One in 10 off-the-plan apartment buyers lost their deposits in June quarter

One in 10 off-the-plan apartment buyers lost their deposits in June quarter
One in 10 off-the-plan apartment buyers lost their deposits in June quarter

One in 10 off-the-plan apartment buyers have lost their deposits in the last quarter, according to analysis by Digital Finance Analytics.

Out of around 35,000 off-the-plan settlements between March and June, 3000 have collapsed.

off-the-plan values have dropped between 10 and 15 per cent during the past 12 months on average, Digital Finance Analytics principal Martin North said.

In Sydney's inner west and eastern suburbs about 551 apartments failed to settle, as did 457 in Melbourne's inner suburbs.

There was an $87 million potential loss in deposits, excluding how developers impose penalties when buyers pull out of the sale.

The analysis by Digital Finance Analytics suggested lower valuations due to weaker demand and oversupply had prompted banks to reject final loan approvals, forcing buyers to give up millions of dollars in deposits.

"Values are likely to fall further, given the oversupply in the sector," he said.

The proportion of off-the-plan apartments racking up large losses in values at settlement has surged over the three months to May, CoreLogic data shows.

More than half (52 per cent) of the 3389 off-the-plan properties across Sydney had a lower value at settlement compared to the contract price.

Values fell by more than 10 per cent for one in four (26 per cent) Sydney apartments since the contracts were signed circa 2017.

Melbourne saw 51 per cent of the 4173 off-the-plan apartments were worth less at settlement compared to their purchase price.

Values fell by at least 10 per cent for one in five (20.9 per cent) apartments since the contract was signed, North told Nine Entertainment.

In Brisbane, 41 per cent of off-the-plan properties have lost value since being purchased.

It was 49 per cent in Perth, 25 per cent in Canberra and 20 per cent in Adelaide.

CoreLogic noted the trend was not just a result of COVID-19.

Undervaluation of off-the-plan apartments across Sydney and Melbourne has been rife over the past two years, averaging 46 per cent in Sydney and 42 per cent in Melbourne, CoreLogic advised.

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Off the plan COVID-19

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