Melbourne’s luxury apartment market is suffering badly, with losses of up to 25% according to an article by Chris Vedelago in The Age.
Prestige areas, including Toorak, Brighton, East Melbourne, Southbank and St Kilda Road, where hundreds of $1 million-plus apartments have been for sale, have been hit hardest over the past year, according to research by Australian Property Monitors.
Owners of some of the most expensive penthouses and flats in the city are having to slash their asking prices by millions in some cases to close deals. Others have had to sell for well below what they paid, even after years in the exclusive buildings.
Industry sources say Lleyton Hewitt is one to feel the pinch, cutting the asking price for his St Kilda Road penthouse from $15 million to $10 million. The tennis champ bought the 19th-floor of the Yve development for $8.32 million in 2004, and spent nearly four years fitting it out.
And things will only get worse.
The tough conditions, blamed on a glut of luxury apartments and jitters about the economy, are set to get worse as analysts Charter Keck Cramer estimate that 49 new buildings with about 13,100 apartments are under construction or being marketed for sale in the CBD, Southbank, St Kilda Road and Docklands.
Why is this happening?
Andrew Wilson, senior economist at the Fairfax-owned analysts APM, said the top-end apartment market was facing a ”convergence of negative factors”.
”The popularity of penthouse, inner-city living has certainly dropped off sharply since the heady days of the boom before the global financial crisis,” he said.
”Subdued performance for the sharemarket, the slowdown in the wider property market and signals that Victoria has one of the worst performing economies on the mainland – it’s all happening at once.”
The lesson to be learned.
Unfortunately some owners are learning that off-the-plan apartments are often sold at prices that had little to do with their actual value.
While this happens at all levels of the market, the prestige end of the property market has always been more cyclical than other sectors of the market.
During economic booms when the “rich and famous” want to buy into icon buildings they are prepared to overpay, but in tough times, they think twice about buying this type of trophy property.
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