Three things to consider before buying an apartmentOctober 2, 2019 / By
Buying your first property – it’s the great Australian dream, right? But what happens if that dream turns into a nightmare? For many domestic and foreign buyers, this has become a reality as a result of apartment construction defects due to poor construction standards and a lack of building regulation. Recent media attention has highlighted these issues, particularly in Sydney, which is adversely affecting buyer confidence and sentiment across Australia’s apartment market.
So what should buyers consider to minimise their risks and maximise the value of their long-term investment?
1. Know who you are ‘getting into bed with’
With such strong media attention on improper materials and construction defects, it is crucial for buyers to conduct comprehensive due diligence. Larger reputable developers and builders have a strategic advantage over smaller and inexperienced developers, as prospective buyers will hold more confidence in the structural integrity and safety of their buildings. Furthermore, in the event that such problems do arise, buyers can have the peace of mind knowing that a large developer has the balance sheet to rectify issues and the incentive to protect their corporate image.
Reputations take a long time to build and a short time to destroy, so long-standing reputable firms generally will not want to be affiliated with substandard projects.
2. How does the development stack up?
Amenity and inclusions are great, but they come at an ongoing price. Nevertheless, some inclusions are worth paying for. As the cost of living rises, sustainability initiatives should increasingly be on a purchaser’s radar. While a premium is paid for such inclusions, long-term energy savings will eventually offset this upfront cost and add-value upon resale. The CSIRO estimates an average energy rating of 6.4 stars for Australian apartments, so buyers should look at this as a minimum benchmark.
Furthermore, it is imperative to assess the livability and longevity of the project – is the building design practical? What is the quality of the build? Ultimately, long-term value also comes back to location and access to transport and amenity.
3. Future-proof your investment
Changing social habits has been an important driver prolonging the average holding period for buyers. Units are now held for an average of 9.6 years up from 6.7 years a decade ago.
As such buyers should be forward-thinking and consider what they want in three, five, or even ten years’ time? While you may not be intending to hold onto your property for an extended period of time, you should be prepared to do so if necessary. Consider your needs: although you may not need that extra bedroom now, could it provide rental income in the interim?
Regardless of motivations, buyers need to be proactive in assessing the viability of their purchase in today’s market context as well as considering future needs and resale. Ultimately, knowledge is power – you can never overdo your due diligence and should always have a plan B in terms of exit strategy.
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