March 23rd, 2008
Its on again for off the plan
It seems like only yesterday that queues of frenzied buyers were
forming before dawn outside building sites to buy apartments off
the plan in projects hyped as the last word in lifestyle.
But, six years on and with signs of a price recovery in the unit
market combined with low vacancy rates and a sharp rise in building
approvals, off-the-plan units for sale are starting to
reappear.
From boutique Sydney blocks in Surry Hills and Leichhardt to
sprawling complexes in Rhodes and reconfigured heritage buildings
in Little Bay, the debate over whether yet-to-be-built apartments
are good buys - or not - has roared back to life.
ARE THEY A GOOD BUY?
For developers, selling off the plan is a way of securing
guarantees of enough early capital to finance the project and is
often a prerequisite of bank lending.
On the upside for buyers, says Australian Property Monitors general manager Michael
McNamara, there’s always the chance that prices might rise enough
during construction - between the buyer putting down the deposit
and final settlement - to eclipse any premium added on by
developers and deliver a capital windfall.
On the down side, buying off the plan always has to be
approached with caution, plenty of homework and faith that the
developer will actually deliver what has been promised.
“And it does mean you can get into the property market without
really much outlay at all, just a deposit bond for a few hundred
dollars,” McNamara says. “If the price is good and prices are
rising, then off-the-plan apartments can be a good buy, especially
with the depreciation benefits.”
It’s still important to check that the price being asked for an
off-the-plan apartment compares with a similar product in the area,
says Louis Christopher of Adviser Edge. “Many people believe
they’re buying off the plan at a discount but the reality is that
you’re paying a premium and, like buying a brand new car, the value
can drop when it’s no longer new,” he says.
“So you have to consider all factors, like whether it has a view
and a car space in a locality where there’s not much car parking.
And you also have to take into account the quality of the
project.”
That is how many people, during the off-the-plan frenzy of the
early 2000s, had their fingers burnt, says Andrew Finlayson,
managing director of developers the Carrington Group. Some
developers produced beautiful brochures with images of what the
finished apartments would look like - and then failed to deliver on
that promise.
“As a result, some buyers are now gun-shy of buying off the
plan; they’re more wary and seek out more information,” says
Finlayson, who has some apartments still being sold off the plan in
Beumont in Wahroonga. “People are now more savvy about finding out
who the developer is and looking at their history and after-sales
service. But it’s still certainly a good way to buy from a quality
developer, particularly if you want the pick of the apartments, in
terms of size or orientation.”
A FRESH SUPPLY
At the Prince Henry redevelopment at Little Bay, a block of 42
apartments, all with large balconies, in a heritage-listed building
is being sold off the plan. The former 1930s nurses’ quarters have
been redesigned by Tanner Architects as The Dickson, and have
stunning coastal views (see illustration).
The general manager of apartments at developers Stockland, Mark
Dickinson, says it was decided to sell off the plan to allow buyers
to get in early. “We anticipate a number of people will go down
that route, while others will wait till we’ve completed them, so
they can go in and see and touch the finished product.
“But with the development as a whole now coming to life, we’re
not asking them to suspend belief on all aspects.”
Out west, there are 256 apartments and townhouses being offered
off the plan as the first of three stages in the development of
Village Quay, a 780-strata home waterside project at Walker Street,
Rhodes. Within easy access of the busy Rhodes shopping centre,
cinema and cafes, all the buildings, with units of one to four
bedrooms, are designed to be ecologically sustainable.
“Part of the appeal of off the plan is that people are buying
something that’s all new,” says Ian Troy of developers Billbergia.
“There are some really positive signs of the market moving quite
quickly over the next few years, so people who buy now won’t be
disappointed by the time they settle. There are no guarantees, as
no one knows what the market will do, but we’re building a quality
product and we hope people will get a bargain.”
In Surry Hills, the 51 units in a five-storey boutique building,
deNode Apartments, next to the old Reader’s Digest monolith, are
also being sold off the plan. Developer Con Haralambis says much of
the appeal of the studio and one-, two- and three-bedroom units lie
in their elevated position in a lively area, not far from Crown
Street.
“It’s good to offer off-the-plan sales as then it doesn’t
clutter the market; sales are spread over two years,” he says.
“In places like Surry Hills, there’s been an undersupply of new
property, so we think there’ll be strong demand. Surry Hills is a
good story and is getting better all the time.”
In Leichhardt, 21 warehouse-style apartments have also just come
on the market, with the conversion of an old toy factory on Beeson
Street by developer Modog in conjunction with Platino. With high
ceilings and open-plan living spaces, The Factory will be a mix of
one-, two-, three-bedroom and loft apartments.
DO YOUR HOMEWORK TO AVOID NASTY SURPRISES
When university lecturer Hilary Lloyd bought a $321,000
apartment off the plan in Chiswick late in 2001, she says she was a
complete property novice.
Despite doing many of the right things - getting an independent
valuation to make sure the developer-set price was in the right
ball park, talking to the council about certification and
consulting the Environment Protection Authority about the
remediated site - there were still unpleasant surprises in
store.
“If you go naively into buying off the plan, you’re depending
largely on the developer and his agents for all your information,”
says Lloyd, a senior lecturer in pharmacology at the University of
Sydney.
“But you need to seek independent information. For instance, I
was discouraged from getting a building inspection, which I later
really regretted. I didn’t find out until later that the management
rights had been sold off and I took out a mortgage with the
developer where I signed over my proxy to them, without
understanding the implications.”
It was only when Lloyd became involved in the executive
committee of the building that $2.5 million worth of defects in the
complex were uncovered and, happily, rectified, before the
developer’s obligation to do so had expired.
“There’s also a lack of certainty over what you’re actually
getting compared to what you think you’re going to get,” says
Lloyd, who later sought help from the apartment-owners’ peak body,
the Owners’ Corporation Network.
“I saw the plans and assumed that, having been approved, that
was it. But, a couple of years later, there were changes.
“The original plans showed there would be a wonderful view from
the outdoor pool overlooking the Parramatta River, but … instead,
a block of high-rise units was stuck in front.”
WHATS ON OFFER?
The Dickson, Little Bay
42 one- to three-bedroom apartments with study, due for
completion early 2009. One bedroom with study from $550,000, two
bedroom from $1.13 million.
NG Farah Project Marketing, 0419 310 311
The Factory, Leichhardt
21 apartments in factory conversion, due for completion
mid-2009. Loft, one, two and three bedrooms, priced from $576,000
to $1.1 million.
King Residential, 1800 447 570
Village Quay, Rhodes
256 apartments and townhouses, due for completion 2010. One
bedroom from $390,000, two bedroom from $531,000 and townhouses
from $732,000.
Billbergia, 1300 551 123. Display suite open daily 10am-5pm.
deNode apartments, Surry Hills
51 apartments in boutique building, due for completion September
2009. Studios from $365,000, one bedroom from $450,000 and three
bedrooms from $1.5 million.
BresicWhitney, 0411 385 444
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Disclaimer: Michael McNamara is the General Manager of
Australian Property Monitors, owned by Fairfax Media, publisher of
Domain.com.au.