The Barefoot Investor has blamed the construction boom and distrust in the quality of new construction for the sharp decline in property prices in some parts of the country.
Scott Pape highlighted an apartment at 883 Collins Street, a huge waterfront complex in Melbourne’s Docklands, which just went up for sale last week.
The two-bedroom apartment had been listed online for months with a “urgent sale” description for between $630,000 and $650,000.
But the sale could result in a huge loss of up to $230,000 for the owner who bought it for $860,000 shortly after finishing construction in 2017.
Mr. Pape said in his weekly column the numbers “are only getting worse… it would have to be worth at least $1.1 million just to keep up with inflation.”
“That loss is without taking into account inflation, body corporate fees, council rates, land tax, maintenance, agent sales commission and of course 10 years of interest on your loan,” he said. to the readers.
‘Guess who is the real winner in our scenario? It’s the tenant!
Pape said tenants had “enjoyed 10 years” of amenities provided by a landlord while their property depreciated in value and was urgently sold at a massive loss.
Barefoot Investor Scott Pape (pictured) has revealed the shocking losses homeowners are suffering in dozens of suburbs.
The Barefoot Investor also noted that apartment is not an isolated issue, pointing to CoreLogic research that found 65 suburbs in Sydney and Melbourne that had average property sales below their historical peaks.
It also found that values in 16 major city suburbs had fallen more than 10 per cent.
The 16 suburbs that hit that benchmark are also located in inner-city areas previously highly regarded in Sydney and Melbourne.
“In some of these markets, housing affordability is improving despite high interest rates and a large portion of sellers are willing to sell at a loss,” CoreLogic’s Australian research director Eliza Owen said in October. .
“But buyers are not interested.”
The research found that the unit market had particularly depreciated following an investment boom in new builds between 2010 and 2017.
“The supply created during an investment boom may not meet the needs of today’s buyers,” Ms Owen said.
“Rather than first-time home buyers rushing into this relatively affordable stock, many are likely to be wary of the flaws of these constructions or put off by the high density and relatively small size of the units.”
Corelogic research found property values in 65 Sydney and Melbourne suburbs had fallen from their historic peaks, 16 of which by more than 10 per cent (file image)
He also noted that interest rates may have to “fall further” to get a more attractive rental yield and persuade investors to buy units.
The suburb that saw the biggest drop was Epping, in Sydney’s northwest, where the average property cost 18.4 per cent less than its peak in May 2017.
It was followed by East Melbourne, which has fallen 17.2 per cent since November 2018, while Sydney’s Beecroft fell 16.5 per cent.
Sydney Olympic Park has collapsed 14.8 per cent since June 2017, after Opal Tower residents were evacuated on Christmas Eve the following year for structural repairs.
Owen said recent construction had helped lower rental prices, but failed to keep the market competitive because they were often smaller apartments near universities or the city center.
“Unfortunately, they are something of a waste on some of our most treasured and convenient sites in Sydney and Melbourne, in the middle of a housing crisis,” he said. Domain.
‘Viewing housing solely through the lens of wealth creation can be detrimental to the quality of life of the people who live in it and lead to a lack of utilization of this housing.
“The right type of offering is large enough that different types of households will want to live in it long-term, whether it’s a wealthy boomer downsizing or a young family looking for enough bedrooms and outdoor space to form a family.”