Buyers are becoming increasingly sceptical of off-the-plan purchases as valuations, as new data shows about 60 per cent of off-the-plan properties settled with a price which fell below their contract value.
Fresh data, released today by research house CoreLogic, shows that in Sydney alone, 62 per cent of apartments were worth less at settlement than they were at exchange.
In Melbourne, that figure hovers at around 46 per cent — still representing a huge portion of the new-build market.
This creates major headwinds for new developments and tension among buyers who are eyeing off-the-plan purchases.
What’s the outlook now?
Although this is a rough finding from CoreLogic, markets are set for recovery towards the end of the year, meaning values should stabilise in the coming months.
Further, building approvals — which have taken a hit, therefore impacting the new builds pipeline — should start to return to less volatile patterns as market conditions ease.
CoreLogic commercial research analyst James Shang said that while residential building approvals peaked in 2018 and have continued to trend downwards since, there have been several other policy announcements that are likely to support an improvement in housing market activity.
“Namely, the Reserve Bank slashing of the cash rate by 50 basis points, taking the official cash rate to a record low of 1.0 per cent,” Mr Shang said.
“In addition, APRA confirmed its decision to remove the 7 per cent serviceability floor on mortgage lending, switching to a 2.5 per cent buffer on mortgage rates, and legislation was passed for tax cuts targeting low-income earners, which will see $7.6 billion in tax refunds paid out to low-income earners.”