Luxury OTP townhouses/apartments (Melb)

Discussion in 'What to buy' started by wentworthmeister, 3rd Feb, 2020.

Join Australia's most dynamic and respected property investment community
?

Are OTP 'luxury' downsizer apartments likely to be a safer bet than other OTP developments?

  1. Yes

    1 vote(s)
    33.3%
  2. No

    2 vote(s)
    66.7%
  1. wentworthmeister

    wentworthmeister Member

    Joined:
    25th Jan, 2020
    Posts:
    14
    Location:
    Melbourne
    FHB here.

    Based on my reading it seems the general sentiment here is to avoid buying anything OTP due to the risks involved (usually build quality). This makes sense to me, but I'm wondering if it also applies to the more "luxury" developments that we're starting to see aimed at downsizers - are these likely to be any better in that regard? They're usually 3 levels max, between 10-30 dwellings, and most don't have over the top amenities like pool/gym (though they almost all have lifts). Most are apartment complexes but some are townhouses.

    Examples:
    Central Park Apartment at 2a Nyora Street, Malvern East - realestate.com.au
    Timeless Apartment at 555 Burke Road, Camberwell - realestate.com.au
    23-27 Prince Edward Avenue, McKinnon, Vic 3204
    134 McKinnon Road, McKinnon, Vic 3204

    Despite their purchase prices being well out of FHB incentives territory (generally $800-900k for 2BR and $1.1-1.4M for 3BR), because they're OTP the dutiable value might actually fall within the $650-750k range to qualify for stamp duty concession (I need to research construction costs further to validate this - could be completely off the mark). OC fees seem to range from $2k-6k p.a. from what I've seen so far.

    My thinking is that if we could afford to do so, would it make sense to skip the FHB price bracket ($500-700k) and the locations that would restrict us to, and instead jump straight into the next level/upgrade of dwelling to make use of the OTP stamp duty incentives on offer, thus avoiding them further down the line? We'd primarily be looking at the property as a PPOR, but may be open to rentvesting if that made sense.
     
  2. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    8,920
    Location:
    Melbourne
    I don't think it makes a huge diff - where I do see difference is whether the construction company (as different from the developers etc) is a big listed company or a small company that might simply disappear.

    The Y-man
     
    TMNT likes this.
  3. JetstreamVic

    JetstreamVic Well-Known Member

    Joined:
    29th Dec, 2015
    Posts:
    253
    Location:
    Melbourne
    @wentworthmeister - There is also significant risk with the valuation of the property.

    You might commence the build with a valuation of $1 mil and a 10% deposit and the figures work.

    However, when the building is complete, the market might have crashed and all of a sudden the property is valued at $800k.

    In this case, the purchaser is left holding the bag and needs to make up the shortfall - Not a problem if you are liquid enough to mitigate the risk, but potential for exposure if you can't.
     
  4. TMNT

    TMNT Well-Known Member

    Joined:
    23rd Jul, 2015
    Posts:
    5,574
    Location:
    Melbourne
    Add to that the current climate/trend of many developers getting targetted/singled out of cladding/build issues

    If this trend got worse your valuations/values will be affected
     
  5. wentworthmeister

    wentworthmeister Member

    Joined:
    25th Jan, 2020
    Posts:
    14
    Location:
    Melbourne
    Understood - the valuation aspect is certainly worth taking into account. I guess you could mitigate some of that risk by purchasing something already under construction, but it's still an unknown.
     
  6. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    4,020
    Location:
    Perth, WA
    I would have thought the risks of something going wrong would be even higher.
     
  7. Archaon

    Archaon Well-Known Member

    Joined:
    20th Mar, 2017
    Posts:
    1,848
    Location:
    Newcastle
    Sunset clauses.
    Delay construction/completion
    Variation (10% change allowed in OTP contract)

    Lots of unknowns, buyer beware.