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Wednesday, 12 May 2021

Budget projections bad news for my off-the-plan apartment investment

While unit (apartment) prices in the suburb where I bought my $1m 'off-the-plan' unit have remained fairly steady during the pandemic, last night's federal budget projections regarding the resumption of immigration to Australia mean that I'm unlikely to see much increase in the unit's value before I need have to take out a mortgage when the unit construction is completed in early 2023. I had hoped that international travel and migration levels might already be getting back to 'normal' by the end of next year, but the budget forecasts have cut the population forecast for 2023 by 41,000 compared to the figure in last October's delayed budget. And NSW is expected to have a net population decrease of 20,000 or more each year until 2023-24.

So it looks like rental yields and price appreciation will be weak for my investment unit at least 2025. While I'm still working full-time and can benefit from negative gearing that won't be too much of a problem, but it would have nice for the unit valuation to exceed my purchase price when construction is completed, and for the cashflow deficit to be as small as possible.

Immigration levels might yet pick up faster than predicted in this latest forecast, but they could also be worse than anticipated. In the longer term, hopefully the current fall in new unit approvals (down 26% Y-o-Y to near decade lows) will mean a more favourable demand:supply ratio once immigration levels eventually return to normal.

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