You always hear some real estate rooster crowing about how smart they were when they bought a joint in 2018 for $480,000, and then flipped it three years later for $1.3 million.
Renters hate those guys.
So, just for kicks, let’s look at life on the other side of the ledger.
Specifically, an apartment in 883 Collins Street, Melbourne, that’s just been put under offer this week.
Our story starts around 10 years ago, in 2015:
You’re sitting on the couch watching this new show called Married At First Sight, while simultaneously doom scrolling on realestate.com.au, when you see a sexy inner city property with the headline:
“Waterfront Elegance Meets Modern Convenience.”
Tap.
It’s a brand-new, waterfront, two-bedroom, two-bathroom, one-carpark luxury apartment in Melbourne’s Docklands. The building is like a resort. It has an indoor heated pool, state-of-the-art gym, yoga room, and even a residents’ lounge.
“Ooh, fancy”, as my mother would say.
The real estate agent assures you it will have strong rental returns, and touts the stamp duty and depreciation benefits of buying a new build off the plan. So you pony up and purchase the apartment for $860,000.
Cut to today.
Nearly 10 years have passed since you purchased the property … has it been a good buy?
Well, luckily for you, it’s been a pretty good 10 years to own a property:
For much of the past decade, interest rates have sat at some of the lowest levels in history.
Plus, we were hit with a fully fledged rental crisis in which landlords jacked their rents up, up, up.
Okay, so what’s it worth today?
(Bearing in mind that 10 years ago you paid $860,000, so it would need to be worth at least $1.1 million just to keep up with inflation.)
Well, this apartment has sat for months on realestate.com.au under the headline “urgent sale”.
And last week it went ‘under offer’ … for a price guide of $630,000 to $650,000.
That’s a shocking $210,000 loss over 10 years.
Yet it gets worse.
That loss is before you factor in inflation, body corporate fees, council rates, land tax, maintenance, agent’s selling commission, and of course 10 years of interest on your loan.
Look, I have no idea who actually owns this particular property, or the full story behind it. Yet what I do know is this is not an isolated case. Research house CoreLogic has identified 65 areas (mainly in inner-city Sydney and Melbourne) where prices today are still below the record highs from the 2010s. “Vendors are willing to sell at a loss … but buyers aren’t interested”, says CoreLogic.
Now, guess who the real winner is in our scenario?
It’s the renter!
They’ve enjoyed 10 years of downward dogging in the yoga room and paddling about in that fancy heated pool, plus they’ve even had a plumber on speed dial to unclog the dunny.
Now that is what you call “Waterfront Elegance Meets Modern Convenience”.
Tread Your Own Path!