Hello Friends, Associates and Clients, Another article for your perusal and information:- If you buy a unit because of a developer's incentive, you deserve your dud
investment: Terry Ryder
By Terry Ryder
Wednesday, 15 August 2012
People who allow themselves to be lured by developer incentives into buying
new apartments deserve the dud investment they're getting. Quality properties for which there is genuine demand don't need to offer
incentives to buyers. The existence of incentives is a warning sign for
buyers to look elsewhere. Melbourne's inner-city unit market is the standout example. For the past 18
months I've been urging buyers to steer clear, because the level of new
product being built is bordering on the ludicrous. Demand for real estate is weak in Melbourne, and the only way developers can
stir up sales is to offer inducements or sell product in distant locations
like China. Both are happening, and both serve as danger signals for buyers.
Sadly, Melbourne newspapers have been breathlessly characterizing the
building frenzy as a boom, highlighting the impressive statistics rather
than warning people that the situation has "oversupply" written all over it.
One journalist notes that 6% of national building approvals are focused on
inner-city Melbourne, with over 5,000 new apartments approved in the CBD,
Docklands or Southbank in the past year. That brings to 21,000 the number of new units in the development pipeline. A
metropolitan newspaper journalist who should know better described this as
developers "meeting the demand for inner-city living". It's nothing of the sort. It's developers allowing greed to over-ride common
sense, supported by buyers who conduct research by reading newspaper
headlines. They are likely to end up with investments with falling values and little
demand from tenants. The incentives that inspired them to buy will mean
little when that happens. This is happening at a time when the Melbourne market is weak, the state
economy is falling, jobs are being cut by the state government and major
businesses, and the state's grants to first-home buyers have ended. Melbourne developers have responded by offering discounted prices, rebates,
cars, holidays and furniture to get signatures on contracts. The greatest trap in the history of apartment buying, the rental guarantee,
is also being rolled out. Anyone who buys an apartment because the developer
is "guaranteeing" the rental income has been living in a cave for the past
10 years during which dozens of similar deals have ended in tears for
investors. One developer, having failed to clear stock by cutting up to $200,000 from
individual unit prices, offered a $65,000 car to lure buyers. Another
offered a tropical holiday for two. Some have offered rebates of up to
$20,000. All these measures have one thing in common: desperation. Not even the Gold
Coast, where the unit market has been undermined by oversupply for the past
five years, has resorted to such largesse. The Gold Coast, however, is an object lesson for anyone inclined to ignore
the warning signals in Melbourne. The median price for an apartment in
Surfers Paradise today is almost 10% lower than it was five years ago. It's
the same in neighbouring Broadbeach, according to data from the Real Estate
Institute of Queensland. At Hope Island, on the northern fringe of the Gold Coast, the median
apartment price has dropped 26.5% in the past five years. At Noosa Heads on the Sunshine Coast, a market traditionally favoured by
Melbourne investors, the median unit price has dropped 22% in five years.
Many other markets around the Sunshine Coast are also in negative territory.
These sorry results are not the norm in Queensland real estate. Quite the
opposite. Many markets have appreciated at least 50% over the past five
years. The ones that have gone backwards are the ones where brainless
developers have built too much new product. Melbourne developers have opted to ignore those lessons. Perhaps they think
they can defy the laws of supply and demand. They will experience the same
disappointments as developers and builders who went broke in Queensland. Sadly, mum and dad investors will sink with them.
