Off-the-plan values coming back at 15% below purchase price

Sydney’s off-the-plan apartment market is in a property ‘bubble’ and is an inflated market that valuers are seeing through, according to Just Think Real Estate’s Edwin Almeida.

Pointing to the Sydney suburbs around Parramatta, including Westmead and Granville, Almeida told Property Observer that overseas buyers are falsely inflating property values by trying to ‘save face’ when valuations come in short.

“In a lot of these markets the marketing companies that are selling these units are selling to Asian markets and Asian investors. When it comes to settlement obviously the valuations are ordered,” Almeida said.

He explained that, knowing many valuers and mortgage brokers, current conversations he is having are that the apartments’ valuations are often coming in 15% below what they’re purchased for three months prior.

“You don't hear of this because the Asian community doesn’t like to lose face, so they settle and get the money from overseas. If they did get angry they don't like to go through the litigation process of taking the agent to tribunal for deceptive misconduct,” he said.

He also explained that as losing a 10% deposit is a big incentive, and the purchaser believes the market is ‘running hot’, many buyers still go through with the purchase.

In some instances, properties that sold for $560,000 are coming back with valuations of $440,000 to $450,000.

He said that while he believes this is causing a bubble in new stock, the secondary stock is not experiencing this.

“These three-bedroom apartments were selling in the $520,000 mark, miles from Parramatta CBD,” Almeida said.

“I thought they would be worth around $420,000, and the valuer confirmed that they were around $425,000.”

This gives a false impression the market is growing.

Within the next 18 months, as some of these properties start to sell, he said we’ll see the ‘real value’ of the properties emerge, and likely the market will soften as a result.

Have you heard of this happening? Contact jduke@propertyobserver.com.au