Buying " Off the Plan " !

The Sydney property market is so hot that many people have returned to "buying off the plan " as a means of securing a unit at a fixed price in precisely the suburb and location in which they choose to live.  As one investor discovered - what you get may not be what you signed up for !

This development offered units in an eighty unit building and the one he purchased for $ 600,000 would have "stunning views " and the building itself was described as a " striking architectural concept ".  His corner apartment promised a wrap around patio on two sides.

Somehow between planning and construction the concept "changed " and those eighty units morphed into a much higher one hundred and fifty three unit tower, and his chosen unit shrunk in size.  Instead of being 148 square metres, it condensed to just 92 square metres and the patio was reduced to a single wall facing.

There was no offer of a price reduction, but he was advised that he could withdraw from the sale, but to do so would be at the expense of the upward movement in Sydney property prices that had occurred since he signed the document and locked in his investment.  What he found galling was the "take it or leave it " attitude of the developer who stood to make an extra $35 million from the expanded size of the project.

"Off the plan " follows a very predictable pattern.  A developer obtains a desireable building site and hires an architect to drawup a building plan and submit it to council.  Upon approval, a sales office presents an artists concept of what the building will look like and what views will be obtained from units.  There are usually glamorous depictions of furnished units to entice buyers and sales pressure is immense.  Prospective buyers are assured that all units will sell quickly and the prices offering "can not last "!

This customer faces a dilemma.   His dream apartment has shrunk in size by thirty-six percent and it now probably does not meet the expectations he had when he bought it, but it is still cheap at a price of $ 600,000.   If he walks away from the sale it will probably fetch a higher price for the developer, and he will have to pay more to replace it on the ever expanding Sydney price market.

In many cases, Off the plan precisely follows what is being offered and there are no unpleasant surprises for the buyers, but extraneous factors can come into play.  Usually council restrictions have a lot to do with the size and style of the development being planned, but extensions to the rail network and the implementation of light rail is bringing zoning changes.

It is government policy to increase housing ratios around transport hubs and zoning changes affect council by-laws, usually permitting greater building heights with a consequent increase in housing density.   This particular building is in Lidcombe - and it is likely that both road and rail projects recently approved have been influential in the buildings expansion.

Another option this buyer may consider is to retain the unit with the expectation that selling it later will result in an increased profit.   Unfortunately it is now not the dream property he envisaged and the ever increasing Sydney prices will probably take that further out of reach.

Such is the risk inherent in buying an intangible that awaits construction.   Those who buy an existing bricks and mortar residence know exactly what they are getting.   " Off the plan  "  comes with a risk factor !