- the development not actually starting, as some developers commence selling prior to obtaining development approval from the Council and many developers do not have finance prior to selling
- the development starting late and finishing later than you want (which is not good if you want to move in; but may be good if you are an investor)
- the development finishing earlier than planned (which is not good if you are not ready to move in, or if you are an investor and planned for a later settlement)
- the developer going bankrupt or running into financial difficulties during development, and so cutting corners or having another builder take over
- changes to apartment layout and size, that may be permitted by the contract
- different quality to what you expected
- different views to what you expected
- having no control over the appointment of the onsite manager and caretaker, who could be appointed under a long term contract
- body corporate fees being low for the first year (to attract purchasers) but then increasing dramatically in year two when the body corporate finds out not enough was budgeted
- paying too much for the apartment, especially if the market goes down between contract and completion, or if you are buying something "different" and so can't really determine value when you sign the contract
- not being able to obtain finance when it comes time to settle.
Sunday, August 22, 2010
Risks with Off The Plan purchases
Sunday, April 18, 2010
Flat Market in Brisbane
- higher interest rates
- risk of lower numbers of overseas students and tourists visiting Australia (including due to the higher Aussie Dollar)
- The review of the Australian Tax System, due within weeks, which will likely impact the treatment of capital gains for real estate, and probably recommend the removal of negatively gearing of losses from investment properties to offset income tax from income earned from other sources
- difficulties in obtaining investment loans, and the banks requiring a higher deposit for investment property loans
- increased school fees, which impacts the ability of many families wanting to invest in property
- increased body corporate fees and rates, making returns less
- poor performing vacation rentals and low vacation rental returns, often less than 2% net returns
Sunday, March 7, 2010
Views and off-the-plan contracts
Friday, February 26, 2010
Property Risks
Extract from PropertyUpdate
However over the last 9 months or so, some parts of our property market have increased in price by a rate equivalent to well over 20% per annum. That’s boom conditions as far as I am concerned and unsustainable.
This type of property increase normally happens in the boom phase of the cycle when fear, greed and speculation kick in.
Fear drives property booms as home buyers and investors see property prices going up all around them. They are worried that they will miss out on the profits the boom has delivered to others. Many become overconfident, at a time when they probably should be more cautious, and overpay just to get into the property market, pushing up prices to levels that are (in the short term at least) unsustainable.
At this stage of the cycle properties often sell for more than their asking price as eager buyers compete with each other to snap up any property that comes on to the market. Vendors also become greedy, pushing up asking prices and this just feeds the property boom.
Sound familiar? Isn’t this exactly what is happening in some segments of our property markets today? Because if we are already in boom conditions, the next stage to come is the downturn or bust stage of the cycle. I am sure that the market can’t keep rising as spectacularly as it has over the last few months. And if it does the Reserve Bank will bring it to a halt with rising interest rates.
What I do see happening is property values continuing to surge strongly in selected markets for the first half of this year and then growth will slow. I see a few issues on the horizon.
Finance will be a big issue for property investors this year, some will have difficulty getting it and others will have to pay more for it as interest rates rise.
I also see more trouble ahead for the world’s economies. The world’s debt binge is becoming frightening. A number of European economies are starting to unravel and the spotlight is likely to return to America later this year, as it appears to be a long way from working its way through its own economic woes. This means that there is a good chance that the US stock market will fall again and so will ours.