Off-the-plan apartments are not bringing high returns

Jodie Humphries 28 March 2017

off the plan apartments market returns lowThe 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.

What do you need to know about buying off-the-plan?

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