Your Apartment Lost Money? Sell It. Sunk Cost Is Not a Reason to Hold.

A client showed me her apartment last week. Toorak address. Beautiful building. Purchased twelve years ago. Current value? Less than what she paid. She asked me whether she should hold on and wait for it to recover. I told her the truth: sunk cost is not a reason to hold. And it never will be.

I get dozens of questions every week from people who are stuck. Stuck in bad apartments. Stuck in suburbs they chose for the wrong reasons. Stuck because they are afraid to realise a loss. So I decided to take the most common questions and answer them properly—with numbers, not feelings.

This is the third instalment of my rapid-fire Q&A series. The questions come directly from my inbox and from comments on previous posts. I have not softened any of the answers 1.

Can I Buy a Toorak Apartment as an Investment?

Toorak is Melbourne's most prestigious suburb. Median house prices sit above $4 million. Tree-lined streets, old money, exceptional schools. People assume that prestige transfers to apartments. It does not.

Pull up the price history of a typical Toorak apartment—say, a two-bedroom unit in a 1980s low-rise block. Fifteen years of data. The line is flat. Some years it goes up 2 per cent. Some years it drops 3 per cent. Net movement over the full period: roughly zero, or slightly negative after you account for inflation 2.

Now look at the house market in the same suburb over the same period. Doubled. Some streets tripled.

The reason is fundamental and it will never change. In Australia, property value is driven by land. An apartment gives you a fractional interest in a building. The land beneath it is shared among dozens or hundreds of unit holders. Your individual land component is negligible. As the building ages, the structure depreciates. The land might appreciate, but your share of it is too small to overcome the depreciation of the physical building 3.

Buying a Toorak apartment because you cannot afford a Toorak house is not a compromise. It is a completely different asset class performing in a completely different way. You are not buying Toorak. You are buying a depreciating box that happens to have a Toorak postcode.

If you cannot afford a house in a premium suburb, buy a house in an affordable suburb. A $700,000 house on 600 square metres in Melbourne's southeast will outperform a $700,000 apartment in Toorak over every meaningful time horizon. The data is not ambiguous on this point 4.

I know this is hard to hear if you grew up believing that address matters more than asset type. In China, apartments in premium locations perform well because land scarcity operates differently—there is genuine density-driven appreciation in cities of 10 or 20 million people crammed into limited space. But Australia is not China. We have 7.7 million square kilometres of land for 26 million people. Our cities are sprawling. Our planning laws favour low-density housing. The fundamentals are completely different, and importing overseas assumptions into an Australian investment strategy is one of the most common and most expensive mistakes I see.

I will put it even more bluntly. If you have $700,000 and you use it to buy a Toorak apartment, you are buying a depreciating structure with a prestigious postcode. If you use the same $700,000 to buy a house on 600 square metres in Cranbourne, you are buying land that will be worth more every single year for the next thirty years, with a house on top generating $500 or more per week in rent. One makes you feel good at dinner parties. The other makes you wealthy. Pick one.

My Apartment Has Lost $40,000 Over Seven Years. Should I Cut My Losses?

Yes.

I will expand on that, but the answer is yes.

Here is the question you need to ask yourself—and it is the only question that matters. Forget what you paid. Forget the stamp duty. Forget the legal fees. All of that money is gone. It is spent. It is sunk.

The only question is: if I had the current market value of this apartment in cash right now, would I choose to buy this same apartment today?

If the answer is no—and for a depreciating apartment that has gone backwards over seven years, the answer is almost certainly no—then holding it is irrational. You are choosing to invest your equity (the current value of the apartment) in an asset you would never voluntarily purchase. That is the sunk cost fallacy in its purest form 5.

Let me put numbers on it.

You bought an apartment for $420,000 seven years ago. It is now worth $380,000. You feel like selling means "losing" $40,000. But you have already lost that $40,000. The loss happened over the past seven years, gradually, whether you acknowledged it or not. Selling merely crystallises a loss that already exists.

Now consider the opportunity cost. If you sell at $380,000, pay off the remaining mortgage, and deploy the equity into a house on land—even a modest one in an outer suburb—what happens over the next ten years?

Houses on land in Melbourne's growth corridors have appreciated at 6 to 8 per cent annually over the past two decades. At 7 per cent growth on a $650,000 house (using your freed equity as the deposit), that property is worth approximately $1,280,000 in ten years. Your apartment, based on its track record, would be worth perhaps $400,000. Maybe $420,000 if you are lucky—back to where you started 6.

The difference: $880,000.

Holding a bad investment because you are afraid to realise a loss is like staying in a bad marriage because you have been together a long time. History is not a reason to continue. Future trajectory is the only thing that matters.

Sunk cost is not cost. Read that again.

Is Geelong Still Worth Investing In?

The honest answer: it depends on which part of Geelong and at what price.

Geelong's northern suburbs—Norlane, Corio, parts of North Geelong—were genuine value plays twelve months ago. We were buying houses for our clients at $400,000 to $450,000. Solid brick homes on 500-plus square metre blocks. Rents of $400 to $450 per week. Gross yields above 5 per cent. The affordability ratio was outstanding, vacancy rates were minimal, and the entry price was low enough that the risk-reward calculation worked 7.

