Majority of off-the-plan apartments worth less than purchase price, data show

IMAGINE if you were one of these owners …

you now have further problems

.with your finances, the bank may have second thoughts about your mortgage

.along with the falling value of your property your equity is not looking good either

.if you are looking at selling you know it’s going to be harder to get even near what you need to break even

.to sell now means further proof of your meeting quality assurances the market is now demanding following recent well-publicised failings in this space

AND where are the strata fees going, where are the insurance premiums going, up of course!

Ever increasing realisation that once the developer and builder have left the site having met their minimum obligations they are off the hook, and the owners and the body corporate are left with the issues and liabilities.

Gladys is not going to help, after all her lot are about development they are simply not sincerely concerned about anything that stands in the way.

IT will be interesting to see how long her lot will keep pretending they are genuine about fixing the backlog of major building defects … all they seem to be interested in doing is keeping secret the list of those buildings still cladded in dangerous materials! OMG!


Majority of off-the-plan apartments worth less than purchase price, data shows

7.30 By Tracy Bowden and Kirsten Robb

21 OCTOBER 2019

Apartments being built.

PHOTO: Off-the-plan apartments have seen a drop in value in Sydney, Melbourne and Brisbane. (ABC News: Jessica Hinchliffe)

Shaky confidence in the capital city apartment market is hitting off-the-plan buyers hard, with a significant rise in the number of newly constructed units now worth less at completion than the price they were originally purchased for.

Key points:

  • According to CoreLogic data for August, more than half of newly constructed off-the-plan apartments in Sydney and Melbourne were worth less than the owners bought them for
  • Nearly a third of off-the-plan apartments in Sydney were worth at least 10 per cent less
  • CoreLogic’s Tim Lawless said there had been an oversupply of apartments in the high-rise sector

7.30 can reveal that 60 per cent of off-the-plan apartments in Sydney, and 52.9 per cent in Melbourne, werevalued lower than their contract price at the time of settlement.

The latest figures from property data provider CoreLogic for the month of August shows that nearly a third of off-the-plan buyers in Sydney were moving into new apartments worth at least 10 per cent less than the price they purchased them for.

Just two years ago, less than 16 per cent of newly constructed NSW units were valued below contract price after they were completed.

In Queensland, 43.1 per cent of units were worth less at settlement than what they were purchased for, and in Western Australia it was 22.5 per cent of apartments.Follow this story to get email or text alerts from ABC News when there is a future article following this storyline.Follow this story

‘A very fundamental shift in value’

The Opal Tower with a sign to the left

PHOTO: Opal Tower was evacuated last year when cracks were found in the building. (ABC News: Nick Sas)

CoreLogic’s head of research, Tim Lawless, said when many of these newly completed apartments were originally sold off the plan back in 2016 and 2017, the market was very different.

“We were seeing values rising at about 15 to 20 per cent per annum in Sydney and Melbourne,” Mr Lawless said.

“Now cast your mind forward to 2019 and we’ve seen prices come down in Sydney by 15 per cent. In Melbourne, they’re down by about 11 per cent.

“A lot of those off-the-plan buyers have seen a very fundamental shift in the value of the project that they purchased a couple of years ago.”

Mr Lawless said there had been a significant oversupply in the high-rise sector, with supply substantially outpacing demand.

But he said concerns around construction quality, remediation costs and flammable cladding had had a compounding effect.

“That [is] probably also weighing on the minds of people in the marketplace and potentially affecting the resale value of those properties as well,” he said.

A string of negative headlines has plagued the apartment market in the past two years, beginning with London’s Grenfell Towers fire in June 2017 and the discovery of the widespread use of combustible cladding on apartment buildings.

In Australia, confidence in the market was further destabilised after the evacuations of Sydney’s Opal Tower on Christmas Eve 2018 and Mascot Towers in June of this year.

Mascot Towers owners still in limbo

An apartment block

PHOTO: Cracks at Mascot Towers have gotten worse, residents have been advised. (AAP: Bianca De Marchi)

Owners at the 10-storey Mascot Towers in Sydney have fared far worse than most.

Not only have residents such as retiree Maree Peters watched their building garner major media coverage for its structural defects, they have still not been able to return to their homes.

“We have an asset worth one and a half million dollars that right now is worth nothing,” Ms Peters said.

“It’s your home, it’s everything you worked for, that you think is safe, that you think is protected.”

Having recently learnt that the cracks in their building are widening, owners will meet Tuesday to vote on a program to fund their building repairs.

They will decide between a commercial strata loan or a multi-million-dollar levy to pay for urgent repairs.

Stage one of the levy would cost around $7.7 million.

“At the moment we have a building that if we don’t do anything it’s worth nothing, and unless we put money in to try and get some value back we are left with an asset that is worthless,” Mascot Towers owner Brian Tucker said.

Watch this story tonight on 7.30.