Is Buying Apartments Off the Plans Too Expensive?
Apartment Specialists Podcast No: 151
Is it a good idea to buy apartments off the plans or is it too expensive? Andrew Murray will answer this question and explain the factors involved in buying apartments off the plans. Get the full details from this podcast.
Good day, Andrew Murray here from the Apartment Specialists. Is buying off the plans now too expensive?
It's an interesting question because there isn't enough apartments out there. When there's scarcity, and there is an apartment that is in the secondary market that's already built in area that you want to live, where you don't have a choice, then it is the best option. But in the CBD and a lot of the fringes where there are other options, no way. Selling off the plans is always more expensive and part of their sales pitch is, by the time it's built, it would have risen in value.
You're going to make capital gain over that period and in most cases that never occurs. If you look at the last and as far as around the early 2000s, when everything got built off the plans then, everybody lost money short-term. They made money because long-term property goes up, but the reason why I'm saying it, if you buy off the plans, you're losing money. That's because you can buy the same kind of property that's already built for much less, so the answer is so obvious.
Where it's difficult is and where buying off the plans, in my opinion, does work is with quality stock. We don't have enough of it and so this is where I point to your off the plan stock on Hopetown just off Ponsonby, Heresford residences and all that kind of thing. This is your Tarawera stock and it's large and it got views that can't be built out.
The location is fantastic and you're getting a lot of New Zealanders buying to live in it. If I said okay, go and buy something in the secondary stock and there isn't really much like it. There is a bit but not enough on the market for the demand. Now, if you said then pointed to say to development, for example, the Queen's residences which is off Queen Street or the park. These have all been sold so the developers won't be angry with me and that I'd say no way.
If that stuff came back on the market, and it is way over priced and it won't be selling at what people brought it for, they'll be losing money initially. If they hold long-term and the markets going to go up and they're fine. But it's sold way too expensive and if I had to do a general comment, I'd say buying off the plans is way more expensive. With a little asterisk saying unless its quality owner occupier stock or where there are no apartments.
Now, I hope that helps. Andrew Murray, Apartment Specialists.
Talk soon, cheers.