Considering a yet-to-be-built apartment? Avoid the traps with these seven tips.
There was a time about 10 or 15 years ago when buying off the plan was the golden ticket into property ownership – by the time you got the keys, the property had often increased substantially in value.
But, gradually, the off-the-plan prices reflected the anticipated value when the unit was completed – provided they kept growing.
Meanwhile, publicity about building defects dented confidence in the whole concept. In short, off-the-plan sales became more of a gamble than a guarantee. However, the new $15,000 first home owner’s grant will make off-the-plan purchases an enticing option again.
So what are the possible pitfalls and how can you avoid them?
1. Is it overpriced?
Check the prices of similar completed apartments in the area. Has the first-timer’s grant been added to the price? Do you have any wriggle room if there are unexpected expenses (such as levies increasing after the first year). Expect the unexpected.
2. Is it too good to be true?
It’s better to pay a premium for a unit from a reliable developer with a good reputation than be saddled with a defective property from no-name builders who declare themselves bankrupt at the first sign of trouble from customers.
3. The low-levies lurk
Be wary of apartments that are marketed with low levies – your share of the running costs of the building – as a selling point. If you have facilities, you need to pay for them, regardless of what you were promised in the sales brochure. Look at the number of expensive services such as lifts, security, gyms and swimming pools, and try to do a comparison with similar buildings.
4. Who are your neighbours?
Be wary of being the top-up buyers in buildings that have been predominantly marketed overseas. Multiculturalism is great – and there’s no better way to experience it than in a strata community – but do you want to be the lone voice when your neighbours don’t understand their rights and responsibilities under strata law? Find out where else the apartments have been sold.
5. Avoid the one-stop shop
Be wary if developers are also the building managers and even the strata managers. The ”one place to take your problems” principle doesn’t work so well if someday they are the problem. Separation of powers is a much safer option.
6. Say no to pre-agreed long-term contracts
Some developers pre-sell long-term service contracts then push through the legally required approval at the first annual meeting, when people don’t even know what they are voting for. You then spend the next 10 years paying off the money the contractor gave the developer while tied to a contract you and your neighbours had no part in formulating. It’s a rort, plain and simple, but all you have to do is speak up at the first meeting.
7. Don’t be rushed
With mixed commercial and residential properties in multiphase developments, the contracts can be massive. Insist on your solicitor being given the time to digest a contract that’s going to tie you to the biggest single purchase of your life.