Are Apartments A Good First Purchase?
In This Week’s How's The Market | Edition 57
Are Apartments A Good First Purchase?
Properties Are Selling Fast
25% Of Purchases Last Month Were Made With Cash
Are Apartments A Good First Purchase?
It seems the typical journey as a first home buyer looks something like this:
See some friends purchase a property.
Check some calculators online, wondering what their deposit was and how much their repayments are.
Speak with a mortgage broker to see if you could get finance.
Get pre-approved.
Start looking at properties and realise you likely can’t afford a house nearby.
So you start looking around.
You are then faced with the decision:
Do I buy an apartment closer to the city, a unit a bit further out or a house on the fringe suburbs?
Now we get these questions all the time, and the answer can often depend on lifestyle and personal preference.
If you love being close to the city, as it’s where work is and all your friends and family are, you don’t own a car and rely on public transport then in most cases, you won’t enjoy living in a house on the fringes.
On the other hand, maybe you’re a tradie with a work car and your own ute, plus you’ve got a dog and prefer a big backyard. You won’t want to get an apartment and might not like the idea of a unit.
Though one thing we are very big believers in, is that as first home buyers, you should also consider yourselves as investors… to a degree.
You need to know what the performance of the specific property is or has been since it was built as well as other similar apartments in the building and this is where a lot of first-home buyers make extremely expensive mistakes.
I spoke with a first home buyer recently who sent me across a list of apartments that sold that he loved the look of and wish he purchased.
The first one I reviewed was in Malvern East, a great suburb with premium houses that has experienced above-average capital growth, especially over the last 5 years.
However, this is the numbers surrounding the apartment he looked at:
First Sold Off The Plan: Oct 2017 - $930,000
Finished Construction: 2020
Sold March 2023: $660,000
This purchaser made a $330,000 loss over nearly 6 years.
This equates to a negative 6% loss year on year over 6 years, nearly the opposite of the long term average of the housing market.
This same first home buyer then preceded to show me another 3 or 4 properties that all went backwards by over $100k over the last few years.
Now not all apartments are like this, however, typically this is the story on brand new, off the plan apartments in large complexes with over 30 other apartments.
Though I wanted to take the time to explain what a good apartment looks like too, as they are not all bad.
Some apartment complexes that we have looked at for clients in the same suburb have achieved 4% - 5% growth year on year.
So what do these apartments typically look like:
Built in the 1950’s, 1960’s or 1970’s.
Less than 12 on the block.
Typically in great locations close to amenities, schools and transport.
Some of the higher performing ones will be located on streets surrounded by multimillion dollar houses and not surrounded by an abundance of other apartment complexes.
Some apartments can be great first homes for buyers that want to be in the location, though you need to check the history of the building and the numbers.
A very easy, free way to do this is to type the address of the building in, without the unit number to google and look for the Domain building profile as this will give you a snapshot of the most recent sales in the building and their performance.
What The Agents Are Saying
Large numbers are coming through opens, good properties are moving quicker than ever.
I went through an open home on the weekend that was a great family house in a great suburb inner city with a median house price circa $2m.
The open was buzzing.
It was the first open for this property and there were people everywhere.
The home was quoted $1.6m - $1.7m.
At the open the agent said he couldn’t believe the interest levels and said he’s going to have to increase the quote to $1.7m - $1.8m.
On the Monday, he called me to let me know they were bringing the auction forward to that day (the first Monday after the first Saturday open) as someone had made an offer over $2m that was immediately triggering the sale.
Another agent couldn’t believe the amount of interest garnered by a unit in a first home buyer pocket around inner Melbourne.
Come auction day they had 90 groups through the property, 45 auctions requests and over 15 people she considered hot buyers that were there on auction day. The property ended up selling $70k over the reserve price.
The Wow Factor!
11/208 Canterbury Road, Canterbury, Vic 3126
An incredibly cool penthouse apartment in a beautiful heritage building.
The home office is the entire top floor tower!
Price Guide: $1,250,000 - $1,375,000
In The Media
More buying interest from those downsizing and first home buyers helped by parents
With interest rate rises making it as difficult as ever to purchase your first home first home buyers are turning to the bank of mum and dad to enter the market.
Parents who are in a position to do so are helping their kids across Australia enter the property market with their life savings helping their deposits. This could be a reality down the line that if you want to buy in a big city the large deposit thats required may just be unreachable on your own.
Another strong trend in the market right now is downsizers. Retirees who have enjoyed the benefits of the strong property growth through covid-19 and are now ready to downsize and buy their new homes in cash.
Last month 24.3% of residential sales in Victoria were cash purchases. This could seem crazy to you as it does to me, but these people entered the market at a huge age and are now in a strong financial position to be able to do so.
Final Thoughts
Buying an apartment is not a bad decision, you just need to be careful with which apartment you choose.
You can typically purchase in more blue chip areas, closer to amenities and the city which may be very appealing for first home buyers.
Always check the Domain Building Profile of the building prior to making the purchase so you can get a quick snapshot of how the building has performed.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.
