Buying OTP Apartment for Living

B

Bruc3

Hi guys,

Me and my wife are currently in the market looking for our first home to live in, we are seriously considering to buy an Off-the-plan Apartment however are hesitant due to all the risks involved.

After doing a lot of research I have almost made up my mind to buy OTP anyway inspite of all the risks.

Due to Sydney prices being really expensive we want to buy in Campbelltown where it is relatively cheaper.

The concerns I have are:

1) Fear the market value will drop once we settle due to it being a low demand area. Is it more likely for price to rise or drop in Campbelltown by end of 2015?

2) Because interest rates are currently relatively low, does that likely mean that at the time I settle if Interest rates rise again that the Market value would likely drop? Hence this would heavily affect my Valuation come time of settlement.

3) Another fear is that I noticed quite a few OTP Apartments being developed in the area around the same time, would this influx of new apartments also cause oversupply and hence lower market value?

We are living in Sydney (Australia) and wanting to buy in Campbelltown area.

Please advise? Thanks much appreciated.
 
Hi Aaron,

Thanks for your advice. FYI I am "Mr Anonymous" from Whirlpool and have decided to join this Forum because I heard you were also a member and was trying to see if I can get other advice hehe...

I am aware that no one can answer the questions properly since it would just be speculation/assumption, but just wanted to get a feel of what other people thought.
 
Bruc3 said:
The concerns I have are:

1) Fear the market value will drop once we settle due to it being a low demand area. Is it more likely for price to rise or drop in Campbelltown by end of 2015?

2) Because interest rates are currently relatively low, does that likely mean that at the time I settle if Interest rates rise again that the Market value would likely drop? Hence this would heavily affect my Valuation come time of settlement.

3) Another fear is that I noticed quite a few OTP Apartments being developed in the area around the same time, would this influx of new apartments also cause oversupply and hence lower market value?
.
Click to expand...

Why are these concerning you?

If you are living there, and enjoying it, what does it matter if the price goes up down or sideways?

It would be MORE important IMHO to make sure you are going to enjoy living there, AND that you are not going to have to sell and move in the short term.
Otherwise the value of the place won't matter - in fact sometimes the lower the better because you don't pay as much council rates :p

The Y-man
 
The Y-man said:
Why are these concerning you?

If you are living there, and enjoying it, what does it matter if the price goes up down or sideways?

The Y-man
Click to expand...

You are pretty much right. I guess the biggest concern is really just how these risks would affect my valuation come time for settlement. However, I should have funds saved aside to cover the valuation difference by then anyhow, so hence I am likely going to buy OTP. Just waiting for the right one and then will likely make an offer of 10% lower than the asking price just to test the water.
 
Bruc3 said:
... After doing a lot of research I have almost made up my mind to buy OTP anyway inspite of all the risks...
Click to expand...

Bruc3 said:
... I am aware that no one can answer the questions properly since it would just be speculation/assumption, but just wanted to get a feel of what other people thought.
Click to expand...

The short answer to the OTP question is usually "no"; the long answer is usually "no, run". However you've decided "yes" so there is no more to discuss.

You now need to mitigate the risks: the big one is to get enough money ready to cover any short-fall in valuation at settlement, because the bank will lend on the valuation not the contract price.

What other risks have you identified in the OTP purchase and what plans do you have to mitigate them?
 
vaughan said:
What other risks have you identified in the OTP purchase and what plans do you have to mitigate them?
Click to expand...

Well if valuation comes in short I should have money to cover.

Other risks include there is the possibility the Project may not complete or Developer goes bankrupt, however I will put my money in a Bank Guarantee to protect my Deposit. (Note: this is just in general in regards to OTP and not specific for this particular OTP)

I will also make sure I get a Solicitor to thoroughly check my Contract terms etc for any issues and check for protection for me against any potential risks in the future.

And lastly research as much as possible about the developer, construction company and any other parties involved.

Besides that I am not sure there is much else I could do. Anything else I am missing?
 
Bruc3 said:
Hi guys,


The concerns I have are:

1) Fear the market value will drop once we settle due to it being a low demand area. Is it more likely for price to rise or drop in Campbelltown by end of 2015?

2) Because interest rates are currently relatively low, does that likely mean that at the time I settle if Interest rates rise again that the Market value would likely drop? Hence this would heavily affect my Valuation come time of settlement.

3) Another fear is that I noticed quite a few OTP Apartments being developed in the area around the same time, would this influx of new apartments also cause oversupply and hence lower market value?

We are living in Sydney (Australia) and wanting to buy in Campbelltown area.

Please advise? Thanks much appreciated.
Click to expand...

Why Campbelltown? Lack of transport, distance from city, lack of job opportunities. ....

Lots of new apartments will drive the race for the bottom. If this will become an ip then you will be competing for tenants.

market values may drop purely due to the sales price negotiated being above the future price of comparable projects at the time of settlement but it will depend greatly upon stock in the market, when you purchase in the cycle and when you look at selling or refinancing.

the market isn't generally overly price sensitive to interest rates movements people will still buy if Interest rates were at 17% provided that the other market fundamentals were ok.


The Y-man said:
Otherwise the value of the place won't matter - in fact sometimes the lower the better because you don't pay as much council rates :p

The Y-man
Click to expand...

not necessarily true - newer areas often have higher rates to reflect that new services need to be built eg. libraries, community facilities etc.
 
Bruc3 said:
haha...yeah if I don't end up finding an OTP I like, I will likely just buy an Established property but won't be until 2015 then. :)
Click to expand...

So what? Why the rush to buy OTP now for completion next year? You're not going to be 'locking in' 2014 prices, if that's what you're thinking. In a generally hot market, OTP will be priced based on future prices, with very optimistic growth built in.
 
Bruc3 said:
Besides that I am not sure there is much else I could do. Anything else I am missing?
Click to expand...


Depends whether these things are important to you:

- Can views (if any) be built out

- is it on the sunny side of the building (unless you like dark mouldy apartments)

- what is the rubbish collection mechanism? (sound minor but we have seen developments that "forgot" about where people throw their garbage bags. Lift lobbies as rubbish collection points are not a good idea

- what will you do if the sound insulation is not enough? (can hear the neighbours' every move)

- if there are lifts, how many are there and how long will you have to wait for them?

- what variation is allowed in the contract? Our OTP had a lower ceiling than the display suite because 1. they forgot about the aircon ducting taking up space and 2. they could vary it based on the contract. You could also end up with strange tiles, kitchen appliances, etc that look nothing like the display suite.

The Y-man
 
Bruc3 said:
Yep, those details are definitely important to me. I will try to get a solicitor to arrange if specifics can be put into the Contract such as what brand the elevator may be etc.
Click to expand...

It's unlikely you'll be able to specify anything for the common areas, especially if it's a big development.

How big a development are we talking about, by the way? (How many units)?
 
Also, walk the area at night - on all nights - nothing like having a night club next door.


Noise from outside in the apartment is also a biggie - OTP plans look great until you find there is a freeway flyover going pas your window you failed to notice.


The Y-man
 
The Y-man said:
Noise from outside in the apartment is also a biggie - OTP plans look great until you find there is a freeway flyover going pas your window you failed to notice.


The Y-man
Click to expand...

I will likely go scout out the area again before I commit to anything. Try to sus out the surroundings. Thanks.
 
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