About the writer:
Written by Annie Lim, Mentor and Practitioner, Property and Finance, Australia, Asia and UK
Australia 108, the amazing skyscraper in Melbourne that has gathered much media attention. Naturally so, it is an icon that has been built by visionaries to create a statement for Melbourne. It is now the tallest building in Australia and Southern Hemisphere.
Aus108 is built to be Melbourne’s pride, is it though? So many critics about the risk of buying the property, valuation issues, the high price sold on the properties amongst some reasons mentioned. Some recent dramas about cracks and safety of the building were cited in the press. The builder, Multiplex, however, has issued safety and assurance statements.
The happy purchasers kept quiet. They have probably bought them at more competitive prices. To the ones who acquired at higher prices, some made public news, others did not settle, mainly due to valuation, funding reasons, or personal decisions.
I remember when it was first launched, I knew of a group of purchasers who had indicated interests to acquire Aus108. At that time, stocks were not readily available. With every month of waiting, we see the prices changed. Strategically so; as there are 1015 units. With launches taking place in various countries, prices were moving variables. Prices to some extent were decided by supply and demand.
An anonymous purchaser of Aus108, interviewed by a Melbourne based reporter said that ‘It was their own stupidity’ purchasing a 60 sqm, 64th level 2-bedder at $972,000. Yes, that is a pretty high price transacted at $14,400 psm in 2015. Presumably, this is purchased first hand directly from the developer, a two bed, two baths, and one carpark transaction.
In the same article, someone else bought a 60sqm for $565,000, which is $9,416 psm. I have also seen prices transacted at below $9,000 psm. A recent one was priced at $10,332 psm.
At settlement which commenced in June 2018, the market environment on lending turned unfavorable. Foreign investors are not offered funding by major banks. The second tier banks & private funders went a similar direction. Some do not lend for high rise apartments, not just Aus108. Local lending tightened, servicing calculators were pretty ridiculous. Even local purchasers had trouble getting loans. To settle, it requires top-ups and many could not or did not do it. It is reported that about 10% of the purchasers did not settle.
As I walked into the building each time, I speak to the workers, the residents, the tenants, and I have thus far been getting good feedback about the property and living there. This tall building, 101 levels is really not easy to build. Top architects (Fender Katsalidis), top builders (Multiplex), top engineers and development teams are engaged to ensure the successful fruition of this project. The owner-developer is a low profile nice gentleman, managing a few public listed firms.
Interesting though that for the lower prices sold earlier, I was told valuation could not be met. With the higher prices transacted, valuation also could not be met. It is like if the purchaser bought at $550,000, valuation is $450,000. If bought at $610,000, valuation is still $450,000. Perhaps that is what press reports meant when they described that ‘Valuation is going backward.’ It is not so much the value has gone down, but that those purchasing at higher prices will be further away from the valuers’ benchmarks.
How do valuers value properties in general? Are they valuing an iconic 100 level building the same way as that of any of the neighboring properties? Would that be a fair proposition? In general, valuers value the property based on characteristics such as expected rental yield, comparable market prices, risk ratings for things like environment risks, market risks, description of the properties including average size of the properties.
Valuers will also visit the properties in question so that they can assess the condition of the building and make a note of any structural faults and nuances that might affect its market value. They will then provide the customer with a standard brief report of their findings within two or three days of their visit. The recent Aus108 residents’ reports on ‘cracks’ and ‘building faults’ are not helpful for valuation. Many frowned at the thought of residents moving in before the building completes. A lot of attention on Aus108. However, I have also heard of 5 level apartments uncompleted having residents move in on a staggered settlement basis. I am no expert, but the team behind these projects would know better with their level of expertise, whether such practices are viable.
I have also heard of some remarks from interstate reporters who said “Wow! Fancy paying $500,000 for a one-bedder. That’s a crazy price!” To the local Melbournians, maybe this is not that shocking as there are multiple CBD, city fringe, and even suburb projects transacting at same price or more for similar-sized properties. Well, the 100-level tower is certainly getting media attention.
Will valuers start taking a second look at Aus108 and provide a different view?
I remember in my earlier days of investing, one of my property mentors told me that if I am investing, try to purchase an icon, a collectible, a property that I will keep for a much longer time; not for speculation. Is Australia 108 one of these?
Australia 108, a Melbourne signature development, a supertall skyscraper with luxurious facilities. Really you don’t need to be ‘rich’ to own this property, as the maintenance and body corporation fees are comparable to many lower-quality properties. In the short term, perhaps you do need a bit more cash, as the valuation has not stacked up to the level that lenders are willing to accept. Will prices go down?
Whatever it is, Australia 108, in my opinion is a good property to be placed amongst your property portfolio…