Off the Plan pricing.....

L

life_is_short

I am very interested in buying something off the plan in inner city melbourne (southbank & docklands). However what is on offer does not really represent very good value for money considering what you can pick up 2nd hand right now (or prob even in a year i expect) in the particular area.

I have visited most developers in these areas, and they ensure me that all the developments only have set prices (i.e such as prima pearl/wrapt).

Is this a 'set rule' for off the plan properties, or am i able to go in and make a reasonable offer for a property (i.e. 5 below what they are asking)?
 
life_is_short said:
I am very interested in buying something off the plan in inner city melbourne (southbank & docklands). However what is on offer does not really represent very good value for money considering what you can pick up 2nd hand right now (or prob even in a year i expect) in the particular area.
Click to expand...
OTP would almost never represent good value for money in the immediate term.

You do pay a premium for brand new & shiney. The profit goes to the developer's bottom line and you will likely have the first few years of little or no capital growth unless you are in a rising market. Most people would agree that Melbourne is not in a rising market presently, having just been through a period of higher than average growth.

life_is_short said:
I have visited most developers in these areas, and they ensure me that all the developments only have set prices (i.e such as prima pearl/wrapt).
Is this a 'set rule' for off the plan properties, or am i able to go in and make a reasonable offer for a property (i.e. 5 below what they are asking)?
Click to expand...
Valuers value property for the purpose of a mortgage, on comparable sales. If the developer drops his prices early in the sales & marketing stage where they are selling OTP, then these sales set the benchmark for other comparable sales. If there are 100 units in the building for example, and he gives you a $50K discount, then the whole building has potentially just gone down in value by $5,000,000:eek:

You may get a discount on the last few remaining units when they are just trying to clear them out and move onto the next development, but that's all.
 
I'm about to sell my Central Equity flat in Dudley Street bought off-plan in 2003. Realistically after expenses I will probably get back what I paid - my fault for paying far too much I know, but I fell for the sales pitch, also I was then living in the UK so FIRB rules limited my options. I agree with the previous poster - if you want this sort of property, buy secondhand: you'll pay Stamp Duty but will have a realistic idea of what the rent and outgoings are instead of a developer's optimistic estimates.
 
Propertunity said:
You may get a discount on the last few remaining units when they are just trying to clear them out and move onto the next development, but that's all.
Click to expand...

Thanks for the advice. I now understand how it works so wont even ask for a a discount.

And you have now officially put me off buying a new place off the plan. I am an australian citizen (as of 4 months ago) so luckily dont need FIRB approval anymore.

The apartment wasn't just for investment, but would also be my sole place of residence...however, i am in my late twenties, so growth potential is a big factor for me over the next 5-10 years. Perhaps i might consider such projects in 20 years time, when i can afford to splurge on 'shiny and new'. Until then, i think i'll just stick to 2nd hand and try and pick up bargin properties instead!
 
Propertunity said:
You may get a discount on the last few remaining units when they are just trying to clear them out and move onto the next development, but that's all.
Click to expand...

I also forgot to ask....is there a way i can get onto a list where developers contact me with any developers stop that they may have left over?

I still like the idea of a new place, but unless it offers a reduction, would not want to pay over the odds. I'm pretty confident there will be a lot of left over stock in southbank in a 1-2 years time, as there are so many projects around, and apparently less purchasers, so would like to keep that as a secondary option.
 
Propertunity said:
OTP would almost never represent good value for money in the immediate term.

You do pay a premium for brand new & shiney. The profit goes to the developer's bottom line and you will likely have the first few years of little or no capital growth unless you are in a rising market. Most people would agree that Melbourne is not in a rising market presently, having just been through a period of higher than average growth.

Valuers value property for the purpose of a mortgage, on comparable sales. If the developer drops his prices early in the sales & marketing stage where they are selling OTP, then these sales set the benchmark for other comparable sales. If there are 100 units in the building for example, and he gives you a $50K discount, then the whole building has potentially just gone down in value by $5,000,000:eek:

You may get a discount on the last few remaining units when they are just trying to clear them out and move onto the next development, but that's all.
Click to expand...

Hi Propertunity,

Looking at the above then; would you only look at OTP if you could secure a discount from the developer on valuation and create some instant equity?

Or, you are not a fan of OTP at all :confused:
 
redwing said:
Or, you are not a fan of OTP at all :confused:
Click to expand...
I am not a huge fan .....but I accept that some people (including some of our clients) like to buy OTP for reasons of:
1. Reduced stamp duty.
2. Brand new - no maintenance issues, warranty cover if something does go wrong.
3. Large depreciation allowances.
.......and it can & does work well in a rising market. Sometimes you can see from what you observe on the ground, that you are in a rising market. The issue is, will that still be the case when it comes time to settle in 12+ months :confused:

redwing said:
Hi Propertunity,
Looking at the above then; would you only look at OTP if you could secure a discount from the developer on valuation and create some instant equity?
Click to expand...
That can be the case at the end of a project and you can take advantage of a developer's final clearance.

I have my own "rules" for buying OTP:
1. Builder/developer must be a known quantity with a good track record of quality builds and reasonably 'on time' completions.
2. No new estates - must be infill in an established suburb.
3. No high rise units. Prefer villas of 4 - 8 max on the site.
4. Must already be 'out of the ground' and construction well underway.
5. 10% deposit to be invested in joint names or held in trust. No release of deposit to the vendor.

At least goes someway to mitigating risk. But still obviously not 'risk-free'.
 
Propertunity said:
I am not a huge fan .....but I accept that some people (including some of our clients) like to buy OTP for reasons of:
1. Reduced stamp duty.
2. Brand new - no maintenance issues, warranty cover if something does go wrong.
3. Large depreciation allowances.
.......and it can & does work well in a rising market. Sometimes you can see from what you observe on the ground, that you are in a rising market. The issue is, will that still be the case when it comes time to settle in 12+ months :confused:


That can be the case at the end of a project and you can take advantage of a developer's final clearance.

I have my own "rules" for buying OTP:

1. Builder/developer must be a known quantity with a good track record of quality builds and reasonably 'on time' completions.
2. No new estates - must be infill in an established suburb.
3. No high rise units. Prefer villas of 4 - 8 max on the site.
4. Must already be 'out of the ground' and construction well underway.
5. 10% deposit to be invested in joint names or held in trust. No release of deposit to the vendor.

At least goes someway to mitigating risk. But still obviously not 'risk-free'.
Click to expand...

Sounds like some good rules to have :D

With #4. You would be up for more Stamp Duty though would you not?

How have you gone with enforcing #5 ?

Have never purchased OTP and am curious
 
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