Unit Glut Forces Big Cuts
Sun Herald
Sunday January 18, 2004
PART-TIME investor David Nguyen thought he had secured a definite moneymaker when he bought a unit off the plan in Sydney's inner west.
But 18 months later, as he tries to sell the Marrickville unit, he is not so sure of his chances of making a profit.
His asking price for the one-bedroom unit is almost $30,000 below its former market value and he realises he may be forced to discount the price further in order to secure a buyer.
As the property market continues to soften and talk of an oversupply of new units spreads, developers and investors like Mr Nguyen are struggling to break even.
To combat the slowdown, prices of new units across Sydney have been slashed with some developers offering discounts of up to $50,000 in an attempt to attract buyers.
Prices of many of the units for sale in The Clarence, a large, newly built unit block in Strathfield, have been discounted by vendors who bought off the plan and are now becoming increasingly eager to sell.
Laing + Simmons Strathfield agent Lily Luo is overseeing six ``second-hand sales" in the unit block.
``There are too many apartments out there at the moment, that's why developers are giving special discounts to buyers," Ms Luo said.
She said some vendors have complained that they don't think they will get their money back.
``They are saying they would be lucky if they can sell at the original price. December and January have been quiet. I think that a lot of people are waiting for February. Buyer interest seems to have dried up a bit and that scares people."
Another agent in charge of selling several units in the block said that people bought them off the plan about 19 months ago at a ``fairly good price".
``They are still making money but not a lot, maybe $10,000 to $20,000," the agent said.
``But they thought they were going to make $40,000."
The softening unit market is being felt across Sydney.
Pioneer Pacific Properties agent Randal Cheong, who works in the Dee Why area, said that the market has remained soft through January.
``There are not really a lot of people ready to make a deposit and buy something off the plan," Mr Cheong said.
``A lot of off-the-plan projects are quite soft. Some areas are showing oversupply, such as the inner west and the Green Square area. People are switching from speculating off the plan to buying house and land."
Property Invest agent Shahin Saracoglu is selling a unit in a new block in inner-city Chippendale. Although the asking price of $295,000 is described as a ``price of the past", he says that the vendor may be prepared to negotiate further on the price.
``Developers are panicking about the state of the market," Mr Saracoglu said.
``Of the last 10 units I have sold for developers, there has been a discount from $20,000 to $50,000."
Mr Nguyen's Marrickville unit is for sale for $396,000 and he is resigned to the fact that he won't be making a hefty profit on the property. He originally paid $377,000.
``If I could keep it until after the whole dilemma I would be OK, but I personally can't service the loan," Mr Nguyen said.
He said he is prepared to discount the asking price on the Garners Avenue home as an incentive to house hunters who may have been discouraged after recent interest rate rises.
``With the current situation I hope this will give an extra incentive for someone," he said.
© 2004 Sun Herald
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