So what do you need to know before buying an apartment?
Over the past year, apartment prices have fallen by 4.8 per cent nationally, CoreLogic figures show.
In January, a report by UBS flagged a growing risk of cancellations by buyers of off-the-plan apartments who, despite paying an initial 10 per cent deposit are, no longer able to complete the purchase at settlement.
The national president of the Builders Collective of Australia Phil Dwyer, recent said that defective Opal Tower in Sydney’s west was “having an enormous impact on property buyers, particularly off-the-plan buyers considering a high-rise apartment”.
When purchasing a property off-the-plan, buyers have some rights under Australian Consumer Law, but “there’s no guarantee of a happy ending”, founder of property investment consultancy DPP Zaki Ameer said.
“The responsibility for having defects repaired ultimately lies with the owners’ corporation for common property, though they may not necessarily have to pay for it,” he said.
“Some owners’ corporations may be successful seeking a remedy through the developer,” he said.
But research by the University of New South Wales shows that only 49 per cent of common property defects were fixed by the developer.
“With no other avenues of recourse it will ultimately be apartment owners who carry the cost, either through inaction or through special levies,” Mr Ameer said.
Before buying off-the-plan:
- Research the builder and developer
- Find their previous projects and go and inspect them. Door-knock owners to ask if there have been any issues
- Do desk research into the builder’s and developer’s previous projects. Look at the strata report, paying attention to the sinking fund forecast and any remedial works that are planned or completed
Before buying in an established block:
- Have a building inspection done. While this will only cover off your apartment and not the common areas, it’s still a good idea to get an independent assessment
- Conduct a body corporate records search: This should contain the minutes from recent Annual General Meetings and information on the sinking fund and any planned and completed capital works projects
- Request to see any reports that have been done or mentioned in the minutes. A good conveyancing lawyer will be able to tell you which searches need to be done and assist in deciphering this
Getting a home loan? Consider a finance clause
Would-be home buyers, particularly off-the-plan buyers, should consider including a finance clause in their negotiations, Australia’s leading association representing professional buyer’s agents said.
A finance clause is when the caveat “subject to finance and valuation” in the sale contract. Without this clause in place home buyers risk losing their deposit and having legal action taken against them by the vendor if they fail to secure financing in time, or if their pre-approved home loan falls through due to a valuation shortfall.
Real Estate Buyers Agents Association (REBAA) vice-president Cate Bakos said in the current climate a finance clause could give comfort to a borrower who could not financially bridge the gap in the unlikely event of a valuation shortfall.
“If buyers have any doubt about their future chances of getting the same pre- approval reactivated at a later date for such a purchase they should proceed with high caution,” she said.
Ms Bakos also warned off-the-plan buyers that they must anticipate delays beyond their typical three-month pre-approval timeframe or risk getting caught out.
“If a settlement delay for an off-the-plan purchase pushes past the three-month period and the pre-approval is no longer active or able to be reactivated due to policy changes or a buyer’s own change in employment circumstances, the buyer will find themselves in hot water if they can’t finance the purchase by other means,” she said.