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Which developers tend to overvalue OTP apartments in Melbourne inner city?

Discussion in 'Property Experts' started by Chloe Danza, 4th Dec, 2016.

  1. Chloe Danza

    Chloe Danza Member

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    Hi all,
    I recently found property chat and I'm so grateful for all the great threads on here.
    I was wondering if there are any known (notorious) developers that routinely overvalue their OTP apartments.
    I'm in Melbourne and looking to buy OTP in Clifton Hill. 2 bed, 2 bath, 2 car parks in a development of 33 units.
    Thanks!
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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  3. Chloe Danza

    Chloe Danza Member

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    Really? It's a great area and there aren't a lot of new unit nearby. Also it's protected by heritage overlay and this was the last spot for new units to be built here....
    Does it make a difference?
     
  4. jins13

    jins13 Well-Known Member

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    Wouldn't make a difference. If there is money to be made, they'll go for them. Around my area Dlydam are building like crazy and bought a heritage site too but they are still able to get their DA approved with massive profits to be gained. Why would they do it for the goodness of their heart?
     
  5. Ross Forrester

    Ross Forrester Well-Known Member Business Member

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    OTP can be a hazardous area for a new person.

    A larger developer has to ensure that built stock is of quality otherwise their reputation for future projects is at stake.

    So I am thinking the tier one developers (Mirvac etc) if you are unsure - but the brand alone is not a guarantee.
     
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  6. hammer

    hammer Well-Known Member

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    It's my understanding that OTP MUST be overpriced by its very nature. The developer is taking on a lot of risk and there are huge marketing costs, all of which are fcyored into the price....some one pipe in if I'm wrong!

    On Top of that is the extra risk that the developer doesnt finish the job....does a bad job, doesn't start the job.....

    THEN there's the finance risk, the bank needs more money on settlement etc...
     
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  7. MTR

    MTR Well-Known Member Premium Member

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    Clifton Hill is a great area.

    I am sitting back and watching at the moment.

    I would look at strata fees per quarter
    resales in the area, similar product
    What flys out the door/demand

    I am not totally against OTP, however it would have to meet my criteria. Some OTP stuff is exceptional and holds its value well, not everything is equal.

    Do you know where there is an oversupply areas in Melb? and product? size of apartments etc.?
     
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  8. Chloe Danza

    Chloe Danza Member

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    Hi MTR,
    I know that parts of Melbourne cbd are out of the question, areas like Docklands. There's info online that will tell you if the postcode is high risk to a lender. Apparently Clifton Hill is low risk but who lnow what will happen in 18months when the development is built.
    Problem is we can't afford even a small house with just a courtyard in this area - they're going at or above $1M! Our friends are all on that side of town too. In the end, I guess I have to figure out if the benefits outweigh the risks!
     
  9. Chloe Danza

    Chloe Danza Member

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    Thanks for the reply jins13
     
  10. Chloe Danza

    Chloe Danza Member

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    True. Definitely something to seriously think about.
     
  11. Chloe Danza

    Chloe Danza Member

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    Thanks for the feedback!
     
  12. MTR

    MTR Well-Known Member Premium Member

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    townhouses are probably rare? however is this an option?? $700-800K?? or do I have this wrong.
     
  13. Lara Lansell

    Lara Lansell Active Member

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    Id be on the lookout for smaller / private developers that have had their pre-sales completed and are in construction / built. There's limited flexibility on OTP pricing prior to their pre-sales being completed due to commercial lending covenants.

    I'm running the ruler now over an opportunity that was sold OTP in the mid $5s, failed settlement and now looking at high $3s on completion - developer is keen to get the capital out for the next project.
     
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  14. MTR

    MTR Well-Known Member Premium Member

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    this looks like a clever little strategy?
    with markets Close to peak do you see more opportunities moving forward.
     
  15. Chloe Danza

    Chloe Danza Member

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    There are more townhouses than units. Many are very small and the only difference between them and an apartment is a staircase. A the start of the year, block of 30 units sold out in one weekend. Around the same price as townhouses for a two bed! Crazy stuff.
     
  16. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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  17. MTR

    MTR Well-Known Member Premium Member

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    that's not good at all, I think we will continue to see this moving forward
     
  18. MTR

    MTR Well-Known Member Premium Member

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    I don't know Paul, it amazes me how many investors ignore the obvious and continue to buy OTP or just continue to buy when clearly the environment is changing
     
  19. The Y-man

    The Y-man Moderator Staff Member

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    Hi Lara,

    The only issue I have found with this strategy, was that on 2 occasions that I did buy into a development by a small developer, they disappeared by the time things went wrong and we needed things fixed. So then it became an insurance claim for the BC etc (i.e. costs on claim rather than getting it fixed by the builder/dev).

    The Y-man