Most new city apartments are now worth LESS than their purchase price as buyer confidence plummets in the wake of botched building scandals
- CoreLogic has released new data show off-the-plan units are plunging in value
- In Sydney, 60 per cent of apartments were worth less than the settlement price
- The plummet follows a series of building quality scandals in Australia’s No. 1 city
Most new apartments in Australia’s biggest cities are now worth less than what the owner paid for them following a series of building quality scandals.
Real estate data group CoreLogic has revealed 60 per cent of off-the-plan units in Sydney and 52.9 per cent in Melbourne had a market value below the settlement price.
In Brisbane, where the construction section is subjected to stricter Queensland government rules, 43.1 per cent of apartments were in this situation.
Real estate data group CoreLogic has revealed 60 per cent of off-the-plan units in Sydney had a market value below the settlement price. (Pictured are the Mascot Towers near the airport, which were evacuated in June after cracks appeared in the 10-storey complex)
CoreLogic has released the figures for August to highlight the fragile demand for recently-built apartments, even though interest rates are at a record low and the housing market is recovering.
‘The data shows a sharp rise in undervaluation events across Sydney,’ CoreLogic head of research Tim Lawless said.
‘In terms of materiality, 31 per cent of Sydney off the plan unit settlements have received a valuation at least 10 per cent under the contract price in August, down from 36 per cent in July.’
Mr Lawless said 17 per cent of Melbourne off the plan settlements were more than 10 per cent less than the contract price.
Anecdotally, risks seems to be most concentrated across the high-rise investment grade market where off the plan sales were skewed towards both overseas and domestic investors,’ he said.
‘Projects aligned with owner occupier markets and lower density attached projects appear to be far less risky.’
Opal Towers, a near-new 36-storey complex in Sydney Olympic Park, was cleared on Christmas Eve after residents heard cracking
In less than a year, two Sydney apartment towers have been evacuated, forcing residents to find alternative accommodate and stump up for expensive repairs.
Opal Towers, a near-new 36-storey complex in Sydney Olympic Park, was cleared on Christmas Eve after residents heard cracking.
In June, hundreds of residents were cleared from Mascot Towers, near the airport, after cracks also appeared in the 10-year-old, 10-storey tower in Sydney’s south-east.
A month later, City of Sydney council confirmed residents of 30 loft-style apartments at nearby Zetland had been evacuated.
During the past decade, more than 670,200 new apartments have been built in Australia.
The vast bulk of them were in New South Wales, which two decades ago deregulated building approvals so private certifiers instead of local government inspectors signed off on aspects of the construction.
During the past year, Sydney’s median apartment price has fallen by 4.1 per cent to $710,559, CoreLogic data for September showed.
Prices, however, had been recovering for four straight months in Sydney and Melbourne, even before the Reserve Bank of Australia this month cut interest rates to a new record-low of 0.75 per cent.
‘With housing values starting to rise once again across Sydney and Melbourne there has been some improvement in the proportion of undervaluation events,’ explained Mr Lawless.
‘However, it remains too early to call a recovery.’
The Sydney Olympic Park cracking highlighted the problem of allowing private certifiers to approve of construction projects