How are prices decided when buying off the plans?

Summary:

By the square metre and different floors from the bottom to the top may very due to views and so on.

The units are priced by a set amount per square metre. The metre will be decided on level of the builder so the higher you go are usually more expensive.

This is predetermined by the developers prior to start of the construction.

Being careful of digital imagery and the photos advertised are of the correct level and views and so on. The marketing companies often don’t put the correct photos of the apartment advertised.

TRANSCRIPTION:

Good day, Andrew Murray here from Apartment Specialist, talking about buying off the plans and how they price the units. As you can see here, you've got a building that just came up today on TradeMe and in the papers.

You can see you've got three arrows there. You have got 8,000 meters squared, you've got $10000 per meter squared, and you've got $12000 per meter squared.

Basically, when a development comes out, they have to do this and it is rough numbers, they are also changing it a bit. They have to consider everything because of the cost to build, but on average, a developer to make money has to average selling all their apartments on a development at 10,000 per meter squared. So, that means they sell ones up the top for a lot more and the ones down the bottom, which attract the buyers in. These units are not as favourable, and won't have the views or are facing south for a lower price, or otherwise they couldn't sell them.

We go to straight to TradeMe here, and this is a really good example that shows you how to do it.

What they do is they first introduce you by coming in. First of all, you can see that it is listed today. SKHY High Apartments and this is Newton. This is in the fringe. You can see here they come in and go, "Okay, it has spectacular views." They will have the same pictures, every single one. This will be the penthouse, no doubt. If you divide 74 meters squared into 615,000, you are left with 7,600 dollars per square meter.

Now, that is extremely cheap. That seems very attractive, but if you go back to this picture, they are going to be the ones that nobody wants. Some of that attracts you to go and inquire and find out about it, because it looks like a fantastic deal. Which is very smart in my opinion. Just understand this, then if you go back to some of the high end listings.

I've actually priced it here, which is not normally what they do. If you go this one say, three bedrooms, two bathrooms, you've got 175 meters squared. It's for $2 million and $65,000. If you divide 175 into the $2 million figure you get round it down to four. For $11,000, sorry - its for $11,800 per square meter, right?

You can see the per square meter value is creeping up. And in all of these, there are no car parks.  You can see how they are doing it. Same here, this one is more and that has got a few square meters, it comes out as $11,600 per square meter. Obviously, close to that $12000 figure I was talking about.

Then we go down. We look at another three bedroom. But that is price by negotiation and one's similar to before. Here, oh this one's a lot cheaper. Okay, there's a different square meterage rate, but if you divide 152 meters squared into $1.3 million, you get $8600 per square meter. Again, this will be a unit that's not as favourable. It's without the views. If you look, they still all have the same photos, as if it is the penthouse.

That is how they market, so be very aware of when you are looking at all these listings on Trade Me, Realestate.co.nz or in the newspaper. The prices they show are just a marketing tool. Otherwise, there is nothing wrong with buying off the plans.

I think  if you look at these apartments, I actually think they are really good, and the reason why. I'll just bring it up again and I think I deleted it. I can bring up one of these photo's and make it larger and its  because they've got, what it looks like here they have got views. The company built out, they are large sizes, which is the key.

A lot of these developers are coming up with very small apartments. You know, one bedroom around 40 square meters and things like that. Charging huge money for them, when really it's just not there in the future, in my opinion.

But yeah, just be aware of when you are looking at all this stuff on Trade Me and realestate.co.nz. While you are actually looking at in most cases, you are looking at prices to attract you in and then up-sell you up.

Anyway, I hope this helped. Andrew Murray from Apartment Specialists and this is all about selling off the plan prices.

Thank you.