In Melbourne, the property market is a tried and true place to invest. Over the last 25 years the market has gone only from strength to strength seemingly invulnerable to external market forces such as fires, floods and even Covid-19.
Despite property as a general category being a popular investment vehicle, when blocks of flats were to be offered for sale, investors and developers alike would drool with desire to get their hands on them. Due to them being so highly regarded and so rarely offered they would fetch mouth-watering prices, well above the prices if the flats were to be sold individually.
Recently, the whole-block market has been tipped on it's head and there has been a flood of blocks to the market. Over the last 3-4 months as many blocks have gone to the market as over the past 5 years at least.
There are a number of potential reasons for this sudden surplus.
Firstly, the property marketing has had a bumper 2021, even by Melbourne's robust standards. Although not all sectors of the market have seen the same level of growth, desirable property has been snapped up at a premium. Given that blocks of flats are usually in the 'desirable' category, it stands to reason that they may fetch the associated price premiums.
Secondly, the State Government has recently brought in changes to legislation that make it more cumbersome (and yes, more costly) to be a landlord. If you own a block of flats then the burden of being a landlord is multiplied by the number of flats in the block. It makes sense that some landlords don't want the extra hassle and prefer to cash in their chips.
The question then begs - what impact, if any, will this new surplus have on prices of whole-blocks in the near term?
On the one hand, the market is going gangbusters at the moment and is showing no signs of slowing down. Purchasers are clearly happy to be writing big cheques for the right property. On the flip side, the urgency that is normally associated with whole-blocks due to their rarity has disappeared - in fact buyers are spoilt for choice.
I think the real answer is that it remains to be seen. Many of the blocks that went under the hammer in the first two quarters of the year were passed in but some sold, and sold for a pretty penny. Some as much as $510,000 per one bedroom unit.
If you have some insights or experiences, please feel free to join the conversation.
As always, Capstack are experts in commercial property financing and whether you're an experienced investor or are looking to get into the market for the first time - we can help make it happen smoothly for you.
Send us a message via this page or to jfixler@capstack.com.au to start the conversation.
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