Surry Hills property investors bleeding losses despite “bulletproof suburb” status

Aug 13, 2013 | Property Investing, Property Market

Buying in a so-called bulletproof suburb doesn’t guarantee that investors won’t be unscathed by property market fluctuations.

Despite the enthusiasm of property experts and analysts, Property Observer notes it’s still possible to lose money in suburbs which on paper seem faultless.

Many buyers in Surry Hills, touted by the latest Australian Property Investor magazine as one of Australia’s premier “bulletproof” suburbs, have lost money on their investments in the last few years.

According to Residex the suburb median has increased in value each calendar year for the past 10 years.

The median unit price is now $563,000, having grown an average of 5.2% each year for the past 10 years, according to Residex. The median rent is $615 a week and the gross rental yield is 5.6%.

But Property Observer has skimmed sales and found a selection of properties in Surry Hills where buyers made a loss on their supposedly bulletproof investment during the past decade.

In most cases it’s not that the properties were genuinely poor homes – as quite often the subsequent buyers made a healthy profit on the properties. But poor investment timing meant they perhaps chose the one period when the property went down in value.

Another common trait was people buying in new developments at an inflated price, especially if they bought in the Monument development on Oxford Street from Multiplex. There were multiple buyers reselling a year or two later at a significant loss.

And it’s not just limited to the upper end of the market, with some properties at the lower end losing their buyers money.

Though units were more likely to lose money, several classic Surry Hills terraces made it on the list as well.

The Pelican Street development, The Monument, is now a monument to lost dollars.  The 191-apartment building sold a number of units in the mid-2000s to late 2010s which have not resold well.

Unit 403 was sold for the first time at a hefty $1.175 million in 2005. But in September 2011 it resold for $975,000 – a loss of $200,000 for its vendor.

Unit 413 initially sold for $866,000 in 2005 and then resold in March 2008 for $755,000 – a loss of $111,000. But it did bounce back, it then sold again in September 2012 for $930,000.

Waiting until 2012 did seem to mitigate the loss for a few investors but they still lost money.

Unit 1513 first sold for $1.345 million in 2007 and then at $1.295 million in 2012 –a comparatively small loss of $50,000.

And unit 1313 first sold for $875,000 in 2007 and then at $870,000 in 2012 – a loss of just $5,000, the Monument loss list goes on.

Apartments in the St Margaret’s development on Bourke Street weren’t a guaranteed recipe of millions either.

Unit 39 in the 1930s former hospital building sold in 2007 for $1.25 million. In 2012 the same apartment sold for $1.21 million yielding a $40,000 loss.

Unit 309 in the same building first sold in 2005 for $615,000. Two years later in 2007 it sold for $577,000, a loss of $38,000. The next buyer did okay selling the property for $710,000 in 2012.

And unit 112 lost $20,000 from 2005 to 2009 after initially selling for $480,000.

The most dramatic in the complex was unit 1501, which first sold in 2006 for $3 million. It later traded at a profit for $4.01 million in 2011 – a profit of $1.01 million. But the bonanza didn’t last long with it later selling for $3.825 million in May this year – a loss of $85,000.

Several other prestige apartments in Surry Hills also lost their owners money.

Unit 401/148 Goulburn Street first sold for $1.5 million in 2002. In 2012 it sold again for $1.2 million – a loss of $300,000.

And unit 6/56 Foster Street sold for $2.53 million in 2009 – making the vendor a $400,000 profit on their one year investment. The buyer didn’t have the same fortune, selling in 2012 for $2.5 million, losing $30,000 over three years.

Though less likely to haemorrhage money, some Surry Hills terraces did prove to be poor investment choices.

The traditionally sought after terraces make up about 30% of the dwellings in Surry Hills, according to the Australian Bureau of Statistics.

The corner terrace at 17 Kendall Street was one of the most recent cases in our list. The charming two bedroom home sold for $1.012 million in 2010. But in March this year it sold at auction for just $950,000 yielding a loss of $62,000 for the hapless vendor.

It has been listed for rent at $825 per week suggesting the new owner picked it up at a yield of 4.52%.

Another terrace sale with unfortunate timing is the 1890s-built 115 Goodlet Street. In 2007 it sold for $809,000 but in 2009 in sold for just $740,000 – a loss of $69,000. One wonders if that vendor attended the recent May 25 auction where it sold for $901,000.

And the lovely corner terrace at 418 Riley Street lost money during the financial crisis. It sold in 2007 for $1.027 million but then sold for just $1 million two years later. It went back on the rise though, in 2011 it sold for $1.35 million.

And it wasn’t just limited to prestige homes. At the lower end of the market unit 58/397 Bourke Street proved to be a poor investment. In 2008 it sold for $250,000 but then four years later it sold for $210,000 – a loss of $40,000.

Although these sales just show cases where investments went backwards there are countless examples of properties which stayed stagnant – effectively not moving in price for many years.

The costs of paying off a mortgage, the costs of selling, the cost of outgoings and the cost of lost opportunity means buyers can be left hurting from stale investments.

Though certain suburbs might seem bulletproof buyers still need to do their research or risk a fatal investment.



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