“This poor performance has nothing to do with the structural and cladding problems that are coming to light, but that is likely to compound the underperformance even further,” he said.
“It’s taken about 250 years to build the 10 million dwellings which house 25 million people, but we’ve built 1 million apartments just within our eight capital cities over the past 16 years,” Mr Pressley said.
In the past three months dwelling prices in Sydney have risen by 3.5 per cent after two years of price falls, according to CoreLogic figures.
But in a sign that the price recovery might not be as strong for apartments, a survey of 1200 property investors with at least one property looking to buy another shows they are shying away from buying off the plan.
The survey by Property Investment Professionals of Australia found just 5 per cent intended to buy off-the-plan units or house and land packages. In 2018 the figure was 6.4 per cent.
While investors understand that there can be an oversupply of apartments and there is a developer’s margin that is reflected in the sale price, the fall was probably due to publicity on construction defects in some high-rise apartments, PIPA chairman Peter Koulizos said.
Mr Pressley said the sluggish performance of high-rise apartments came amid concerns over enormous repair bills for owners of apartments in buildings with major structural defects.
He said the several highly publicised buildings were likely to be “just the tip of the iceberg”.
Mr Pressley said he had told buyers to avoid high-rise apartments built in the last 20 years. “There is no due diligence that a potential buyer can do that would give them comfort [about the purchase],” he said.
Returns on property come from capital gains and rental income. Not all investors are looking to maximise capital gains. Some, such as retirees, are looking to maximise the rental yield from their investment properties, particularly at a time of historically low interest rates.
Sydney suburbs with highest density of apartments
APARTMENT CAPITAL GROWTH RATE (%)*
Wentworth Point 46%
Breakfast Point 54%
Cremorne Point 57%
Little Bay 34%
Bronte 53%* Cumulative price growth, 10 years to May 31, 2019.
Writes about personal finance for The Sydney Morning Herald and The Age.