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Melbourne riddled with poor quality apartments

The previous Victorian planning minister (Mathew Guy) wanted to “Manhattanise” Melbourne and make it a city of super-dense high rise towers.

It will be interesting to see the new Daniel Andrews government planning policies

But here’s the problem:

A critical report last year revealed that many of our tiny apartments would be banned in New York, while another report estimated that 55 per cent of the city’s tallest apartment buildings are of “poor” quality, with common design flaws.

Too dense and too small

A scathing report from the Melbourne City Council shows some of the city’s newest developments are up to 10 times as dense as permitted by law in some of the world’s most urbanised centres.Melbourne-Night

Council experts have called for the development of new apartment design standards for the city which could include rules to ban very small apartments.

You see… Sydney, London and Adelaide all have rules that ban new one-bedroom apartments smaller than 50 square metres.

But in Melbourne, 40 per cent of the city’s newest apartments are smaller than this.

Of course many of these sub size apartments are being bought by investors, many from overseas, and often they buy them off the plan not realising they are buying the slums of the future.

Why do I say this?  Well…

Melbourne’s newest high-rise towers are overrun by bad-quality apartments

A Melbourne City Council study has estimated 55 per cent of the city’s tallest apartment buildings over 15 storeys are of “poor” quality, with common design flaws such as cramped layouts and a lack of natural light with windowless bedrooms in almost a quarter of new residential developments.

Melbourne City Council’s Future Living report, which analysed the design of 25 of the city’s new residential developments, found poorer quality apartments were more likely to be located in taller apartments.

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All 11 of the high-rise apartment designs studied were considered either poor or average quality.

Common failings included kitchens in hallways, poor storage, lack of ventilation and excessive energy use.

But the report’s authors said as long as there was someone willing to rent the property, the investors who buy 85 per cent of apartments in the municipality were not bothered.

You must buy investment grade properties

If you’ve been following my blogs you’d know I believe that less than 5% of properties are “investment grade” properties – ones that will outperform the averages in the long term.

At Metropole we use a 5 Stranded Strategic Approach to property selection:

  1. We buy properties that appeal to owner occupiers, as owner occupiers make up the bulk of property purchasers and push up the value of certain types of property.
  2. We buy a property below its intrinsic value – that’s why we avoid new and off the plan properties which come at a premium price.
  3. In an area that has a long history of strong capital growth and that will continue to outperform the averages because of the demographics in the area. This will be an area where more owner occupiers will want to live because of lifestyle choices and one where the locals will be prepared to, and can afford to, pay a premium price to live.
  4. We look for a property with a twist  – something unique, or special, or different or scarce about the property, and finally
  5. A property where we can manufacture capital growth through refurbishment, renovations or redevelopment.

By following this 5 Stranded Strategic Approach, we minimise the risks and maximise the upside. Each strand represents a way of making money from property and combining all five is a powerful way of putting the odds in our favour. If one strand lets us down, I have three or four others supporting our property’s performance.

If you’d like some independent unbiased advice about getting started in property investment, or for one of Metropole’s property strategists to review your existing portfolio click here and organise a free strategic property portfolio review



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Melbourne riddled with poor quality apartments' have 3 comments

  1. Avatar for Property Update

    January 19, 2015 @ 11:48 am Masud

    ‘At Metropole we use a 5 Stranded Strategic Approach to property selection:
    We buy a property below its intrinsic value – that’s why we avoid new and off the plan properties which come at a premium price.’
    By reading different articles regarding property investment, I have found that Off the plan properties are advocated as the buyers can save money in the sense that they are paying on the current market price which has potential to appreciate at the time of settlement.
    Michael Yardney has strong opinion against off the plan properties. May I get further analysis on this?

    Reply

  2. January 30, 2015 @ 12:08 pm What does Sydney's apartment construction boom mean for investors? |

    […] the last few years, relatively high vacancy rates in Melbourne led a number of bearish market commentators to predict a major correction in the city’s […]

    Reply


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