But in the past six months, prices have jumped sharply. Properties that we secured for $500,000 in January are now listing at $600,000. That 20 per cent price increase in half a year changes the maths significantly. When a suburb re-prices that quickly, you have to ask: am I buying value, or am I buying momentum? Those are very different things.

At $600,000, Geelong starts competing with Melbourne's outer southeast suburbs—Cranbourne, Hampton Park, Doveton—where you get similar block sizes, stronger population growth, better infrastructure, and closer proximity to Melbourne's employment centres. A worker in Geelong has a limited job market. A worker in Cranbourne can commute to Dandenong, Frankston, or the CBD. That employment flexibility underpins rental demand in a way that regional cities cannot match 8.

If your budget is $650,000 or above, Melbourne offers substantially better options than regional Geelong. Full stop.

That said, if your budget is genuinely $400,000 to $500,000—perhaps you are a first-time investor with limited deposit, or you are buying through SMSF with a restricted borrowing capacity—then Geelong's northern corridor remains viable. Just be aware that the easy gains have been captured. You are buying at a higher base, and future growth rates will moderate from the explosive run we saw over the past twelve months.

I am not bearish on Geelong long-term. Victoria's second-largest city with genuine employment diversification and continued population growth will always have demand-side support. But timing and price matter. Paying $600,000 for what was a $450,000 house six months ago requires a different thesis than the one we had when we were buying at $450,000. Make sure you have that thesis before you sign the contract.

What About Croydon vs Mill Park for Investment?

Both are decent options. If I had to choose, I lean toward Croydon and the surrounding eastern corridor—Mooroolbark, Kilsyth, Ringwood East.

The demographic profile in the Croydon area is particularly attractive for long-term investors. You have a concentration of families relocating for access to private schools in the eastern suburbs. These are high-income households—business owners, corporate managers, professionals—who rent for six to twelve months while their children settle into school, then often extend to two or three years. They are stable tenants who pay above-market rent for well-presented homes and rarely cause property damage. In my experience managing rental portfolios across Melbourne, the eastern suburbs consistently produce the lowest maintenance call volume per tenant 9.

The blocks in Croydon and surrounds tend to be larger too—often 700 to 900 square metres. That opens up granny flat potential, which transforms the yield profile entirely. A $750,000 house with a $100,000 granny flat addition pulling $900 or more per week is a realistic outcome in this corridor.

Mill Park has its own strengths. Proximity to La Trobe University creates a student rental market. But I have a firm view on student tenants that I share with every client: in a housing crisis with vacancy rates below 2 per cent across metropolitan Melbourne, why would you rent to a transient student population when you can rent to a dual-income family on a two-year lease?

Students move every twelve months. Families stay for three to five years. Students share houses and negotiate hard on rent. Families need the whole property and will pay a premium for stability. In a market where tenant demand far exceeds supply, you should be optimising for quality and longevity, not filling beds. The turnover cost of a student tenant—re-advertising, cleaning, lost rent during vacancy, new condition report—adds up to $2,000 to $3,000 per changeover. Multiply that by annual turnover and it eats into your yield fast 10.

That does not mean Mill Park is bad. It means that if your thesis depends on student demand, you are building on a weaker foundation than you need to. There is a stable family-rental market in Mill Park as well—it just gets overlooked because the La Trobe angle is more obvious.

The Common Thread in Every Bad Property Decision

After answering hundreds of these questions over the past few years, I see the same pattern repeated.

People buy based on what feels right instead of what the numbers support. They buy in suburbs they have heard of instead of suburbs they have analysed. They buy apartments because they cannot afford houses in the same postcode, instead of buying houses in a different postcode. They hold losing positions because admitting a mistake is more painful than continuing to lose money quietly.

Every single one of these errors comes from the same place: emotional decision-making in a domain that rewards cold analysis.

I say this as someone who made the same mistakes early in my career. I bought in the wrong structure. I held assets I should have sold. I let ego override arithmetic. It took a six-figure tax bill to snap me out of it. That experience was brutal, but it rewired how I think about property permanently 11.

The most dangerous phrase in property investment is "but I feel like it is a good area." Feelings are not data. Feelings do not pay mortgages. Feelings do not protect you when interest rates rise and your apartment is worth less than your outstanding loan balance.

Property investment is not about finding the perfect suburb or the perfect house. It is about consistently applying a framework—affordability ratios, land-to-value ratios, vacancy rates, rental yields—and having the discipline to walk away when the numbers do not work, even when everything else about the deal feels right. I have walked away from properties that I personally loved because the yield was 0.3 per cent below my threshold. That discipline has saved my clients millions in aggregate.

One more thing I want to address. Several people have asked me about the Victorian government's first home buyer grants and whether they change the analysis. They do not. A $10,000 grant does not fix a $200,000 problem. If the underlying asset is wrong—wrong structure, wrong location, wrong asset class—no government incentive will rescue it. Use the grants wisely, yes. But do not let a $10,000 carrot lure you into a $700,000 mistake.

If you have a question about your current portfolio, or if you are sitting on an apartment that has gone nowhere and you are not sure what to do, send it through. I will answer it honestly. That is the only way I know how to operate 12.

I am Yan, actuary turned buyer's agent. More Q&A coming soon.