Daily, we are hearing reports about the national new apartment market and its anticipated demise. In the space of 24 hours, I have spoken to 3 Hudson members about their investment properties and or future investment into property. All have expressed concern based on what they have read in the media.
For every bad review there is a good one; and this too applies to property reports. For every report that suggests overdevelopment; I can counter it with a report on these overdevelopment figures including approved projects that have not even broken ground (and may not ever, or at least not until the next cycle).
I am not suggesting that all negative media reports are unwarranted; in fact, the evidence is already beginning to impact on many Hudson members (me included). The most noteworthy would be reduced rental returns in Brisbane coupled with higher vacancy rates. I have had to reduce my rent significantly on a property in inner city Brisbane to retain my tenant, given the increased competition in the area. I am not overly concerned by this as I know my property is a great one with superb long term growth potential. I know also that this is indicative of any market, they go up and they go down. As soon as excess supply in my area is absorbed, I know my rents will lift accordingly. When? This I don’t know, but just as the sun rises each morning, it will happen.
A recent report by Matusik (Matusik Missive, 19 October 2016) supports my opinion about some sensationalist media reporting going even further by suggesting that things are not so black and white. Hudson Financial Planning has always maintained that it is not necessarily “when” in the cycle you are buying but more about the “quality” of the asset you are purchasing and this applies to all assets. Matusik quotes “there are good apartments and, well, pretty crappy ones”.
Let’s be clear, I am still recommending apartments as a solid long term investment, but avoiding areas where there has been significant overdevelopment. In general terms, this overdevelopment exists within the inner ring of the CBD and the product on offer is high density. What I am recommending is;
- superior properties
- boutique developments
- 5km + from the CBD
- areas with limited development thus far
- low body corporate fees
- High owner-occupier appeal.
Don’t be too quick to tarnish all apartments with the same media-fuelled, undesirable brush. Opportunity exists in any downtrodden market; it simply needs to be uncovered.