Firstly, let me start by saying that there’s no one formula that can be carbon copied for each property and each person’s circumstance. While it is great to do your research, you also need to ensure that you get your own independent financial advice and form an objective opinion about what you read and are being told.
Buyers are becoming more and more educated, and developers selling off-the-plan projects need to price their product sharp in order for them to sell. In many new developments, you will see introductory pricing for the early buyers that purchase prior to the developer achieving their pre-sales targets and securing bank funding to proceed with the build.
The more established local developers that know the market (such as Morris Property Group and Rawcorp), will normally introduce the development to the market at a more conservative price in line with older established properties. They will secure a string of sales at this price point, before gradually increasing the price so the original buyers see growth. This is also how they develop a following of buyers on their projects.
Many people are reluctant to buy off-the plan as they are unable to see and feel what they are buying first hand. There is a lot of buyer protection nowadays. Developers and sales and marketing professionals have a lot of responsibility to deliver what you have signed up for, or they risk you cancelling the contract and being sued for misrepresentation (which no one wants). The Office of Fair Trading, the ACCC, the QBCC and the local Government are the industry authorities that oversee compliance in the industry.
Some developers (usually the ones that don’t know the market well), make the mistake of releasing a project to the market at inflated prices then need to pull prices back later on when it’s not selling so well. This strategy is a bad look in the market for the project and also for the developer’s credibility.
It’s important to research the development company, it’s directors and their track record. Zebras can’t change their stripes and chances are that if they’ve been known to overprice product many times in the past and get into trouble later on, it could happen again. Usually real estate agents that are local to the development, have a good understanding on the credible developers in the local area, and you can find out a lot from a simple Google search.
The easiest way to tell if you are getting a great buy is by knowing the second-hand property market well in that area. If you see something that is new and you feel it is priced in line with the second-hand market, then it represents exceptionally good buying (when you take into account all the other areas you will save such as renovation costs, stamp duty, tax depreciation for investors, longer to save your deposit while it’s being built etc).
Have a buffer for when you have a valuation shortfall lower than purchase price. On new projects I have worked on, most of the time the banks settlement valuations came in between 5-10% short of the purchase price. This is because the valuers need to use second hand property sales as a bench mark. They can no longer compare new property sales to other new property sales. They also need to be conservative with their pricing, valuing at fire sale value. Even if there are other new resales in the building, it is unlikely you will achieve a valuation higher than the contract price on a new property purchase (from my experience).
Other benefits of buying new are:
- Tax depreciation benefits for investors
- First home buyers grant applicable on new homes in Queensland (not applicable for established homes)
- Sometimes you may be able to have input into the design or colour schemes
- QBCC – builders structural warranty of 6.5 years in Queensland
- Warranties on new appliances
- Lower body corporate due to lower insurances, warranties on lift, less maintenance
- Sinking fund established
- Lock in the property at today’s market rate with just 10% down and nothing else until settlement allowing more time to save
- Lower stamp duty than established properties
- Modern finishes
- No need to spend thousands on renovating kitchens and bathrooms
- Individual water metres now in new properties in Queensland meaning that you only pay for what you use. In older properties up until a few years ago, complexes where being billed for all the water consumed and dividing it between how many Lots where in the complex. Now with the individual water meters, you can pay for the water you use. There is also water efficient fixtures and fittings.
- Water efficient fixtures and fittings
If you’d like to have a confidential discussion about your property requirements, feel free to give me a call on 0413 602 321.
M 0413 602 321
T 1800 749 470
A: Level 9, Wyndham Building, Corporate Centre 2, 1 Corporate Court, Bundall, QLD 4217