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How to ensure the off-the-plan investment property you’re buying is of high quality

By Binnari Property

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This article was written by our Head of Research and Acquisition Dominic Cavagnino and was originally published on Urban.com.au 

While serious construction issues in new properties are generally few and far between, high profile examples such as Opal Tower or Mascot Towers can understandably make investors nervous.

At Opal Tower, cracks appeared on various levels in the building leading to concerns the project was under-engineered. Experts identified issues surrounding the safety of the building. A similar situation occurred at Mascot Towers.

The good news is that cases like these are unusual. According to a 2018 CoreLogic report, there were 251,510 apartments due to be built nationwide between 2018-2020. Even if we assume only 75% of those projects reached completion during that timeframe, that’s approximately 188,000 apartments delivered across Australia. The reality is these two projects represent a small fraction of the total new units delivered over two years.

Of course, for property owners in Opal Tower and Mascot Towers, the challenges are very real. So, how can you ensure you aren’t one of the unlucky investors who face construction issues in their off-the-plan investment?

Investigate the track record and reputation of the developers

One way to mitigate the risk of purchasing in dodgy development is to know the track record of the developer and builder. Most reputable developers understand the value of a long-term reputation and a trusted brand. Ideally, they have built up a reputation over many years in the building and construction industry, and they are known to the local community.

Select the right off-the-plan project

It is essential to undertake thorough research and select the right off-the-plan project for you. It may make sense to focus on developments aimed at the local owner-occupier market, not just all investors. Typically, owner-occupier purchasers demand a higher standard because they will be the ones living in the property. Owner-occupier projects tend to be more boutique in their scale eg. not high density, have larger floor plans and come with a higher level of finishes.

Should investors invest in old properties over new properties?

You may think it’s simpler to invest in old properties rather than new properties to avoid construction issues, but it would be naive to think these issues are confined to brand new properties.

Think about how many times you’ve heard of someone having issues with an older property that requires considerable investment to bring it back up to standard. Is a 50-year-old apartment requiring significant works to rectify a concrete cancer issue newsworthy? Probably not. The reality is that we’ve come to expect these types of issues from older buildings. However, they can have as much impact (if not more) on their owners from a financial perspective as they are no longer covered under any builders warranty or regulatory protections.

The Opal Tower and Mascot Towers cases have led to a valuable conversation about implementing more stringent building regulations and a more conscious effort from builders, engineers and architects to focus on the quality of their delivery and the safety of the buildings. The good news for investors is construction issues are rare and thanks to these conversations will become rarer still.

If you wish to read more of this topic, click here to read what the benefits of purchasing off-the-plan property during COVID19 are.

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