Off-the-plan properties in Sydney: Are they good investments?

Now that the Sydney property market has entered the softening phase, those who have signed on to purchase off-the-plan properties at the peak of the market are now fearing the possibility of acquiring negative equity.

This risk of investing in an uncertain future is the reason why buyer’s agent Meredith O’Reilly has always been reluctant to recommend off-the-plan properties to investors.

“I would never advise a client to buy off the plan. It’s happened time and time again to friends of mine, colleagues of mine — they’ve bought something off the plan and there’s delay, which always costs money.

“Now that they’ll be scrutinised more, as they rightly should be, for quality of build, the potential for delays will be even greater, I believe.

“I’m just not a fan. I prefer to see the product, to see the builder’s work, even if it’s only a year old, as long as it’s got people living in it and you’re getting the vibe.”

‘Secondary market for off-the-plan’

The “secondary market for off-the-plan properties”, or the market for new builds that have been on the market for a year or two, often presents better opportunities than off-the-plan properties, according to the buyer’s agent.

Apart from having big discounts, the property also had the time to “equalise to the market”.

“Plus, it’s still under builder’s warranty. You can get yourself on that owner’s committee as soon as you can and get the vibe of what’s going on, how the builder is, and be really involved in your building.”

Ultimately, Ms O’Reilly advised investors to actively monitor their investment in order to ensure its positive impact on their portfolio.

“Don’t just be hands-off, set and forget. Take part in all of those meetings so you know where your money is going as an investor. I definitely think that if a building’s a year or even two years old, it’s still got that new feel.”

New suburb developments

Apart from off-the-plan properties, new developments have also been on the radar of investors as they await for the recovery of the Sydney property market. Much like off-the-plan properties, new developments heavily rely on the future movements of the market.

One example would be the emerging Badgerys Creek precinct where several infrastructures, large subdivisions and even new suburbs are set to be built.

However, unlike off-the-plan properties, new suburb developments could be less risky once backed by research and due diligence, according to Ms O’Reilly.

“Badgerys Creek looks like it’s finally going to happen after so many decades of being talked about. This could be a smart proposition as long as the infrastructure is there.

“I would say watch that space a little longer to make sure that the infrastructure and everything else are going to be ready when your property is ready. You should also review the forward planning and make sure that it’s not going to end up like the other satellite suburbs that are not serviced by good transport and other facilities.

“The transport links themselves may not be finished for 10, 20, 30 years. Meanwhile, you’ve already wanted to resell that property. You really have to take timelines into account.”

At the end of the day, Ms O’Reilly strongly encouraged investors to do their research and due diligence before making a big investment decision.

With the Sydney property market still very much at the softening phase, along with other major markets like Melbourne, practising caution has become more important than ever.

“You’ve really got to do your research. You’ve got to be across what’s hot, what’s not, what the local infrastructures that are coming on. Get in touch with your local councils, look at the recent sales and all indicators of capital growth. Just do your research well,” she concluded.

Tune into Meredith O’Reilly’s episode on The Smart Property Investment Show to know more about the opportunities across the Australian property market this 2019.