Selling the Bolthole

We are five years off retirement. We live mostly out of town, but for the last seven years we have owned a well-located Melbourne city apartment that we use from time to time. It has grown very little in value (and with all the new apartments coming on to the market I can’t see it increasing any time soon), and we no longer need to use it. So should we sell it and invest in the stock market, or rent it and work like crazy to pay off the mortgage? At that point, of course, the apartment would be about 20 years old and in need of a refit! What to do?

Leslie

Sell it. Sell it. Sell it. Seriously, sell it.And to be clear, I’m talking against my own interests: I’m an owner of a Melbourne CBD apartment myself (though I’m at an earlier phase of my life than you and am looking to hold on for decades).

The market is oversupplied -- approvals are running at about 23,000 apartments each year, which is about 75 per cent higher than the long-run average. This is going to flow through and affect vacancies, rental yields and prices.

At your stage of life I’d suggest you sell and make a post-tax contribution to an ultra-low-cost super fund, then focus on building up your nest egg over the next five years.

Scott