Why apartments are a risky investment.

The Australian Bureau of Statistics has reported Melbourne’s apartment approvals were 75 per cent above the long term average. Approximately 50% of the approvals where within 5km of Melbourne’s CBD.

BIS Shrapnel’s Angie Zigomanis said much of Melbourne’s new housing approvals are attached dwellings, especially high rises with a “long gestation period”.

“So while we may not oversupply now, what is being approved now will come on the market in two or three years,” he said.

Zigomanis​ also said declining population growth and waning migration levels also threatens to throw out the balance of supply and demand.

“That means some investors may struggle to attract tenants,” he said.

Why choose a property that the banks don’t like? 

There are several property types that are considered ‘risky’ by banks. These often include serviced apartments, student accommodation, defence housing, small apartments, commercial properties and properties in a business or mixed zoning or in country or outer coastal areas.

If the major banks don’t want to lend against a certain property or will restrict loan to value ratios (LVR’s), these types of properties should be seen as risky and purchased with caution. If it’s not good enough for the bank’s money, it shouldn’t be good enough for your hard earned cash.

Properties in certain postcodes or suburbs also have finance restrictions. For instance, highrise apartments in Melbourne’s CBD (postcodes 3000 and 3004) and surrounding areas including Southbank, Queens Road and St Kilda Road, Docklands, Port Melbourne, South Melbourne and Carlton are generally seen as riskier properties for the banks and will have finance restrictions.

Buying your first home or investment can be a difficult process that many find over whelming, hiring a buyers agent can increase your chances of owning property portfolio that will help you achieve your financial goals sooner. For a consultation free meeting on getting into the property market contact us via email or call us on 1300 00 WISE.

Mark Ribarsky.

Senior buyers agents at Wise Real Estate Advice.