As talk of a pending property crash ripples through a buoyant market, horror stories are still unfolding of how those blinded by pre-GFC euphoria have come crashing to earth from the stellar orbits to which their hopes and fantasies had been launched.
Of the three luxury Gold Coast developments that are a showcase for speculator catastrophe, the two tower Hilton Surfers Paradise Resort appears to have produced the worst investor carnage.
Consider the story of Perth property buyer and mineral prospector Patricia Parniczky who signed up in April 2008 for a $1.56 million Orchid Tower apartment.
Construction of the tower drew to completion in the worst affected property market in the country just as the property crisis was nearing its zenith.
When the developer called for settlement in September 2011, Parniczky’s family trust refused to complete.
It finally re-sold the unit in April 2013 for $800k – near to 50% of the pre-GFC sale price – crystallising a loss (after adding re-sale costs of $72k) of $870k.
Having already got its hands on the buyer’s $156k deposit, the developer sued for the balance plus interest.
Contending that the contract was “induced by misrepresentations as to the availability of finance” and that Parniczky had no authority to buy, the trust defended the claim.
But the buyer’s no-show at the Supreme Trial scheduled in Brisbane led to a ruling by Justice Martin Burns that such contentions must be dismissed.
Of more concern to the court was whether or not the $564k default interest claimed – at the contract specified rate of 15% – was collectable or whether it was an unenforceable “penalty”.
Initially “troubled” by the enormity of the interest claim – more than one third of the value of the unit itself – the court ruled that by not being present to argue for example, that the reserve bank cash rate was the appropriate rate to apply, the defendant must suffer the consequences.
Ms Parniczky was after all, a “sophisticated and experienced purchaser of property” with at least 10 properties in her name in New South Wales and Western Australia.
The total payable by the disappointed investor – including the forfeited deposit – is $1.4 mil. And that’s with no property changing hands!
Similar fates befell many investors in Broadbeach’s Oracle and Soul at Surfers Paradise but pre-GFC buyers who managed to settle continue to worry how long it will take for their buy prices to return and whether a further crash may intervene in the meantime.