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Episode Highlights
1.42 – Cate defines the various types of apartments
5.32 – Dave shares the data from the 2022 Core Logic study that benchmarked houses with apartments in capital cities and regions
8.13 – Will the older apartments catch up?
12.24 – Dave invites Mike to talk about some of the data his firm has collected in the 1000 Assets Study
15.56 – Mike points out some tax deduction statistics corresponding investor attitudes
17.26 – Teaser for next week’s show – All Things Apartments Part 2
22.08 – Dave asks Cate if she saw a correlation at the coal face in relation to buyer fears about apartments
24.16 – Are developers delivering better products today?
26.34 – The Trio explore the cost of running a high density building – and this cost is borne by the owners
28.00 – Mike explains MCG Quantity Surveying’s Rental Loss Index and the subsequent risk rating
30.29 – And our gold nuggets!
Show notes
Welcome back to another exciting episode of the Property Trio podcast! In this episode, your hosts Dave, Cate, and Mike delve into the intriguing world of apartments. They kick things off by defining where apartments fit within the unit subset and share their insights into the types of apartments they favour. Dave lays down some criteria for identifying high-scoring gems, emphasizing sought-after features, allure, land-to-asset ratio, and unbeatable locations.
Historical Growth Performance
Dave takes the stage and reveals some startling facts about the historical capital growth performance of apartments versus houses. Drawing on Core Logic’s study from August 2022, covering the last thirty years, they uncover the numbers. While combined capitals exhibited impressive 450% growth for houses, units clocked in at 307%. In regional areas, houses outperformed units with 314% growth compared to 213%.
Underperformance and Mistakes
Cate steps in to discuss the reasons behind this relative underperformance of apartments. She also dives into the mistakes some investors have made by aligning too closely with one geographic base and ignoring other gentrifying options with strong growth drivers. The Trio emphasizes the importance of flexibility in your investment model.
The Apartment Renaissance
Will older style apartments make a comeback? Cate explores the concept of the ‘apartment renaissance,’ especially in the context of an aging population. They discuss how changing demographics can impact the apartment market.
The 1,000 Assets Study
Mike delves into the 1,000 Assets Study, taking a trip down memory lane since 2016. Initially, 47% of their investor study focused on purchasing units. However, this percentage dropped to 40% in 2018/2019, and more recently, it plummeted to 18%. Mike discusses various factors contributing to this decline, including the pandemic, building defects, and investor education. They also highlight the trend of larger unit complexes and the implications for investors.
Buyer Beware
Cate shares some wisdom on the importance of helping investors grow wealth rather than solely focusing on saving taxes. She discusses common reasons why buyers have become more cautious about certain apartment subsets, from off-the-plan risks to lender appetites. The Trio also highlights positive changes they’ve observed in recent developments and designs.
Strata Fees and Special Levies
Cate addresses the elephant in the room: strata fees and expensive special levies. They explore the factors influencing these costs and why it’s crucial for investors to be informed.
The Rental Loss Index
Mike treats listeners to a chapter on the Rental Loss Index and their subsequent study. They delve into the issues of oversupply and high vacancy rates, providing powerful insights for investors.
Gold Nuggets
Cate Bakos’s gold nugget: Cate takes a leaf out of the Property Professor’s handbook. She urges investors not to purchase off the plan, high-rise apartments.
Mike Mortlock’s gold nugget: Mike reminds listeners that not all units are bad! They can also have a decent Land to Asset Ratio.
Resources:
Thirty years of housing values
Ep. 15 – Why you must keep clear of properties banks don’t like
Ep. 26 – The different property types that you can spend your hard-earned cash on
Ep. 32 – Misunderstanding what makes a good property investment
