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Category: Building and Construction

WA property developers try to lure buyers with incentives

15:42 UTC+8 March 29, 2017 | Emily Piesse

Property developer Mirvac's apartments under construction at Leighton Beach. (ABC News: Emily Piesse)

Apartment developers in Western Australia are offering increasingly generous incentives to lure buyers in a sluggish property market.

Developer Mirvac is offering up to 1 million frequent flyer points - equivalent to three business-class return trips to Paris - for buyers of its Claremont and Leighton Beach apartments.

Last month, Mount Pleasant-based developer Norup Wilson was offering luxury cars to buyers of its apartments in the same suburb.

Other developers, such as Frasers Property, are offering to pay the equivalent of a year's worth of interest on the purchase price of an apartment.

Momentum Wealth managing director Damian Collins, who runs a property investment consultancy, said incentives could be worth up to 6 per cent of the purchase price.

"Over the last couple of years, it's been really hard for developers to get pre-sales off the ground," he said.

"Even with good marketing, buyers have been reluctant to commit to anything. There's been a lack of confidence."

Mr Collins said incentives were being used throughout the sales process, from off-the-plan offers to deals on unsold apartments in completed projects.

"For developers, time is money, so if there's only a small number of pre-sales they need to get things going and get off the ground ... any sort of marketing strategy they can use to help them get those last few sales to get the project going could be crucial," he said.

Real estate agents say buyers beware

In general, incentives prompt a small number of sales, according to real estate agents, which could be critical for a developer depending on the project's timeframe.

However, buyers need to be aware that developers may choose to offer incentives rather than reduce the headline price, which could have implications for the apartment's final value.

Space Projects director Cindy Lee said off-the-plan buyers might end up owing more for their brand new apartment than its market value.

Space Projects director Cindy Lee Photo: Space Projects director Cindy Lee says buyers need to be aware that incentives may affect an apartment's value. (ABC News: Emily Piesse)

"When [the incentive] comes off that price, you won't get bank funding on that component, but yet you're still responsible for settling on the contract at the price that you paid for," she said.

"If you are reliant on bank funding, a valuer usually is aware of what has actually been offered at the time the contract was written up."

Other pressures faced by WA developers include higher bank lending standards, imposed by the national regulator to reduce investor demand in Sydney and Melbourne.

Hayden Groves, president of the Real Estate Institute of WA, said people downsizing from houses to apartments often needed to take out a loan, which was becoming more difficult.

"The prudential regulator settings around lending criteria, particularly for off-the-plan apartments, makes it even harder for developers to find a buyer," he said.

"The buyer is going to be very anxious that when it comes time to settle, will the prudential regulations and those settings be the same as they are today?

"There's going to be pressure brought to bear on those buyers and some uncertainty creeping into their minds as whether or not they'll actually be able to get the finance by the time they're due to settle."

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