Sunset clauses and torn-up contracts have made headlines for all the wrong reasons in the past few years.
But data shows buyers are willing to partner with developers who have a pipeline of work and that a strong brand can capture the upside of significant price growth in the frothy undersupplied markets of south-east Queensland.
While the difference between a good decision and a great one is all in the timing, SIERA Group founder Brent Thompson says buyers in his Tapestry project who bought in the first 12 months after its launch in 2022 have already chalked up an average total return of 37.3 per cent.
Thompson says there is definitely some upside in buying off the plan, but it comes down to choosing a trusted developer and taking a calculated risk.
Thompson says downsizers who put down a 10 per cent deposit on a $1.3 million apartment two years ago, for example, have likely experienced a 20 to 30 per cent price growth. They would also have recorded a similar uplift on their home, he says.
“They could be $1 million better off (after buying off the plan),” Thompson says.
It’s also an important pathway to home ownership for many, according to Thompson, enabling first home buyers to buy early, capture growth, and bridge the gap between first home and next home.
Risk vs reward
But, he acknowledges, there is the risk within the market as to whether the project gets out of the ground, particularly in the past few years where projects were sold out quickly as construction costs escalated, leaving developers with unfeasible projects.
“In times gone past, you would be celebrating that you had sold out so quickly [on a project],” Thompson says. “But costs were much more stable.”
“There have been times where developers have had to go back and renegotiate contracts of sale to ask for more money in circumstances where it’s not out of greed, it’s out of necessity to make things complete.
“I know some really good developers that have been in that situation where it’s just been a pure window of timing. They just launched a month before construction went crazy and there was so much pent-up demand that they sold out quickly.
“Nobody wants someone to go broke on completion … no one goes into business to fail.”
But it doesn’t have to be a risky prospect, Thompson says. It’s a big commitment from buyers in terms of trust and not one that Thompson takes lightly.
“Buying off the plan requires transparency, collaboration, and a developer who values the buyer experience,” he says.
“We genuinely just want to make it about educating about purchasing off the plan. I think it’s so important to educate people when they do buy off the plan that the project’s not going to be finished for two years and construction can take an extra six months “They don't need to go and sell their house tomorrow and then go and find a rental and move into it. We’ve taken every step to guide our purchasers through the process, from initial decision to handover.”
Progressive pricing to manage sales volumes
Managing the velocity and volumes of off-the-plan sales has become an artform that takes on a more dynamic approach to absorb cost fluctuations and market acceptance.
“For us on Chevron Island, we didn’t sell everything straight away,” Thompson says.
“We sort of worked our way through what we wanted to sell, so we were able to revenue progressively through the project and it was typically done at milestones once we had more certainty.”
Tapestry will be a 22-storey apartment tower at Chevron Island, comprising a mix of two and three-bedroom homes.
Thompson says construction milestones such as breaking ground or basement completion tend to provide a level of certainty and comfort for buyers
“Those buyers are paying a little bit more than the early buyers and we have an escalation strategy for all of our projects on commencement that we build in. Prices are slightly discounted for people who get in before the official launch.
“Then on official launch there’s pricing and then as we move through the project relative to certainty and timeframes, we change the pricing and we do that so that we’ve got some ability to be able to recoup any unforeseen costs.”
“We’re at the mercy of the market, construction costs, legislation, interest rates … there’s a lot of things we can’t control on that journey that we just want to give ourselves some opportunity to.”
The developer made the decision a few years ago to move out of Brisbane’s inner-east and focus on the Gold Coast where Thompson says the planning and regulation had been more straightforward.
SIERA has two projects under way on the Gold Coast. The boutique medium-rise PIPIS at Bilinga, which features half and full-floor apartments, is close to completion, and Tapestry at Chevron Island, which will rise to 22 storeys and comprise 38 three-bedroom apartments and 75 two-bedroom apartments.
