Dear Fellow Property Investor,
Apartments are selling at a loss in Australia’s two biggest cities even during a housing affordability crisis, new data shows.
Record-high immigration has pushed up house prices but more inner-city units are selling at a loss in already-overcrowded Sydney and Melbourne than anywhere else.
An ultra-tight rental market and a digit-double surge in rents during the past year is also no guarantee that units will go up in value, especially if they are in a high-rise tower.
In the centre of Melbourne, 40.7 per cent of apartments sold at a loss during the December quarter – or 6.8 times the national average loss rate of 6 per cent, CoreLogic data showed.
Tim Lawless, CoreLogic’s head of research, said oversupply was an issue in that part of Melbourne.
‘Higher supply levels across the inner Melbourne apartments sector are likely to be a factor in this under performance, coupled with the preference shift towards lower density housing options though the pandemic,’ he told Daily Mail Australia.
‘Areas of inner Melbourne are now recording the highest population density of any region nationally.’ 
In the centre of Melbourne, 40.7 per cent of apartments sold at a loss during the December quarter – or 6.8 times the national average loss rate of 6 per cent, CoreLogic data showed (pictured is the Docklands area near the city) – and 98 per cent of loss-making sales were apartments.
CoreLogic noted that 98 per cent of loss-making sales were apartments, even though sellers in the Melbourne City Council area had held on to their apartments for an average of nine years and eight months. Losses are more likely to occur in areas where apartments were built during the 2010s, when interest rates were lower and building activity was much stronger.
This has led to an oversupply of apartments in some areas and in some cases, quality issues.
‘Unit supply was particularly elevated in the mid-to-late 2010s, buoyed by a high concentration of investor participation in the housing market and structurally falling interest rates,’ CoreLogic said.
In Melbourne’s city centre, the median apartments price is $473,483, or 28.2 per cent less than greater Melbourne’s mid-point apartments price of $607,473.
Despite the tight rental vacancy rate, North Melbourne’s apartments prices fell 0.3 per cent during the past year to $505,702.
Apartments are even cheaper at Flemington with a median unit price of $410,528.
But at Docklands, they are a bit dearer at $592,863, which would still be attainable for an average-income worker on $98,218.
In the neighbouring Port Phillip City Council area, 21.3 per cent of apartments sold at a loss, with this densely-populated area covering bayside St Kilda where the median apartments price is $530,584.
In Windsor, the median apartments price plunged by 6.2 per cent during the past year to $512,633. Next door in the Stonnington council area, 27 per cent of apartments sold at a loss.
This covers South Yarra, a suburb with a median apartments price of $579,182, following a 4.2 per cent decline during the past year.
In ultra-upmarket Toorak, the mid-point apartment price fell by 3.4 per cent over the year to $1.033million.
So my advice is do not buy apartments in Melbourne CBD just yet…unless you are taking on a ultra long-term investment horizon and plan to hold them for 20 to 30 years!
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