A sobering reminder emerged this week of the scale of GFC-related property losses, when a 2008 glitter strip investor was ordered to reimburse a developer nearly 60% of the price of the units she agreed to buy – 85% of their current value – just for the privilege of unravelling the deal.
And in a further indicator of the spiralling deterioration of the Gold Coast home unit market, courtroom evidence called to establish the developer’s loss, revealed condominiums in the marquee development had already booked a 30% value write-down.
Hilton Surfers Paradise developer, Elan Boulevard Pty Ltd – a subsidiary of the now defunct Raptis group – sued investor and Varsity Lakes restauranteur Georgina Lee-Crawford, for its loss resulting from her failure to complete off-the-plan buys when settlement became due in December 2010.
Lee-Crawford had agreed in January 2008, to pay $1.86 million for two, level 12 tower apartments, that had by the date of the court hearing, dropped by $575k in worth.
The judgment – which was handed down in May but was withheld from publication until 8 October – recites sworn evidence that since 2010 “this market segment has been characterised by rapidly falling confidence levels in the new high-rise apartment market on the Gold Coast and consequently, poor rates and falling apartment sale prices”.
Herron Todd White Gold Coast resident expert Luke Nichols, testified that the resort’s units had incurred most of the value loss even before buyers were called on to settle but that a further 8% deterioration had occurred in the following 12 months.
In one of the first reported judgments against a 100 or so buyers being pursued at Hilton, Nichols also reported that values had held through the early part of 2012 despite “rising interest rates …negative media publicity … subdued economic conditions and the reduced volume of [investor] apartment buyers”.
The expert did not claim that the slump has bottomed out.
But given this week’s sales re-launch of the Hilton luxury project – which trumpets as the major selling point an “up to 34% price slice” and a “truly unique buying opportunity” – the developer clearly believes so.
With the snapshot of Nichols’ analysis ending at April 2012, reports from agents in the field are as a reliable source as any to suggest there has been no uptick in buyer volumes and sentiment since then.
But what of our investor?
Not only was Lee-Crawford ordered to pay the $575k re-sale loss – and a further $120,000 in commissions, marketing costs and legal expenses – judgment was given against her for interest at $700 for every passing day since December 2010, totalling nearly $380k.
The total payment ordered is nearly$1.1 million, more than 85% of today’s value of the product she had agreed to buy.
With better economic or financial news unlikely any time soon – as reflected in the perceived need to drop official interest rates in October and possibly again in November – plenty believe the “noticeable softening in market conditions” reported by valuer Nichols, will persist thru 2013.
The test will inevitably lie in the correlation – or difference – between the price of private re-sales and those achieved by the off-loading of developer stock.
Elan Boulevard Pty Ltd v Crawford  QDC 305 Brisbane Reid DCJ 28/05/2012, published 08/10/2012