Should you buy off the plan in the Sydney Property Market?
For the time poor busy executive buying something off the plan or new can be very appealing. You walk into the showroom, everything feels new, the salesperson talks to you about the concept of the building, hands you a beautiful brochure, you see the display suite, everything smells new and looks good, you don’t have time and BOOM…. …YOU’VE BOUGHT IT!
Fast forward seven years. A couple that I met as a selling agent had owned their new apartment for 7 years. Just like the developer said they were always rented out almost above market. However, when it came time to sell for this couple they did not even make their stamp duty back, there was no capital gain! What an opportunity cost I thought, the rent had only covered the interest-only mortgage, so for the whole exercise they ended up with 0!
A few years ago the first home buyers grant has been geared toward buying new property and I think that this is a false economy. What is potentially saved in stamp duty is not made up for in capital gains by making the wrong decision.
I was out with a client a couple of weeks ago and a property that we looked at new had a price of $1,045,000 with no parking in Surry Hills. I had made a comment to my client that the price would need to be slashed by $100K for us to even consider it and then boom the following week it was. Some buyers left to their own devices think – wow! $100k discount – however when looking at property, owner occupiers need to think more like investors and investors more like owner occupiers, they need to consider if they would live in it or is it emtionally appealing for resale.
There are very few examples of buyers making money out of new developments within a short period of time. I’m not saying that it is impossible but everything needs to be weighed up.
In the last few years buying off the plan has become even more of a nightmare as foreign investment has driven the prices up so much that your average Aussie investor can’t compete. I saw 62sqm two bedrooms apartments in Lewisham where there will be 13,000 new apartments sell for $950,000 each.
If you are looking to purchase a new development apartment make sure you ask these crucial questions as you won’t get to see the property.
- Where exactly will the apartment be positioned in the complex regarding aspect?
- Where is the property in regards to the carpark?
- Where are other buildings around it? Do they throw off white noise?
- How many apartments and stages are planned?
- Will there be any infrastructure changes?
- Where is the rubbish dumps and what are they the like?
- How many in the strata plan?
- If it is over a certain height has it got a sprinkler system?
- How many lifts has it got?
- What amenities has it got?
- How many investors/ Owners are buying these?
- What fittings are you getting? Can you choose?
- How many of the same type in the building?
- Is there Air Cond?
- Does it come with curtains or blinds?
- Can you have floorboards?
- What else is happening in the area?
- What have established properties like the new one selling for?
By asking yourself these questions if you do buy off the plan you can ensure that you buy well. If you are looking to make a wise investment choice call Brooke Flint 0425 221 226.