While overall the Melbourne property market is performing well – in fact better than many expected- there are some segments of the market that are in trouble.
There is a significant oversupply of new house and land packages sitting waiting for buyers, particularly in the norther and western suburbs.
And there is an oversupply of new and off the plan apartments in the 300 projects being markets in and near the Melbourne CBD.
According to the Age, this has led to developers resorting to giveaways of free marina berths, $40,000 furniture packages and stamp duty rebates of up to $45,000 to attract off-the-plan buyers in an increasingly flooded market.
According to the Age:
There were 23,325 new apartments granted planning approval in the 12 months to February, driven in part by interventions by Planning Minister Matthew Guy to approve a host of new skyscrapers.
It represented a 19 per cent jump in approvals from the year before, when 19,530 apartments were given the green light, according to the Australian Bureau of Statistics. That compares with just 11,258 five years ago under the previous government and during the credit crunch.
[sam id=32 codes=’true’]While some of what is approved never gets built because the developer fails to get enough pre-sales to fund construction, the glut of apartments already on the market means buyers are likely to find the value of their apartment on completion will be less than the price they paid for it. In some cases 10 – 15% less. And that they will have little capital growth for many years.
As for the incentives on offer, the Age explains:
The record competition has pushed even established developers such as Mirvac to resort to extra incentives for buyers.
Mirvac is offering buyers of million-dollar apartments at its proposed Docklands Yarra Point development a bonus berth at the local marina on a leasehold until 2030.
A 17-year lease at Mirvac’s Yarra’s Edge marina sells on the open market for $120,000 for the smallest berth (12 metres). A large number of the 149 marina berths are still for sale.
At the Studio Nine apartment project in Richmond, buyers of an off-the-plan penthouse will receive a $40,000 Hermon & Hermon designer furniture package and a consultation with a home stylist.
Those buying a townhouse are entitled to $20,000 worth of window furnishings.
Agents CBRE are offering 5 per cent rental guarantees at the You and I development in Collingwood and the Lucia development in South Yarra.
CBRE and Spec Property developers are also offering stamp duty savings of up to $45,000 for developments in Prahran and Doncaster.
Obviously by offering incentives, developers are trying to keep prices artificially high, but valuers are aware of these incentives as is a more informed market place.
There are much better opportunities in Melbourne’s established apartment market.