Investors should take some simple precautions to help ensure they make a wise choice of apartment.
So you’ve decided to buy an apartment in a new development, either one that’s just been completed or off-the-plan? Here are 10 key issues to consider when doing so.
Location, location, location
As well as considering the general precinct and street, you should also think about the position of the apartment within the block. This is particularly important when it comes to ensuring views won’t be built out. ”We’ve seen massive turnarounds in value where that’s happened,” says Greg Hocking, director of project sales at Greg Hocking City Residential.
What facilities will be included in the new development, and how much could they cost?
As well as considering the owners corporation fees (see breakout), it’s important to be aware of the regulations that can govern everything from keeping pets to what you can put on your balcony. Glenn Donnelly, managing director of City Residential Real Estate, says a detailed Section 32 statement should contain all the necessary information. ”Most apartments are pretty good … but you still need to know all those regulations.”
Size does matter
”If you’re buying off the plan, don’t be swayed by big A3 sheets of paper when in fact it’s just a small apartment blown up on a big sheet of paper,” Mr Hocking says. ”You’ve got to be very, very careful that the space is actually liveable.” Beware of apartments that compromise on living space to make way for another bedroom and make sure you have a balcony.
Try before you buy
Consumer Affairs Victoria advises when buying an apartment to check out whether you can hear people talking in nearby apartments, smell cooking or find yourself located near the garbage bins. While these things can be harder to check with new apartments (and some of them impossible when buying off the plan), experts still advise spending some time in the area at different times of the day. If buying off the plan, research the different types of soundproofing for walls and floors and then ask what is being used. And given some buildings are predominantly lived in by owner-occupiers and others renters, it can be a good idea to buy in one that matches your use.
See what apartments located in buildings nearby are going for as well as within the building itself to make sure you’re buying something priced in line with the general market. ”Look at the recent sales results of the companies that sell in that area,” Mr Donnelly says. ”They’ll have all their sold results so you can compare apples with apples.”
Communal facilities – anything from a gym and pool to common eating areas or gardens – can vary and may make a significant difference to owners corporation costs. Lyle Dean, sales manager at Barry Plant in Docklands, says buildings that have a concierge, for example, will likely have higher fees than those without. And be warned that facilities may not meet your expectations. While having a gym in the building may save you the cost of a membership, it may be unsuitable for a hardcore ”gym junkie”.
A place to park
A parking space is an ”absolute must” says Phil Manning, from the WBP Property Group. ”You’ve got to have off-street parking otherwise your life will be a pain and you’ll never sell … in the future. You’ve got to have a car space and it’s got to be yours; you’ve got to own it.” While some developers are looking to put less parking in apartments, most experts agree that a car space will help with resale and may lift the property’s value.
Know your developer
Have a look at some of the developer’s previous work. ”Ensure the developer has a solid reputation within the property industry,” says written advice from Motion Property. ”Research how successful past projects have been and consider whether the company is well known and trusted. Visit past developments if possible.” Experts suggest a recognised architect behind a project may help resale value.
Be wary of inducements such as rental guarantees, which are offered to investors. ”[They] sound too good to be true because they are; you just pay for them in the purchase price,” Mr Manning says. He says investors should also be aware the depreciation allowances they get aren’t a gift. ”You have to understand that just because it’s all stainless steel and marble now, it won’t be forever.”
Have someone independent such as a solicitor take a look at the contract before you sign on the dotted line, or during the cooling-off period. Having the property independently valued may also be a good idea. And, of course, you should also take careful note of any restrictions on the property – such as it being classified as student accommodation only – which may restrict its future marketability.
- Stamp duty – calculated on a sliding scale. Buying off the plan can result in considerable savings.
- Mortgage-related fees – these include registration fee, establishment or application fees and valuation fees, as well as continuing fees and mortgage insurance.
- Transfer of land and conveyancing fees.
- Owners’ corporation fees can range from a few hundred dollars a year to several thousand and special levies may also be required on occasion.
- Utilities – council and water rates as well as utility bills
- Rental fees – can include continuing management fees as well as fees when re-letting such as for advertising.