What is the Melbourne Apartment Market Myth?
Melbourne property buyers need to be aware of some of the ‘myths’ surrounding apartment size, location and tax depreciation in order to decide what is best for them.
‘Housing affordability crisis’ is a term we have heard a lot of recently and it is high density accommodation that is being widely touted as the best solution.
With households shrinking due to the ageing population, a desire to live within the ‘inner city’ and affordability issues, there is increasing demand for apartments across our capital cities.
Here we debunk some of the myths relating to buying an apartment in Melbourne:
Myth 1 – Two-bedroom apartments are better value than one-bedroom apartments
According to the Australian Bureau of Statistics, the number of lone person households, largely due to the ageing population, will have the most rapid increase of all household types − up by 65 per cent in the next 25 years.
It is also forecast that couples without children are set to outnumber the typical ‘nuclear family’ by 2031.
All this means an estimated extra 3.8 million households by 2031 and a real need for an increase in smaller apartments.
To further push up demand, many Melbourne couples are choosing one-bedroom apartments closer to the CBD and all it offers, rather than relocating to a larger unit further out.
Affordability is also an issue. There has been a rapid increase in apartment prices, with CoreLogic data reporting that the typical Melbourne unit is on average $485,850. Given this, two-bedroom apartments are now out of the price range for many resulting in a larger pool of buyers competing for one-bedroom apartments.
For buyers and investors alike all of this creates a higher demand which equals higher capital growth.
Myth 2 − Body corporate fees are ‘wasted money’
A body corporate requires an ongoing fee to handle the management, insurance requirements and upkeep of the building and grounds including repairs and emergencies. Costs are shared and you usually don’t need to concern yourself with organising any work.
When you buy a house, you are solely responsible for paying all insurance, council rates and maintenance costs from roof repairs to plumbing services. This will all add up over the long-term.
Body corporate fees vary depending on the property, but it is a mistake to dismiss them as a waste of money.
Myth 3 − Never buy into an apartment block on a main road
Buying a quality apartment at the rear of the building means that you are away from the main road and can be a good way to buy into a prized suburb at an affordable price.
Even if it is close to a main road, people will always be attracted to catchment areas within walking distance of highly regarded schools, as well as cafe cultures, transport options, parking and green space.
Myth 4 − New apartments offer favourable tax advantages
This one is a little dependant on your financial situation. Many investors may have one property in their portfolio negatively geared to offset tax, however usually there is an expectation that as the property pays itself off and the rents rise, those properties will eventually become neutrally or positively geared, making way for new projects.
However for most buyers there is no need to go running out looking for ‘loss’ – it’s difficult to “depreciate” your way to property success!
More Australians are opting for apartment living and for Melbourne property buyers, smaller apartments offer good value, strong rental returns and capital growth. If you would like more information on the Melbourne market, please contact Cohen Handler now to ensure you find the right property at the right price.