5 Reasons Why Now Is The Best Time To Buy Off-The-Plan in Sydney
In the last 20 years, no downturn has lasted longer than the previous or subsequent boom and all booms have significantly overshadowed any drop. So why the fear?
If the media actually took a break from bashing the property sector, some solid advice and worthwhile information would rise to the surface.
Has anyone actually reported why the trend of this market correction is any different to the ones we have seen before? Or how our sustained population growth will not somehow absorb the excess of apartments?
The answer is no, because there is nothing different about this correction trend. Like every previous correction, it will be followed by a positive period, which will last for longer and increase by more than the correction. If you look at the graph below showing the cycle for the last 20 years it is very clear, no downturn has lasted longer than the previous or subsequent boom and all booms have significantly overshadowed any drop.
So why does all this make it the best time to be buying off-the-plan? Well, here are 5 reasons.
Best Time To Negotiate
The best time to negotiate is when there are few and limited buyers. This is when you can take your time, test low offers and receive all the attention you need from the salesperson. As soon as the media indicate that the property market might have reached the bottom or has started to recover, millions have received this message and you now need to compete with more people.
The developer's appetite for low offers will also diminish as the interest increased and they have more buyers to deal with.
So go and make an offer, the worst that could happen is you are told ‘no’.
New Starts At Their Lowest
Between 2015-2017 apartment approvals averaged almost 30,000 per quarter. In stark contrast to this, the December 2018 quarter showed only 17,778 approvals. That number is predicted to further fall. That is a 40% fall in a city that has had an average population growth of over 180,000 people per year over the last 8 years.
So whilst there may be an oversupply at this time, new approvals are plummeting. Buying off-the-plan now will ensure that when settlement time arrives in 12 or 18 months, the market will be seeing supply well below that of upcoming demand.
Funding Conditions Will Improve
We are currently facing some of the strictest lending criteria. The banks are now even looking into peoples use of, Uber, Pay TV and other subscriptions when determining their borrowing capacity.
ANZ’s head of Australian Economics – David Plank has come out to say that the Royal Commission hasn’t indicated a need for further tightening and as such the worst is over. This will only improve over time, meaning you will have an easier time getting finance at settlement when purchasing off the plan.
Better Quality Apartments
Whilst we have some of the best building regulations in the world, in a hot market when 100% of a building is sold even before a hole has been dug in the ground, it is easy for developers to reduce costs in terms of finishes. Areas not stipulated can always be downgraded, however when the developer knows at completion they will still have apartments to sell, it means they will make sure their quality is on point, to increase their ability to sell at completion.
So buying off-the-plan in the past may have presented uncertainty, however now you can be assured for an overall better product than before.
Rental Returns Will Increase
Currently, vacancy rates are at a historic high and have impacted rental prices. One thing history tells us is that rents do not stay low for long periods. Buying off-the-plan presents you with an opportunity to secure an investment with the strong likelihood that at settlement the rent return will be much higher than the current rental market.
This will not only boost your return but the serviceability of the investment.
One thing all commentators can agree on is, it is impossible to pick the top or the bottom of the market and all we can do is comment on reasons why the worst is over or still to come. Whilst the next 6 months are debatable, across all commentators there is a broad consensus that 2019 will see the worst for this property cycle.
Considering this, securing a property now at today’s low prices, that doesn’t complete for 12-24 months is a safe and smart move.