Buyers of Melbourne apartments in the last year or so are being forced to take a haircut of up to 30% off the price they paid to get a sale, according to new research.

The Australian Financial Review (AFR) reports that a not all units have fallen, some have in fact risen, but many apartments are failing to hold their value for even a few years.

A 3-bedroom, 2-bathroom apartment of 140 square metres sold for $1,565,000 in August 2015, a 28.7% discount on its November 2010 purchase price of $2,195,000. A 2-bedroom unit in the same building fell nearly 23% in less than a year.

The AFR says many of the units experiencing falling prices are in the 171-unit 27 Little Collins Street development, above a Sheraton-branded hotel completed by developer Golden Age in July 2015.

The news is unlikely to be a surprise to many, with predictions that heavy overbuilding of apartments in Melbourne would lead to an oversupply and push prices down. 41,400 high-rise apartments were approved in Melbourne in 2013, 30% more than in 2012.

In 2014 vacancy rates in Southbank was over 8% and rising sharply, while Docklands and the CBD saw vacancy rates of more than 5%.

According to BIS Shrapnel analyst Angie Zigomanis, “Anyone who’s bought an apartment off-plan and then looks to on sell within a couple of years will probably be looking at a 10% decline, but a 40% decline – there might be the odd example – it’s definitely not going to be the norm.

What becomes a bigger concern is that there are a number of apartments coming due for settlement, and buyers may have to stump up more cash or sell out, with banks likely to drop their valuation prices and the amounts they will lend to borrowers. If they are forced to sell out, they will only add to the weak market, causing a self-perpetuating free fall in apartment prices.

The banks including Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) announced a range of measures last year to tighten their lending rules, particularly to investors. ANZ has also announced a further tightening of home lending standards, changing the way it calculates living expenses when deciding on loan applications, as well as pay from overtime, bonuses and commissions.

Foolish takeaway

What many property investors don’t realise is that they could be paying the developers a 20% to 40% margin on the construction cost. Apartments in areas with massive numbers of units quickly become commodity-type assets, where the lowest price becomes the biggest sale factor, with sellers forced to match the lowest asking price in the area.

It’s a warning for investors and property buyers looking for a quick buck. There’s no such thing.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.