| 22.10,19. 03:07 AM |
Majority of off-the-plan apartments worth less than purchase price, data shows
Photo: Off-the-plan apartments have seen a drop in value in Sydney, Melbourne and Brisbane. (ABC News: Jessica Hinchliffe)
Shaky confidence in the capital city apartment market is hitting off-the-plan buyers hard, with a significant rise in the number of newly constructed units now worth less at completion than the price they were originally purchased for.
7.30 can reveal that 60 per cent of off-the-plan apartments in Sydney, and 52.9 per cent in Melbourne, were valued lower than their contract price at the time of settlement.
The latest figures from property data provider CoreLogic for the month of August shows that nearly a third of off-the-plan buyers in Sydney were moving into new apartments worth at least 10 per cent less than the price they purchased them for.
Just two years ago, less than 16 per cent of newly constructed NSW units were valued below contract price after they were completed.
In Queensland, 43.1 per cent of units were worth less at settlement than what they were purchased for, and in Western Australia it was 22.5 per cent of apartments.
'A very fundamental shift in value'
Photo: Opal Tower was evacuated last year when cracks were found in the
building. (ABC News: Nick Sas)
CoreLogic's head of research, Tim Lawless, said when many of these newly completed apartments were originally sold off the plan back in 2016 and 2017, the market was very different.
"We were seeing values rising at about 15 to 20 per cent per annum in Sydney and Melbourne," Mr Lawless said.
"Now cast your mind forward to 2019 and we've seen prices come down in Sydney by 15 per cent. In Melbourne, they're down by about 11 per cent.
"A lot of those off-the-plan buyers have seen a very fundamental shift in the value of the project that they purchased a couple of years ago."
Mr Lawless said there had been a significant oversupply in the high-rise sector, with supply substantially outpacing demand.
But he said concerns around construction quality, remediation costs and flammable cladding had had a compounding effect.
"That [is] probably also weighing on the minds of people in the marketplace and potentially affecting the resale value of those properties as well," he said.
A string of negative headlines has plagued the apartment market in the past two years, beginning with London's Grenfell Towers fire in June 2017 and the discovery of the widespread use of combustible cladding on apartment buildings.
In Australia, confidence in the market was further destabilised after the evacuations of Sydney's Opal Tower on Christmas Eve 2018 and Mascot Towers in June of this year.
Mascot Towers owners still in limbo
An apartment block
Photo: Cracks at Mascot Towers have gotten worse, residents have been advised. (AAP: Bianca De Marchi)
Owners at the 10-storey Mascot Towers in Sydney have fared far worse than most.
Not only have residents such as retiree Maree Peters watched their building garner major media coverage for its structural defects, they have still not been able to return to their homes.
"We have an asset worth one and a half million dollars that right now is worth nothing," Ms Peters said.
"It's your home, it's everything you worked for, that you think is safe, that you think is protected."
Having recently learnt that the cracks in their building are widening, owners will meet Tuesday to vote on a program to fund their building repairs.
They will decide between a commercial strata loan or a multi-million-dollar levy to pay for urgent repairs.
Stage one of the levy would cost around $7.7 million.
"At the moment we have a building that if we don't do anything it's worth nothing, and unless we put money in to try and get some value back we are left with an asset that is worthless," Mascot Towers owner Brian Tucker said.