Moonee Valley apartment boom affecting property prices, with resale values dropping

A flood of new apartment buildings and a crackdown on home loans are seeing property owners suffer big losses, with vendors in one inner-city region losing as much as $54,000. And the pain isn’t over yet.

The year-old Hall St apartments in Moonee Ponds are among a glut of buildings across the city now impacting resales, statistics reveal.

A glut of apartment buildings and stricter lending conditions are being blamed for a slew of inner-city vendors selling their properties at a loss.

The top five regions for property losses were; Melbourne, Stonnington, Yarra, Moonee Valley, and Boroondara, new figures by CoreLogic revealed, with the rate likely to climb higher.

In Moonee Valley alone the median loss was $54,000, with the loss rate jumping to 13.6 per cent.

Real estate agent Brad Teal said owners who had bought an apartment over the past five years were sold a false promise.

During the same period in the same area last year the rate was 8.3 per cent, with a median loss of $25,000. Owners who made a loss had owned their home for about five years.

CoreLogic analyst Cameron Kusher said properties that made a profit were owned for about 10 years. “It reiterates that housing is a long-term investment, not short,” he said.

Mr Kusher said Moonee Valley was an “apartment-centric area”, which contributed to a high resale loss. “The share of resales at a loss for houses is significantly lower than units, which is anything on shared (land),” he said.

Brad Teal estimated 30 to 40 per cent of apartment owners were ‘trapped’ in their investment.

But real estate agent Brad Teal said owners who had bought an apartment over the past five years were sold a false promise that they would hold their value when it came time to sell.

“The new apartments that are being built are not standing the test of time,” he said.

“There are so many apartments on the market being built, they are not holding up in regard to price. The impact on people’s equity is enormous.”

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He guessed 30 to 40 per cent of people who had bought apartments in the past five years were “trapped” and couldn’t sell at a profit.

One reason for a drop in value was poor architecture.

“They’re too small, they’re compacted and they’re not standing up on the secondary market,” he said.

Another reason was how the apartments were purchased. Mr Teal said many owners, especially overseas buyers, bought their apartment off the plan to take advantage of reduced stamp duty, and paid on a dollar per sq m basis rather than looking at market forecasts.

But the property couldn’t be sold again using the same method.

“It’s now worth what the market is saying and it’s significantly less than a dollar per square metre price,” Mr Teal said.

He said stricter lending practices by banks last year had contributed to the problem.

Mr Kusher said Australia’s housing market had been weakening and he expected resale losses to increase over the next two to three quarters.