High Rise, High Risk

It’s interesting to note a recent survey of residential developers found up to 30 per cent of city apartment projects are purchased by overseas investors. This accords with our own experience and previous reports to clients. The influx of international purchasers, however, should not cause too much concern for PMS buyers. The high rise apartments being targeted by these overseas interests would never meet our rigorous investment criteria. As property purchasers, of traditional housing in established locations, we are rarely in competition with this type of buyer.
However, this behaviour does impact the wider investment markets, especially the rental market.

Although an estimated 10 to 15 per cent of off-the-plan apartments are left untenanted, as their international owners prefer to keep them in pristine condition, there are still many hundreds of properties in these development that come up for rent. Often, the completion of a tower will place hundreds of apartments on the rental market virtually on the same day. This regular flood of unremarkable and mostly identical apartments quickly leads to heavy rental discounting. And as new buildings come on stream, many tenants simply hop from one identical apartment to another — but with newer appliances and cleaner carpets. This creates even more discounting of the “second hand” apartments.

The overflow from this unhappy rental merry go round is that rents for traditional housing in our prime inner city locations can also be temporarily affected. From our experience, however, good quality tenants soon realise the short comings from such high-density, high-rise living conditions.

UNTIL NEXT WEEK

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