Despite the Melbourne lockdown and the restrictions on private inspections and in-person appointments with sales consultants, generally pre-sales of off-the-plan properties continued to be strong and have not been greatly impacted for property developers.
This is because information such as architectural renders, floor plans, colour schemes and specifications could be provided by virtual appointments or disclosed in the sale documentation. Sales agent have also improvised since COVID-19 and many are holding virtual inspections of display suites and appointments to take purchasers through the sales material.
Currently, there is a construction boom causing there to be a shortfall of supply to timber and other construction materials. The increase in construction is likely brought about from the HomeBuilders grant. However, recent reports from the Housing Industry Association (HIA) has reported that homes were taking twice as long to build.
The above in conjunction with caps on construction workers on-site and the recent two week ban in the construction industry will likely lead to further delays in the completion of construction and delay development projects more generally.
In light of the delays, property developers should consider whether the sunset date conditions in their off-the-plan Contracts of Sale are sufficient and may consider seeking the Purchasers’ consent to extend the sunset date. It is also important that property developers consider the terms of their construction finance facilities, as it may well be a requirement of their loan agreement that the sunset dates be at least six month’s following anticipated completion of their project.
As the market is currently hot, valuations appear to be stacking up in most cases. However, this is highly dependent on the lender’s risk appetite and the types of valuations conducted. The types of valuation are generally as follows:
Types of Valuation Risk settings
- Desktop Report from property data such as CoreLogic Low risk (quickest turnaround times)
- Kerbside valuations, where valuers view the property Medium risk
from the kerb and compare to settled sales
- Full valuation, where valuer inspects both internally High risk
and externally and research of recent settled comparable sales
Loan to value ratio (LVR)Often the type of valuation will depend on a number of factors including:
- Qualifying pre-sales
- Who the lender is and whether they are a bank vs non-bank lender
- Location of the property / development site
The property market continues to rise, with price surges seeing the median property prices grow by 13.1 % per annum. Houses have grown by 15.6% per annum and Units have grown by 7.3% per annum (^Source: Corelogic – August).
After seven weeks of a ban on property inspections, and in combination with the Spring season, the property prices are anticipated to further surge as the competition gets fiercer.
There has been limited stock on the market with many vendors holding patiently for marketing photographs to be carried out and in-person inspections to occur before listing their property on the market. Now that private inspections have resumed, we have already seen a flood of properties being listed in the market and this is expected to rise in the coming weeks.
Despite the restrictions, we have still seen a number of deals having been negotiated for development sites, given less of a need to inspect a property in circumstances where consultants and legal advisors are still readily available to carry out due diligence on the property prior to any acquisition.
With demand and supply both high, the property market is looking to be in good shape.
At Burke & Associates Lawyers, we deal extensively with property developers but also have a depth of experience in dealing with purchasers who buy property off-the-plan. This means that we are well placed in advising property developers and purchasers because we understand developments from both sides of the equation.
Please contact one of our Real Estate Lawyers for further information or to have a free 15 minute consultation with one of our lawyers to see how we can assist you.
Insight written by Wendy Toura and Kristy Muhlhan