SAVE WILLIAMSTOWN
SAVE WILLIAMSTOWN
Landlords hit by glut of apartments
Australian Financial Review
Michael Bleby 21 AUG 2014
http://www.afr.com/p/business/property/landlords_hit_by_glut_of_apartments_TyeuZS5jx2nrxr0Yo1MxaI
•Falling rental yields point to price pressure
•Robert Harley | Rental boom days are over
Jason Plevras paid $600,000 for a two-bedroom apartment in Melbourne’s Southbank last May. The off-plan unit was one of 237 in the 15-storey Sunday Apartments on Coventry Street that went on the market around the same time.
The real estate agent assured him he would have no trouble finding a tenant, Plevras says. “I remember when I was signing the contract to buy, I made clear that I was worried we won’t be able to rent it,” the 33 year old says.
“They said ‘renting will never be a problem. You’ll always have tenants’.”
He waited three months before advertising the unit. His starting price was $600 a week, but that went down to $525 before it rented. It’s been a “yo-yo” of tenants coming and going ever since Plevras says.
“Because it’s so competitive, we’re almost putting anyone we can in.”
For Plevras, the news is not good. The pressure on prices will only grow as more stock comes to the market. Weekly advertised rents have fallen 3.6 per cent in Docklands and 6.4 per cent in - Southbank over the past 12 months while they have stayed still in the central business district, RP Data figures show. Over the past five years, rents in Docklands have fallen 8.6 per cent......
.....In Melbourne, the New York-style incentives that have started to creep into the soft market, such as offering the first month rent-free, will grow as investors and their agents seek to draw tenants into dwellings without affecting all the other rents in the same building, says buyers’ advocate Paul Osborne.
“Investors will be caught in a very competitive market needing to offer pricing discounts to lure tenants,” he says.
Central Melbourne has over 17,000 new apartments in the pipeline and 5260 are under - consideration for development approval, the city disclosed last week when it passed a resolution asking Planning Minister Matthew Guy to impose a $900-per-apartment levy.
“There’s chronic oversupply,” say Margaret Lomas, a founder of property consultancy Destiny. “There’s an increasing demand for inner-city living, but the supply is going much faster than that demand.”
Without rental growth or capital growth, the prospects for many investors are bleak, Lomas says. “What normally comes next after this, as those people become more and more distressed financially, they begin to need to sell as well.
“Then you’ve got the double whammy of not achieving a rental yield, but you can’t achieve anywhere near the price they’ve paid to go in. You start to see them dumped. Prices topple.”
SW Comment:
Nelson Place Village development now called Waterline Place
is offering high density high rise apartments and townhouses in Pt Gellibrand Williamstown next to Mobil’s Major Hazard Facility & about 11km from the city centre with a half hourly evening train service which finishes about midnight. Will these factors make this development very difficult to sell and rent.
Recently VCAT overturned Hobsons Bay Council’s refusal to issue permits and now council must issue permits.
The issues raised at VCAT
•lack of rail services to Williamstown particularly after midnight;
•lack of parking in the area particularly when events occur at Seaworks and in Nelson Place Williamstown;
•apartments having to be designed with special provisions for noise from nearby heavy industries of ship building and fuel importation by ship - internal noise level in the proposed dwellings is be reduced & tested to 45dB ie the noise allowed when doors and windows are closed;
•because of danger of explosions from vapour clouds, apartments are to built to 3.5 kPa overpressure and townhouses in the advisory area to 6 kPa. VCAT chose the advice of the Safety Expert engaged by the Developer and refused to take the advice of the State Government Authority Worksafe who said a vapour cloud explosion could cause over-pressures of 8kPa on the site. Worksafe advised against residential development based on this development being relatively close to the Mobil Pt Gellibrand Major Hazard Facility and a similar distance to buildings impacted in the 2005 Buncefield explosion in the UK. The difference between 3.5kPA versus 8kPA is windows shaking and possibly breaking versus structural damage to buildings which may cause them to collapse. Regarding the danger of boilovers from the crude oil storage tanks, the developer’s expert said these were noisy events and it would allow about 8 hours to evacuate the buildings. There are about 5 boilovers per year internationally.
VCAT has made such a strange planning decision if the state government has any responsibility for people safety and the safety of nearby residents in the shadow of the apartment tower.
Even the location in heritage Williamstown may not be sufficient to attract investors in a market which is obviously experiencing a glut according to the AFR article..
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