Overview Of Melbourne's Apartment Market

There’s no denying that Melburnians are fascinated by high-rise strata living.

The sheer number of multi-storey apartment developments being marketed, built, and sold “off the plan” in and around Melbourne is undeniable evidence of the city’s fascination with high-rise living.

Buying “off the plan” means you’re buying a property that hasn’t been built yet. You’re basically buying a promise based on plans and drawings, not a finished product.

This popularity is driven by a number of appealing factors. In fact, buying “off the plan” offers several potential advantages over purchasing an existing property:

Financial Benefits:

Competitive Pricing: Secure a purchase at today’s price, potentially capitalising on future property value increases.
Potential Capital Gain: Benefit from a potential increase in property value between the contract signing and settlement.
Extended Financial Planning: A longer timeframe to settlement allows for more time to organise finances.

Customisation and Choice:

Flexibility: Enjoy greater flexibility and choice in selecting finishes and fittings, potentially influencing floor plan design.

However, there are also emerging risks:

Developer Funding: Increasingly, projects are financed by overseas syndicates, particularly those from China and Malaysia, with less stringent lending requirements than traditional Australian banks. This reliance on foreign investment raises concerns about potential financial vulnerabilities and the developers’ commitment to long-term project success.
Increased Risk: This shift in funding can potentially lead to higher risks for buyers, including project delays, compromises in quality, and even project abandonment.

Therefore, while “off the plan” purchases offer attractive benefits, careful consideration and due diligence are crucial in light of these evolving market dynamics, especially the growing influence of Chinese and Malaysian property syndicates in the Melbourne development landscape.

Some of the most important things for prospective purchasers to consider are:

Buying “off the plan” comes with its own set of considerations. Here’s a breakdown of key questions to ask before you commit:

About the Developer:

Reputation:
- Does the developer have a proven track record of quality projects in Australia and internationally?
- Do they address defects and stand by their work?
- Are they financially stable? (Online research can help answer these questions.)
Financial Security: A developer facing financial difficulties can lead to lost deposits, project cancellations, or significant delays.

About the Property:

Clarity of Information:
- Do the architectural plans provide a clear picture of the building and common areas, or are they just generic images?
- Are the internal fixtures and fittings clearly specified?
Running Costs:
- Have the estimated operating costs and levies been accurately calculated? Unexpectedly high costs can be a burden.
Construction Phases:
- Will the building be completed in stages? When will your unit be ready?
- Moving into a partially completed building can mean ongoing construction noise and disruption.

About Building Management:

Body Corporate Management:
- Will the building be managed by an independent and reputable company?
- Does the contract allow the developer to appoint their own management company, potentially locking the OC into a long-term agreement?
Building Rules:
- Do the proposed rules align with your lifestyle regarding pets, smoking, and renovations?

Other Important Factors:

Commercial Use: Will any part of the building be used for serviced apartments or a hotel? This can impact the building’s atmosphere and management.
Views: Will your apartment have the view you expect when the building is complete?

There are always risks implicit with any investment, but with a large choice of apartments currently on the market, potential purchasers can afford to shop around and be picky about whom they choose to invest their money with. Reputable developers with a good track record will do well out of the Melbourne market, while those developers who do not have a good reputation or are new to the market may struggle to get their developments sold quickly, unless they market the building overseas and sell to overseas owners.

Need expert advice on navigating the complexities of “off the plan” purchases and Body Corporates? Contact Tom at Strata Title Lawyers for guidance: