Quote:
Originally Posted by Ruby Okim
Having been a renter for the last decade I don't really know much about the Oz property market, but since OH and I will (fingers crossed) be moving over to Melbourne in the first half of next year we've started thinking that it might be time to get on the property ladder. Funnily enough, whilst on PiO I noticed that Central Equity were having a property seminar in Singapore about projects in Melbourne.
We went to the seminar yesterday and found out that they have an "off-plan" project just off LaTrobe Street a few minutes from the CBD area. The location looks great (it is minutes from where we stayed in Melbourne last year when we came to visit so we know the area a little) and there are some good perks to buying at the moment, such as a lower stamp duty because the development has not been built yet and only having to pay 10% of the price until completion in 2009.
However, we also have some major concerns:  - It'll not be ready until May 2009 so we'd have to rent for a whole year to begin with
- We're not sure if we would get a better deal once we're in Melbourne and can look around ourselves (the asking price for a 2 bedroom apartment is around $570-600k)
- Not sure what the average cost of renting will be versus paying a monthly mortgage of around $3k(!!)
- Though the area is great OH and I have no idea where our jobs will be located
if anyone might be able to help me with our concerns, I'd be grateful for some friendly advice for a very novice prospective houseowner! |
Buying off the plan can work Ruby................. a client of mine bought a high-rise split level penthouse suite off the plan almost 2 years ago for $2.3 million. We went with her last month to pick up the keys and to do a photo shoot in her unit. It's a huge unit....... well over 500 m2 of living space on two floors with 3 under cover parking spaces.
Whilst my wife and I were there taking photos......... our client bought two more properties for cash off the plan at $1.3 million and $1.6 million respectively........... neither will be complete for at least 18 months to two years.
The developer suggested she on-sell her brand new unit to them for $4.0 million. That's not a bad return in 2 years eh.................. but I advised her not too as i reckon it's worth closer to 6 than 4 mil?
I don't know Melbourne at all so I can't give you specific professional advice............ all I can reiterate is please tread with caution.
Here's an article that you might be able to glean some useful info from?
Good luck with whatever you do end up purchasing.
Bobcat Realty
Traps in buying off-the plan
By Pam Walkley,
Money Magazine, September 2007
Buying off-the-plan real estate is often presented by marketers as virtually a licence to print money. But, as
Money reader Justin asks, how safe is buying property sight unseen? Certainly people have made money buying real estate before it is completed. Some have on-sold their properties at a good profit before ever having to settle, but these are usually more exclusive properties close to major cities, where demand is strong.
There have also been many instances of people paying far more for an off-the-plan property at settlement than they could hope to attain in the prevailing market. Melbourne Docklands apartments, where oversupply drove down prices, are a prime example of where this happened.
Buying off the plan is undoubtedly a leap of faith and the dangers are twofold.
First you have to believe that the property you can only see on a plan will eventuate exactly as specified within a certain time. If, like most of us, you do not find it easy to envisage exactly what you will get, it's probably worth getting help from an expert. Even if there is a display suite it may not be truly representative of the finished product.
One service you could consider is from Archicentre, the building advisory service of the Royal Australian Institute of Architects, which provides advice on plans. These reports include things like an opinion on whether the rooms are of a reasonable size, the quality of the fixtures and fittings and the layout.
When building is completed, before you fork out your money to settle, Archicentre can conduct a practical completion inspection, including checks of the area of the building against the plans, confirmation that the promised fixtures and fittings have been included, and comments on the overall standard of the building.
Each of these services costs around $400, says managing director Robert Caulfield, depending on the state and how much work is involved. Other precautions you should take include:
- Only buy from developers with a good reputation and whose work you can see.
- Make sure every detail is specified in the contract, including fixtures and fittings — for example, not just a stainless steel oven, but a particular brand and model.
The second major pitfall relates to price. It's difficult to establish whether the asking price is fair when there are no benchmarks. "Buy tomorrow's real estate at today's prices" is the spiel of the marketers. That assumes property prices always rise, which of course is not the case. For example, if you bought a unit off the plan three years ago in Sydney's outer west and are settling on it now, it is likely to be worth less than you are paying.
With investments be very suspicious of rental guarantees, which can be used to set artificially high prices. For example, if gross rental returns are 10 percent in an area and the vendor guarantees a $400 a week rental, that would price a property at $208,000. But say that market rent is really $350 a week, meaning it's only worth $182,000. If you fall for this you would pay 12.5 percent above market. The vendor only has to pay $5000 to guarantee the extra rental for two years and score an extra $26,000, or $21,000 net.
