I was thinking back to a thread from a while back just this week and thought it might be worthwhile posting a follow-up. The original thread was about buying off the plan and the general consensus was “don’t”. At the time I said I’d had success being the second owner of properties bought off the plan in very recent times. Here’s an example which really illustrates this:
Southport on the Gold Coast 5 years back and the Southport Central complex is selling 2 beds, 2 baths off the plan for around the $600k mark. As early as Feb that year and over the preceding years we’d been buying 2 beds and 1 or 2 two bath properties for the low $200k mark in very clean, older style buildings (10 to 15 years old), some as close as the adjacent block to Southport Central. The new developments were clearly overpriced, but they were still selling.
Fast forward a couple of years and the towers (there are three of them), begin reaching completion and settlement is due. This one on the 22nd floor with views over the southern Broadwater and ocean settles at $601k. Now go forward another couple of year and the owners want out. What’s it worth?
They go to auction in May last year and don’t get a bid so they relist in July for $440k. Ouch! Around about this time the bank seizes the property. No takers by August so they drop to $424k. The selling agent is our existing PM for other Southport properties and he puts if forward to us so we offer $370k and get told by the administrator that we’re dreaming. Get round to November and now we’re down to $400k asking price. Yesterday settlement went through at…..$370k.
So the bottom line is that someone did $231k of their hard earned in the space of four and a bit years – that’s a 38% drop. Or put another way, someone paid 62% more than what we just did a few years back for the same piece of real estate which incidentally, has never even been lived in. Plus of course all the acquisition, holding and disposal costs.
Whilst Southport and the Gold Coast in general has copped it a bit recently, those same low $220k properties we were buying back in 06 could easily sell in the high $200k range and are all yielding 7% plus with depreciation still remaining. They’re as good as cash flow neutral.
Whilst it’s not always so black and white, I did think it was interesting to reflect back on that original thread after this week’s purchase. Who knows where this style of property will be priced in a few years’ time, I’m pretty sure it won’t be back at $601k in the near future. The only thing I’m sure of is that while sales offices are flashy, agents are slick and the allure of shiny and new remains, buyers will keep stumping up inordinate amounts of cash to have the privilege of being the first owner.
Southport on the Gold Coast 5 years back and the Southport Central complex is selling 2 beds, 2 baths off the plan for around the $600k mark. As early as Feb that year and over the preceding years we’d been buying 2 beds and 1 or 2 two bath properties for the low $200k mark in very clean, older style buildings (10 to 15 years old), some as close as the adjacent block to Southport Central. The new developments were clearly overpriced, but they were still selling.
Fast forward a couple of years and the towers (there are three of them), begin reaching completion and settlement is due. This one on the 22nd floor with views over the southern Broadwater and ocean settles at $601k. Now go forward another couple of year and the owners want out. What’s it worth?
They go to auction in May last year and don’t get a bid so they relist in July for $440k. Ouch! Around about this time the bank seizes the property. No takers by August so they drop to $424k. The selling agent is our existing PM for other Southport properties and he puts if forward to us so we offer $370k and get told by the administrator that we’re dreaming. Get round to November and now we’re down to $400k asking price. Yesterday settlement went through at…..$370k.
So the bottom line is that someone did $231k of their hard earned in the space of four and a bit years – that’s a 38% drop. Or put another way, someone paid 62% more than what we just did a few years back for the same piece of real estate which incidentally, has never even been lived in. Plus of course all the acquisition, holding and disposal costs.
Whilst Southport and the Gold Coast in general has copped it a bit recently, those same low $220k properties we were buying back in 06 could easily sell in the high $200k range and are all yielding 7% plus with depreciation still remaining. They’re as good as cash flow neutral.
Whilst it’s not always so black and white, I did think it was interesting to reflect back on that original thread after this week’s purchase. Who knows where this style of property will be priced in a few years’ time, I’m pretty sure it won’t be back at $601k in the near future. The only thing I’m sure of is that while sales offices are flashy, agents are slick and the allure of shiny and new remains, buyers will keep stumping up inordinate amounts of cash to have the privilege of being the first owner.