Looking at current market conditions, WBP Property Group has revealed that half of all off-the-plan inner city apartments in Melbourne will drop in value by an average of up to 15% before settlement.
“It’s not like the values are falling. Simply, they’re over-priced from the very start,” Greville Pabst, executive chairman of WBP, told Nine News
“It’s a bit like a new car. When you drive it off the lot, straight away it depreciates. It’s the same when you buy new property.”
This 15% value was extrapolated from a 2015 study surveying around 1,800 OTP properties purchased between 2009 and 2015, Pabst told Australian Broker
“Upon valuation in 2014 to 2015 the average loss of properties showing a negative discrepancy of $1,000 or more between market price and contract price was almost 10%,” he said.
“With the significant jump in supply of high density apartments in Melbourne’s CBD and surrounds we expect this figure has worsened with the average deviation expected to be closer to 15%.”
While the survey only reflected OTP apartments located in Victoria, Pabst said the same fundamentals were at play in Sydney and Brisbane – areas with an increasing supply of high-density, high-rise residential dwellings.
Likewise, the phenomenon does not discriminate based on the buyer type and whether one is a homebuyer or investor, he added.
Pabst continued, saying that the onus was on the buyer to do their homework independent of their broker, accountant, financial planner or any other advisor.
“Like any asset, scarcity plays an important role in performance. Applying this philosophy to property can mean avoiding high-rise high-density developments and selecting boutique properties with fewer units and fewer expensive facilities like gyms and swimming pools that result in high owner’s corporation fees.”
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