Buying off the plan caveats for House and Land package in Sydney.

People,

I'm interested to buy house and land package offered by some of the real estate agent in Sydney in area like Schofields and Edmondson Park.

Since it is house and land package, what are the inherent risk or the possible risk given that the area growth is all confirmed by the local council and state govt. ?

For the apartment and unit, yes it is over stock issue.
 
If you do secure a house and land package, try and arrange for independent building inspections during construction.

Hi wombat,

So why during construction not after it has been constructed ?

I've never bought OTP before but so far I got tempted for the short term Capital Gain potential in those two areas when the infrastructure and shopping mall is fully build in the next 5 years.
 
During construction there is a greater chance that defects that would otherwise be hidden can be fixed and rectified. e.g. Plumbing and electrical work that is hidden in walls not done to standards, building frame not to standards, waterproofing not to standards, etc, etc.

Mistakes can occur at any stage during construction and can be impossible to rectify after the house is constructed. For example, slab not in the right place or with the correct structural integrity. Other problems can occur with termite barriers or reticulation systems.

Multiple building independent building inspections at key stages keep the builders honest.

Most builders use council-approved inspectors that aren't totally independent since they are regularly on their payroll. It is best if you have separate independent building inspections done.

The homeone forums have lots of examples of where builds have gone bad.
 
During construction there is a greater chance that defects that would otherwise be hidden can be fixed and rectified. e.g. Plumbing and electrical work that is hidden in walls not done to standards, building frame not to standards, waterproofing not to standards, etc, etc.

Mistakes can occur at any stage during construction and can be impossible to rectify after the house is constructed. For example, slab not in the right place or with the correct structural integrity. Other problems can occur with termite barriers or reticulation systems.

Multiple building independent building inspections at key stages keep the builders honest.

Most builders use council-approved inspectors that aren't totally independent since they are regularly on their payroll. It is best if you have separate independent building inspections done.

The homeone forums have lots of examples of where builds have gone bad.

Ah I see,
So when there is defect uncovered, what else can we do ? Urge them to fix it based on the report ?
 
Ah I see,
So when there is defect uncovered, what else can we do ? Urge them to fix it based on the report ?

Yes. That is the idea. Some defects will be minor, picky things. Others might need urgent/drastic attention whilst others you can negotiate a fair/reasonable outcome.

Read through some of the build threads on homeone to see the sorts of problems people have.
 
make sure you can fund it........................

with some of the changes going down in lending, what was a snack a year ago may be a real battle now

ta
rolf
 
make sure you can fund it........................

with some of the changes going down in lending, what was a snack a year ago may be a real battle now

ta
rolf

Thanks for the insight Rolf.

One thing that I still don't quite get it is that why most of the investor here advice against off the plan investment property ?

Why existing property within the same suburb is the best way to go instead of the new building ?
 
Thanks for the insight Rolf.

One thing that I still don't quite get it is that why most of the investor here advice against off the plan investment property ?

Why existing property within the same suburb is the best way to go instead of the new building ?

Essentially one component is ,and value and future appreciation potential

Land appreciates buildings depreciate
Ta

Rolf
 
Essentially one component is ,and value and future appreciation potential

Land appreciates buildings depreciate
Ta

Rolf

There can also be more risk with off-the-plan, particularly in a stagnating or declining market. It is worse for some unit developments, since the time from placing the deposit to the property being completed can be 3 years ( or more ).

You can get similar timeframes with some land estates. E.g. 2 years from deposit being put down to land being registered and ready for building. That tends to be the case with smaller land developers. Allow 12 months for planing and construction and you can very easily see 3 years of time elapse. That is a long time for market conditions to change.

For more certainty, buy land from the larger developers ( landcom, lendlease, australand, etc in Sydney ) or better still buy land when it comes back into the market, but be prepared to move very quickly ( this was the case when I bought my block - the builder folded and the previous owner decided to put the block back on the market ).

OTP might be profitable or breakeven in Sydney for properties completed within the next 12 months, but are you prepared if completion takes much longer and the market suddenly goes bad?
 
OTP might be profitable or breakeven in Sydney for properties completed within the next 12 months, but are you prepared if completion takes much longer and the market suddenly goes bad?

... Sorry to keep on asking such a silly question, because I've never bought OTP before so I'm curious what are my risk in financial terms like you said above ?

if the market goes bad ?
 
... Sorry to keep on asking such a silly question, because I've never bought OTP before so I'm curious what are my risk in financial terms like you said above ?

if the market goes bad ?

Because of potential for market movemeets over time you have the risk that the valuation for the completed property will come in lower than the land + construction cost. In this situation the bank would likely ask you to provide more capital ( i.e. Cash ). Just to use an example, whereas the initial loan might have been at say 90% LVR, they may ask you to top up with cash and bring it down to 80% LVR. That means you need to make sure you have some cash reserves set aside if the market drops and bank wants more capital.

http://forum.homeone.com.au/viewtopic.php?f=9&t=52777

This was in 2011:

1322668800000.jpg



http://www.theage.com.au/business/p...es-decline-by-54-per-cent-20111130-1o76r.html
 
... Sorry to keep on asking such a silly question, because I've never bought OTP before so I'm curious what are my risk in financial terms like you said above ?

if the market goes bad ?

