_{Highlight segments:}

_{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!}

The Trio kick off this exciting episode by defining where apartments sit in the unit subset, and Dave shares with the listeners his favoured types of apartments. Some of Dave’s criterion paves the way for a high-scoring gem… he shares some valuable tips; Highly sought-after, great allure, attractive land to asset ratio and unbeatable locations!

Dave shares some startling facts about the recent historical capital growth performance of apartments versus houses. Core Logic did a study in August 2022 for the last thirty years across the two data sets. While the data showed that combined capitals exhibited 450% growth for houses, while units only clocked 307%, and for regions the house data set tracked 314%, and units, 213%.

Cate discusses some of the reasons for this relative underperformance and she also chats about the mistakes that some have made in the past when they were aligned to one geographic base and ignored other gentrifying options with strong growth drivers. As Mike says, “Blue chip or bust? It doesn’t make sense. Their model doesn’t have flexibility.”

Will the older style apartments bounce back? Only time will tell, but Cate discusses the ‘apartment renaissance’ that she’s noticed of late, particularly with an aging population.

Mike cracks into the 1,000 Assets Study, specifically a trip down memory lane since 2016. Initially 47% of their investor study were purchasing units. Into 2018/2019, it dropped to 40%, and following this, a huge drop-off surprised Mike, with a recent figure of 18% recorded.

Mike puts this down to a few factors, including the pandemic, horrific building defects and cladding issues, and the evolution of investor education. This, coupled with the increasing number of units per building has translated into heightened apartment avoidance for many investors. Unit complexes are getting bigger and the average count of apartments per building has risen from 61 to 110 over this period. Buyers do tend to red flag huge developments, particularly of late.

“Your job is to help them grow wealth, not to save them tax” is one of Cate’s sayings when it comes to accountants recommending new properties.

Cate shares some of the common reasons why buyers have been more fearful about some apartment subsets in recent years. From off the plan risks to lender appetites, there are a few alarm bells that listeners should pay attention to. But the Trio talk about some of the positive changes they’ve seen across developments and designs of late.

Cate talks about the elephant in the room; strata fees and expensive special levies. It’s a must-listen!

Mike treats our listeners to a chapter on the Rental Loss Index and their subsequent study. From oversupply to high vacancy rates, this insight is particularly powerful for investor insight.

And our 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

If you enjoyed this episode, you may also enjoy these:

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

Ep. 89 – Capital growth – what increases property value

Ep. 169 – Houses versus units; capital growth performance in capital cities and regions over the last twenty years