If you are considering buying residential in the foreseeable future the market will present an opportunity to purchase quality stock in quality areas over next 2 years.
The number of properties on the market with “residential development upside” increases every week. Nearly all have approved DAs. Essentially they are devlopers trying to exit positions. My criteria in assessing these properties is they have to be income producing for a period that will get through to the next recovery in the residential market. Then the underlying developed land value must exceed the intrinsic worth of the commercial investment otherwise when you develop the site you are destroying investor equity.
The Australian Financial Review reports that apartments in central Melbourne are being resold at up to 30 per cent less than their off-the-plan purchase price.
Is the Australian residential property market so overpriced that we should be shorting our banks? Or is it reasonably priced because of low interest rates? In attempting to assess residential property’s fundamental worth we need to recognise that residential property has two very different functions - as a home providing safe shelter and as an investment providing a return.