Best regards,
Linda and Carlos Debello
http://www.ljgrealestate.com.au
http://twitter.com/GillandDebello
http://au.linkedin.com/in/lindajanedebello
http://gillandrealestate.wordpress.com/
http://www.facebook.com/pages/LJ-Gilland-Real-Estate-Pty-Ltd/169194919788253 Confidential email:- The information in this message is intended for the
recipient name on this email. If you are not the recipient please do not
read, copy distribute or act upon the message as the information it contains
may be privileged. If you have received this message in error, please
notify the writer by return email. Thank you very much for your assistance
in this matter and your co-operation.
investment: Terry Ryder
By Terry Ryder
Wednesday, 15 August 2012
People who allow themselves to be lured by developer incentives into buying
new apartments deserve the dud investment they're getting. Quality properties for which there is genuine demand don't need to offer
incentives to buyers. The existence of incentives is a warning sign for
buyers to look elsewhere. Melbourne's inner-city unit market is the standout example. For the past 18
months I've been urging buyers to steer clear, because the level of new
product being built is bordering on the ludicrous. Demand for real estate is weak in Melbourne, and the only way developers can
stir up sales is to offer inducements or sell product in distant locations
like China. Both are happening, and both serve as danger signals for buyers.
Sadly, Melbourne newspapers have been breathlessly characterizing the
building frenzy as a boom, highlighting the impressive statistics rather
than warning people that the situation has "oversupply" written all over it.
One journalist notes that 6% of national building approvals are focused on
inner-city Melbourne, with over 5,000 new apartments approved in the CBD,
Docklands or Southbank in the past year. That brings to 21,000 the number of new units in the development pipeline. A
metropolitan newspaper journalist who should know better described this as
developers "meeting the demand for inner-city living". It's nothing of the sort. It's developers allowing greed to over-ride common
sense, supported by buyers who conduct research by reading newspaper
headlines. They are likely to end up with investments with falling values and little
demand from tenants. The incentives that inspired them to buy will mean
little when that happens. This is happening at a time when the Melbourne market is weak, the state
economy is falling, jobs are being cut by the state government and major
businesses, and the state's grants to first-home buyers have ended. Melbourne developers have responded by offering discounted prices, rebates,
cars, holidays and furniture to get signatures on contracts. The greatest trap in the history of apartment buying, the rental guarantee,
is also being rolled out. Anyone who buys an apartment because the developer
is "guaranteeing" the rental income has been living in a cave for the past
10 years during which dozens of similar deals have ended in tears for
investors. One developer, having failed to clear stock by cutting up to $200,000 from
individual unit prices, offered a $65,000 car to lure buyers. Another
offered a tropical holiday for two. Some have offered rebates of up to
$20,000. All these measures have one thing in common: desperation. Not even the Gold
Coast, where the unit market has been undermined by oversupply for the past
five years, has resorted to such largesse. The Gold Coast, however, is an object lesson for anyone inclined to ignore
the warning signals in Melbourne. The median price for an apartment in
Surfers Paradise today is almost 10% lower than it was five years ago. It's
the same in neighbouring Broadbeach, according to data from the Real Estate
Institute of Queensland. At Hope Island, on the northern fringe of the Gold Coast, the median
apartment price has dropped 26.5% in the past five years. At Noosa Heads on the Sunshine Coast, a market traditionally favoured by
Melbourne investors, the median unit price has dropped 22% in five years.
Many other markets around the Sunshine Coast are also in negative territory.
These sorry results are not the norm in Queensland real estate. Quite the
opposite. Many markets have appreciated at least 50% over the past five
years. The ones that have gone backwards are the ones where brainless
developers have built too much new product. Melbourne developers have opted to ignore those lessons. Perhaps they think
they can defy the laws of supply and demand. They will experience the same
disappointments as developers and builders who went broke in Queensland. Sadly, mum and dad investors will sink with them.
Best regards,
Linda and Carlos Debello
http://www.ljgrealestate.com.au
http://twitter.com/GillandDebello
http://au.linkedin.com/in/lindajanedebello
http://gillandrealestate.wordpress.com/
http://www.facebook.com/pages/LJ-Gilland-Real-Estate-Pty-Ltd/169194919788253 Confidential email:- The information in this message is intended for the
recipient name on this email. If you are not the recipient please do not
read, copy distribute or act upon the message as the information it contains
may be privileged. If you have received this message in error, please
notify the writer by return email. Thank you very much for your assistance
in this matter and your co-operation.
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