A recent forecast from Morgan Stanley predicts that there will be an oversupply of apartments in Melbourne by 2018.
Melbourne, Sydney and Brisbane have been driving the surge in unit construction. The concentrated nature of the boom also raises concerns that in some inner city areas there are more units being built than will be in demand. The S&P said in their recent report they thought the potential was greatest for oversupply in Brisbane and Melbourne.
In addition, the banks have tightened their lending to property investors, especially those from overseas and buyers of high rise apartments. The big banks have tightened or stopped lending to overseas buyers. These are the major players in buying off the plan apartments.
Migration laws have also tightened making it harder for our once burgeoning inflow of Chinese immigrants.
This potential apartment glut has many analysts concerned about further pain in off the plan apartments. Off the plan sales creates demand for two properties, when the real demand is only really for one. When people move into their new apartment they have to move out of their rental accommodation or sell their existing home. This is when you get the problem, there are two markets rather than just demand for apartments. In the east coast capitals a recent survey revealed there were more cranes building apartments than in major United State cities.
This sounds like bad news, but is it?
The apartment market has come back to where it should be. Gone are the days when developers can charge over the odds for a poor quality build. Renters in Melbourne and Brisbane now have the upper hand when it comes to price, cheaper rents can be easily negotiated.
If you're thinking of buying an apartment, then it is the perfect time to negotiate your way to a less expensive price. If you don't feel comfortable negotiating, then employ a buyers advocate to do it for you.
Believe it or not now is actually a good time to be buying apartments. But be warned, one still has to do their homework.
Here are some tips to help you avoid the traps of buying in the Melbourne property market:
- In Melbourne avoid the city’s World Trade centre, Southbank, South Yarra, Docklands and South Melbourne, inner city Melbourne also has an oversupply.
- Check the builders out, see if you can view their quality of work on other projects.
- Make sure what they say they will put in they do, watch for changes along the way. Leaks and plumbing issues are rife.
- Buy in the suburbs.
- Don’t buy into high rise.
- The least amount of apartments in a development the better, very important. I would say this is the most important.
- Look for developments that are away from main roads, much more appeal for long term gains.
- Use a buyer advocate to get a market analysis on where best to buy.