Off-the-plan apartments are not bringing high returns
The growing supply of apartments in the inner-city suburbs of Sydney, Melbourne and Brisbane is causing off-the-plan property returns to fall.
A new report released last week by BIS Oxford Economics on off-the-plan apartment purchases has shown that the capital growth of established dwellings is greater than that of off-the-plan apartments. The report focussed on inner-city suburbs within a 3-5km radius of the CBD in Sydney, Melbourne and Brisbane where there is currently a slew of apartments being built and sold.
Melbourne’s inner suburbs were the worst off, with the aggregate gain made on the resale of off-the-plan apartments decreasing by an average of 2.7% since July 2011. This is compared to the aggregate gain made on the resale of established apartments, which has seen an increase of 7.4% since July 2011.
Sydney saw the largest gains across both established and off-the-plan apartments, but there was still a slower growth in off-the-plan apartment sales, with just a 7.5% increase in returns. Established apartments, on the other hand, had an increase of 25.9% in returns.
There is much say about Brisbane’s apartment market and the possibility of an oversupply problem, which isn’t good news considering that the report has shown that off-the-plan apartments only saw an aggregate gain of 1.9%. The figures aren’t much better for established apartments, which only saw an aggregate gain of 4.4% upon resale.
The report further stated that 96% of off-the-plan apartments sold in Sydney were resold with positive gains. The same goes for 41% of off-the-plan apartments in Melbourne and 60% in Brisbane. With multiple developments still in the pipeline in Melbourne, these figures might give property buyers something to consider when making their purchasing decisions.