Off The Plan
No boom for many buyers.
What a great article you wrote about the falling dominoes. All too true.
I am in the industry and experienced personally this situation.
Back in 1999, I purchased a three bedroom, top floor apartment on the waterfront with a north east aspect. It is on the old Balmain Power Station site in Balmain (sorry, Rozelle).
Without going on with a long winded story, here’s the gist of what has happened.
Four years later, after going through the boom, an exact property two floors under mine sold for $50,000.00 less than I paid four years previously.
Based on what’s happened in mainstream real estate, the property should have doubled in price over this period. It didn’t.
I spent months researching properties before my purchase and I truly believed I had a winner for my Super Fund. This property had it all – 270 degree water views and all the trimmings. The area and the development is spectacular. That’s why I bought there. But it didn’t perform.
I agree with you that there are many properties like this that have been purchased off the plan with the enticement of massive growth before settlement.
So why don’t we have a special clause in the contract saying that if the property has not risen by the promised or implied percentage in value it goes back to the developer?
When buying from developers, the profit of the developer often means that the property is sold at more than it would sell for in a normal-seller-to-normal-buyer sale. You then have to wait for the true market price to increase above the amount you paid.
When you first buy from a developer, it can be hard to realise you are paying too much because hundreds of others are doing the same. It seems safe.
It’s not until you have to sell that you discover what happened to you and all the other buyers. You paid too much. You paid the developer a handsome profit which bore no resemblance to the true market price.