return, they are likely to sell, which could lead to a lot of secondary product hitting the market, which will have a bearing on the amount of new supply that gets built," he said.
Hocking Stuart manager Brett Jarvis said the apartment market had in-built protection against oversupply: "If the apartments don't pre-sell, the project would not get built." Mr Jarvis said several developments had not got off the ground because buyers had not taken to their design or location.
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