Property ‘Warning Signs’ turning into 'Alarm Bells'

Property ‘Warning Signs’ turning into 'Alarm Bells'
An Editorial By Phil Anderson - Tuesday November 1st

 

Remember when seeing a bunch of cranes in the air was a reassuring thing? Spotting tall cranes sprawled across the urban jungle like giraffes grazing at feeding time use to be a sign of growth, and potentially some good news for property owners. “A Boom Is Coming!”, is what the headlines would scream. I hate to say it, but these days it may mean tears are coming, and here’s why what use to be just warning signs are now very loud alarm bells.

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Lets start with some good news; if you’re interested in buying a Perth inner city apartment, they’re currently on sale. The bad news is an alarming number of experts are voicing their concerns that Perth is currently leading the charge for an Australia wide apartment market crash of biblical proportions.

Their words, not mine. But I must say this theory certainly has some merit to it, which I have been discussing in depth in my seminars recently, where I go into detail on exactly where the HOT spots and NOT spots in the country are right now.

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CoreLogic data showed in the June quarter that Perth apartment prices declined in the three months to June by 5.5 per cent, which is a rate of knots. And while Perth is a smaller market in terms of stock and population, it’s currently providing the rest of the country with a preview of what may be to come.

While the unit markets of Sydney and Melbourne around that same period successfully kept their collective heads above water, you have to wonder how much longer they can do this before sinking into the abyss.

To this end some alarming numbers have recently come out of Melbourne, with the number of empty apartments in the city reportedly reaching as high as 20% of all investor-owned properties.

But when we dig deeper we see this is just the tip of the iceberg. An alleged total of 82,724 properties in Melbourne have been suggested to be effectively unoccupied, the data collected from retailers City West Water, South East Water and Yarra Valley Water.

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To frame that up with some context, that would be the equivalent of 4.8% of greater Melbourne’s total housing and 18.9% of all investor-owned housing stock laying vacant.

This is an increase in vacant property by 28% in the last 12 months in Melbourne. But the idea here is not to bash up the Melbournites… as we are also witnessing a losing battle in the Brisbane unit market as we speak.

The unquestionable oversupply of units in the Brisbane CBD is already yielding some horror stories. Earlier this month a gentleman shared a very sad story with me personally at one of my seminars in Brisbane, a story that has been all too common, and sadly will continue to be so in the foreseeable future.

What I am referring to are the dangers of the high rise unit market, where unsuspecting Mum and Dad investors are falling prey to the clutches of stalking marketing teams with their glossy brochures and irresistible display suites.

predator-2They are locking in high prices at the peak of the market for off the plan units, where they don’t need to settle for another 12 months or more. Sadly, when it does come time to take possession, the valuations on the units are coming in well short thanks to the previously mentioned fall in unit prices in certain markets.

And this is if the Banks are willing to lend against properties in these markets at all. Just this week AMP have announced an updated list of suburbs where borrowers will need to supply a minimum of 30% deposit in order to gain finance.

There were a whopping 600 suburbs on this list. I’ve been warning about this exact topic for over 2 years now, with my team and I watching the data very closely. I will be exposing the postcodes mentioned above at my live events.

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This scenario can leave would be investors high and dry, unable to come up with the shortfall in order to settle and take possession. In other words, they are forced to leave their deposits behind, cut their losses and simply walk away.

This is a horrible result for anyone, and investors must arm themselves with the best weapon there is in Real Estate… knowledge.

There are still many robust property markets currently ripe for the picking, provided you’ve done your due diligence, controlled the deal and stacked the odds in your favour.

We pride ourselves on being as informed as possible, and sharing our honest views directly with our clients to protect them from the dangers the property market can provide. To learn more about how we reduce risk by researching and identifying quality performing markets for our customers, please come along to one of our complimentary information evenings specifically designed for investors. Seats are limited, so to reserve your spot, click here now.

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