Hi Everyone!
I will start with a story I recently heard through a mutual friend.
A couple bought an inner city apartment off the plan, here in Melbourne, and settlement is approaching. Apparently they do not have enough equity *surprise, surprise* as the valuations do not stack up against the purchase price. They do not have enough cash lying around to cover the shortfall so they are considering selling their existing home in the suburbs and living in the new apartment – with the hope that it will increase in value in years to come.
So I thought I would start a new thread asking if anyone else has similar experiences or stories they would like to share. Surely this problem is not unique…
Its what all the property experts and journalists have been saying for some time now. Are you really surprised?
I think I would probably sell the apartment and keep the property in the burbs. The apartment could keep going down in value.
As a broker, I have been seeing htis since last year. I had one young client who purchase off the plan in Sydney 2 years ago. There was no growth in value at all. The person did not even have a deposit and had used a deposit bond. because of her low wage she couldn’t qualify for a loan. It was also in an area that was hard to get finance for.
The last I heard was that her mum was writing to the developer to say she didn’t want the unit anymore. They were told that it wasn’t as simple as that and they had better get some legal advice. I don’t know what happend to them or how htey got on.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
There is still some very good money being made from off-the plan apartments here in Perth – in and around Subiaco particularly. I heard of someone losing $100k in the Perth CBD. Just use common sense though – there are a lot more people that can afford $250k than say $600k for a penthouse. Try to get unique locations, look at resales in surrounding buildings – usual things. As far as losing money on these goes – there has to be a basic cost value to any physical product (unlike shares that seem to disappear into thin air) and at the very least you can value it on a return basis (which I hear is negligible in Sydney/Melbourne). Maybe take the annual rent and divide it by .05 to get a bottom line value??
Extensive list of new Perth property available for sale.Alternatively, become a joint venture partner in one of our property development partnerships – contact me to find out why our developments are unique. John – 0419 198 856
Grreg
I agree with Yack, I believe your friend is better off selling the apartment and keeping the property in the suburbs.
You will most likely get better growth in the suburbs especially if it is house and land, than an city unit.
Sometimes you are better off cutting your losses and starting again.
Can’t they re-finance existing home loan, rent out property in the suburbs. Surely that might assist them in getting a 90 or 95% LVR loan for the apartment. I know St george have a 100% loan facility, although income qualification is higher.
The numbers will dictate if this can be done. Whilst it might be an expensive mistake, I think just cutting your losses might comopund their problem.
I agree that the value of the suburban home may, depending on location etc, increasing at a greater rate in the medium term than the inner city apartment. Is this the Docklands? Hence why all attempts should be to keep it and make some sacrfices to maintain the apartment.
Speak to a few mortgage brokers and get their feedback and advice.
James
I have heard (although this could be an urban myth) that with some developments RE agents won’t even try to resell the units because there aren’t the buyers out there. They don’t want to put their reputations on the line.
I thought when buying off the plan, if you don’t proceed with the settlement you automatically forfeit your deposit and also you have to pay the developer the difference between your sale price and the amount the developer can resell the property for (assuming the price is less – if it is more, the developer wins & you just forfeit the deposit)
Shushar
“All our dreams can come true, if we have the courage to pursue them.” – Walt Disney
Shushar
Yes it is true. I had a unit myself off the plan and tried to onsell it beofre completion. No agent was interested in it. I ended ended up just rescinding the contract and walked away from the deal because of delays and lack of growth. (No penalty for me as I legally got out of the contract as it went over the sunset date)
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Now there’s a great idea I had forgotten about.
Thanks – I think I should phone my solicitor now!
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TerryW,
I guess what you did lose is time. Time to invest into something else which may have turned out better.There is an opportunity cost for everything.
James
Hi Ausprop,
Can you tell me a little about property in the southern parts of Perth ex Rockingham, Waikiki,do you think these areas have potential with the new train lines going through, is $160-170 on average an ok asking price for a typical three bedder or is there better value elsewhere ex Northern suburbs near the water , any help would be great.
taOriginally posted by AusProp:There is still some very good money being made from off-the plan apartments here in Perth – in and around Subiaco particularly. I heard of someone losing $100k in the Perth CBD. Just use common sense though – there are a lot more people that can afford $250k than say $600k for a penthouse. Try to get unique locations, look at resales in surrounding buildings – usual things. As far as losing money on these goes – there has to be a basic cost value to any physical product (unlike shares that seem to disappear into thin air) and at the very least you can value it on a return basis (which I hear is negligible in Sydney/Melbourne). Maybe take the annual rent and divide it by .05 to get a bottom line value??
Extensive list of new Perth property available for sale.Alternatively, become a joint venture partner in one of our property development partnerships – contact me to find out why our developments are unique. John – 0419 198 856
Originally posted by AusProp:There is still some very good money being made from off-the plan apartments here in Perth – in and around Subiaco particularly.
Extensive list of new Perth property available for sale.Alternatively, become a joint venture partner in one of our property development partnerships – contact me to find out why our developments are unique. John – 0419 198 856
I am not too sure what you mean, how do you know it is still good if you buy off the plan. What I think is that until the property is settle or re-value then you just don’t know whether it is going up or down.
Just my thougt.
Happy investing
Warm Regards
ChanDollars
[Keep going, you’re on your way to financial freedom]Hi Chan$ – I know people are making good money because I have been trying to secure an apartment for someone at $40k above what the off plan buyer bought it for and they rejected the offer out of hand. not bad for a $200 deposit bond! Hence my comment that if the off-the plan price compares favourably to the exisitng stock you should do well.
Extensive list of new Perth property available for sale.Alternatively, become a joint venture partner in one of our property development partnerships – contact me to find out why our developments are unique. John – 0419 198 856
Hi Marketmad.. I will send you a PM regarding this, but for the benefit of others, Rockingham is tipped to be a big mover and was recently rated highly in the “most likely to succeed awards” for want of a better name!
Extensive list of new Perth property available for sale.Alternatively, become a joint venture partner in one of our property development partnerships – contact me to find out why our developments are unique. John – 0419 198 856
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