Melbourne’s most expensive apartments are slumping badly

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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'Melbourne’s most expensive apartments are slumping badly' have 10 comments

  1. Michael Yardney

    July 30, 2013 Michael Yardney

    Without knowing your circumstances I can’t give “advice” but my thoughts are your instinct to rescind the contract is correct.
    It doesn’t make sense to do anything else and try and “flip” it to a sucker is pure speculation.

    Take your deposit and invest it in a good (not off the plan) property


  2. Avatar

    July 28, 2013 Hendra

    Hi michael
    I juat bought off plan grand southbank apartment. 3 bedroom 114square meters , 2 bathroom , 2car park, 1 study room. I bought it for aud 829000 plus aud 12000 for investor pack. Central equity giving me 5.5 rental guarantee for 1 years. The apartment address is the corner of city road and power street southbank. The apartment is due to complete at the end of 2015. What is your advice on it ? Thank you very much


    • Michael Yardney

      July 28, 2013 Michael Yardney

      I’m not sure what type of advice you’d like.
      This blog was written over a year ago and the situation at the top end of the Melbourne property market is just starting to turn.
      However if you’re like most investors who bought off the plan, it’s likley the value of your property on completion will be substantially less than the price you paid for it and after the 1st year the rent will be considerably less then the first years “bribe” rent you’ve been offered


    • Avatar

      July 30, 2013 Ben

      Hi Michael,
      I chance upon one of your seminars at the property expo in the city and your book has been enlightening. I bit the bullet and decided to buy a property in Melbourne. I reside in Sydney. I would like to lend your experience on a position i am in. I just needed an expert to verify the next step I will be taking.

      1. I bought an off the plan property in Aug 2010 and suppose to complete in 2013 however the development has been resold to a new developer. The property is literally next to crown casino near the multi storey.
      One bedroom apartment with balcony – 62 squaremetree and 7 square metres balcony space.
      (the apartment can be made into 2 bedrooms because the other two bedroom apartment is 59 squaremetres)
      one lockup storage space
      no parking space
      City Road, Southbank VIC 3006.
      The apartment was purchased at 10% discount @414000 in 2010.

      2. Due to the delay, the new developer as asked us to sign a new contract and given some freebies to entice us. I did not sign a new contract and based on the old sunset clause i have the opportunity to rescind the contract and get back my deposit. Is this possible that date will be coming up in a few months. This must be done before the plan of subdivision is registered.
      They have further enticed us that there is a potential rental yield of 5% guarantee for 2 years.
      I am keen to rescind the contract.

      3. There is another option that i try to sell the property before reaching the end of the sunset clause. From the comments above. it appears the value might be lower than what i paid for. Let me know if there is anyway for me to do a valuation on the property independently.

      thank you for your time.

      Please lend me your views.


    • Avatar

      August 11, 2013 Hendra

      Hi michael , , from your opinion when the apartment complete at end 2015 , how much my apartment price worth ? Do you think If i hold it for 7 to 10 years , the value of my apartement will increase ? Thank you


      • Michael Yardney

        August 11, 2013 Michael Yardney

        I have no idea how much you apartment will be worth, but past record suggests it will be worth considerably less than you paid for it.
        There are many apartments in the Docklands region that could not be resold at their original purchase price 10 years later.
        That’s a huge loss of opportunity to make money elsewhere


  3. Avatar

    July 6, 2012 Peter

    Hi Micheal,
    I baught my first off the plan investment property; one Bedroom without car park; in ILK South Yarra in Toorak for 360k which is due to complete early 2013. What’s your advice on it? Thanks in advance.


    • Michael Yardney

      July 6, 2012 Michael Yardney

      I don’t know enough about your individual purchase to know whether you got good value.
      While South Yarra is usually a great location if you look on you’ll find there are around 450 properties for lease there. far too many in new complexes – there isn’t the demand there.
      This will push down rents and values


  4. Avatar

    May 31, 2012 Jul

    Hello Micheal,
    Last year i bought my first investment property in Albert Park (1bed apartment + car park). Unfortunately being young and inexperienced bought it off the plan. Any word of advice? Should i hold on to it? Its settles mid next year.


    • Michael Yardney

      June 2, 2012 Michael Yardney

      Hi Jul
      Firstly congratulations for taking a step forward and getting into the property market.
      Albert Park is a great suburb, but I don’t know the building your bought in to nor do I know how much you paid.
      I do know that on completion, most people who buy off the plan have difficulty getting valuations that justify their purchase price and this means they need a bigger deposit than they thought. As well as the fact that they overpaid and lost money.
      I’d carefully reevaluate your purchase


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