I bought established PPOR few months ago in Schofields after thinking over OTP for a while. Just went for established house for bigger chunk of land atleast 100sqm more than new builds. Only time will tell if that's the right move or not
 
For the off the plan to work. You to get the buy price right.

The price you pay for need to be give you good profit upfront, NOT the overinflated future price.

A Developer needs to get enough pre-sale before bank/lender willing to give them the loan for the project. You need to do your research to find out if the property you want to buy will give you the profit which you are looking for.

So often people paying over priced property and thinking they can profit from off plan property, but in reality, the developers/agents already factor the future growth into the price.
 
For the off the plan to work. You to get the buy price right.

The price you pay for need to be give you good profit upfront, NOT the overinflated future price.

A Developer needs to get enough pre-sale before bank/lender willing to give them the loan for the project. You need to do your research to find out if the property you want to buy will give you the profit which you are looking for.

So often people paying over priced property and thinking they can profit from off plan property, but in reality, the developers/agents already factor the future growth into the price.

So yeah, that's the thing. How can I understand what the present market value rather than the "future" market value for an OTP IP ?

Usually now they give one or even two years rental guarantee which I think that's just a gimmick.
 
I think buying OTP is about luck, if you buy in the beginning rising Market, the profits will be nice.

Or perhaps if you buy in an area where there's no new development yet.
 
First things first, a lot of people associate OTP with apartments and apartments can be negative in a slowing down market as there can be a mass oversupply..

Buy land and pick your builder. That's the only way you can buy below market value. If you buy a package you are paying an extra 50k at least because the builders know people will buy it as getting land in SW and NW is near impossible right now.

Thirdly, buy land where you can see demand will not slow down and prices will not stagnate. Edmondson Park, Glenfield and Leppington will do well. Schofields, Marsden Park and The Ponds will do well..

Don't get scared of what people say about H & L packages, especially out of towners who aren't sure what's happening on the ground..

I think people buying OTP apartments where there is oversupply or prices much higher than they are be will get bitten on the backside..

Lastly, ask people who know these areas inside out and know the demand and where prices are going.

Be very careful with some suburbs..

Buy where there's trains, schools, shops etc going in where people want to live..

I know for a fact that land prices in some parts of Northwest CANNOT go down and will have to go up as I know what the developers have been paying for it and know what they have to sell each lot for to make their profit.. I've met up with the agents selling them the development sites and talk to them about the actual plans the developer has..

e.g. stockland will be selling land for minimum $1200/sqm in Schofields to make a profit because they only recently purchased the land.. If you can buy under that around there you will make money.. The only time i'd pay more than $1300/sqm in NW is in Rouse Hill, Castle Hill, Kellyville and The Ponds.. There was an estate in a farm in Riverstone that sold for $1300/sqm last month.. it's gone up $300/sqm in 3 months. The Ponds went up by $400/sqm within 4 weeks recently too..

in SW, Edmondson Park atm is a fair bit higher than Leppington. I think Leppington has some catching up to do as it's just as good as Edmondson Park as there's a train line there too.. I also know that in Spring Farm (which imo is too far away from anything), landcom is selling half their land to developers.. I know that anyone who buys through landcom before that will be buying at a much cheaper price than what the new private developers will be selling for..

At the end of the day, buy where you know there will be growth and buy where your house after you build it through a builder will be cheaper than just buying the package. You don't need a crystal ball to see that.. Look at the trends, ask about demand, find out buiding prices too if you were to buy land so you know your land budget too... Go to open homes of established homes selling in the suburb and see if the demand is good when the homes are being re-sold etc.

I've recently purchased land in The Ponds for just under 400k. Small-ish land but all up will cost me 620-630k to build a 4 bedder, 2 bath, 2 livingroom house.. Seen the same house i'm building, except this one sold was crappier with less features just sold for 870k in The Ponds and other similar ones have been selling 900k+. No such thing as buying under value in new estates? Not true..

There's a couple of estates I've messaged you about where you can build much cheaper than what packages are going for.. That's the way to go imo.

If you need more help just pm me. I know these estates inside out and spent way too much studying all of them lol

I think Jacque buys out NW way as well for her clients..

I think both NW and SW will have a fair bit more growth with the train line coming in and airport too and new shops etc..

I don't think banks will start making people do 80%lvr for land otherwise thousands of people will get screwed in Sydney and it will deadset cause a downward spiral in new properties and potential crash with oversupply of land on market and quick sales and it would destroy consumer confidence..Can you imagine the 20,000+ lots coming to registration next year and the banks telling all these people they have to come up with 80%? I can't see it.
 
The main downfall is your money is tied up and you have to pay progress payments..oh, and over-capitalisation..
 
Agree, best advice is to pick your block yourself and then find your own builder.

When choosing a layout, think about attributes that will make the house easy to sell. This is one of the reasons I went for a custom build. It allowed me to make sure the living areas and kitchen were generous, bedrooms large and ensure there was lots of storage space. All things that will help with selling downtrack. Although I also built it as my PPOR and have no plans to move in the short term.

Cookie-cutter builds from project home builders just didn't suit my small block, so I was able to optimise the house design for my block.
 
Back
Top