Off-The-Plan Bloodbath

https://www.smh.com.au/money/invest...ttle-at-lower-valuations-20181122-p50hpo.html

Off-the-plan units warning as more buyers settle at lower valuations

With property prices are falling across Sydney and Melbourne, people who bought off the plan some time ago and are only settling now who are likely to be in for a rude shock.

 

There's 2 or 3 more series of "Strata Meetings Make You Laugh Out Loud" guaranteed...

 

I remember clearly the "woe is me" on the news when Docklands did the same 15-ish years ago. If they can hold then the cycle will come good again - if they were speculating and can't settle then they're buggered

 

Yes, I don't remember the details but there was a court case in which some OTP buyers tried to claim that their contracts weren't valid for some reason or other. The judge IIRC gave them short shrift, saying that if the valuations had been more than the contract sum they'd have been the first to argue that a contract was a contract.

 

This could be my situation, I bought an OTP townhouse. The suburb is down 4% according to core logic and my place won't be ready for another year

 

Depends whether you're borrowing at maximum or not.

If so - yes.

If not - you should be okay but time to get get Plan B into action with some breath space. Even if that means borrowing now against another property to make up the shortfall

 

OTP Townhouses are a lot more resilient than apartments or else I would have said your in a bit of trouble.
You really just need to start planning with the aim of the property being 10% less than what you paid for it. If you already have equity/cash to cover a good deposit then you should be right.
If you planned on being highly leveraged then I would speak to a broker now to start planning accordingly.

 

I should be ok with around 10% drop, it’s painful but we’ll manage. Planning on living there 10+ years so hopefully in the long run we’ll be ok

 

We're also contracted to buy a townhouse - the suburb (in Newcastle) is still going up, but starting to plateau. I don't know that it will drop, as there is still strong demand and no oversupply, but kinda hoping it takes the 22 months to build so we can get further cash reserves behind us just in case

 

Polite and personal question. How close to the bone are you if you are worried about a town house dropping before completion?

If you are that close - is it work the risk?

 

Honestly - not worried but am aware and no bone issues

xx

 

Just make sure you’re buying good bones

 

Well I’m likely screwed. If I can’t get out of this contract, I don’t know what’s going to happen

The median house price for the suburb I bought in is down 240k since peak. At this rate it will be worth nothing in a year

 

Where did you buy? Or at least what are the medians there if don't want to disclose the name of the suburb?

 

It’s in Sydney, less than 18kms from cbd. Good transport connections with some big infrastructure projects going on, family orienteated suburb.

From realestate.com, Houses in 2017 were at 1,131,000 and it’s now at 940k. I paid 1,095,000

I mean I do have a buffer and I’m still not sure if I can manage, I can’t imagine how many others will be in a worse off position

 

Post it here when it gets to 10% and someone will buy it.

 

So what’s the worst case here, if it does hit 20-30% drop and people can’t settle?

Is it a matter of bankruptcy?

 

Arent you expecting 100% fall by next year?

 

Can you rent it out short term and stay with family to help get $$ off the loan.