Apartment Chic, Apartment Sick? The Quiet Virtues of Due Diligence
Scene: Inner city, large excavation site with vibrant hoardings… a definite ‘build-it-and-they-willcome’feeling in the air…
“Wow, check out the plan for that brand-new apartment block! Architectdesigned, sun-drenched balcony, cool entertainment area, and a coffee maker in every butler’s pantry. Beyond chic. Gig economy, latte-sipping hipsters, start-up entrepreneurs, everything bright, light and white - what a lifestyle!”
So you’re tempted to buy a high-rise apartment? OTP, ‘off the plan’ of course - no getting out-bid at auction, but also no sizing up your neighbours before you move in.1 Let us hope that both the developer’s model of the building and the price asked are accurate. OTP can include premium mark-ups which incorporate not only government incentives to first-home buyers, but also tax benefits.2 Apart from these vagaries, other pricing forces can be at play.
Don’t assume that just because you enter a contract for a set price, that is what you’ll pay, nor that it will be what the property is worth. Newspapers and online sources, key to this contemporary account, have reported developers in Australia cancelling OTP contracts should the apartment’s market value at transaction time exceed the contract price.3,4
DON’T ASSUME THAT JUST BECAUSE YOU ENTER A CONTRACT FOR A SET PRICE, THAT IS WHAT YOU’LL PAY, NOR THAT IT WILL BE WHAT THE PROPERTY IS WORTH
Building Commissioner, David Chandler, informed a State parliamentary inquiry that it helps if a builder can read construction drawings
Until prohibitions were added to the New South Wales Conveyancing Act 1919 and amendments, your choice in this instance would have been to pay the required premium or retrieve your deposit, with or without interest, and return to a more expensive market. Conversely, upon release, there is no comfort in a quotation below what you paid OTP. You would then have a negative investment: pray that the dwelling at handover is at least worth its bank valuation.5
Pray further that the developer: (a) actually intends to follow planning and building regulations; (b) does not and (d) is not itself, and has not engaged builders, facing liquidation.
