Market conditions have created a difficult environment for
developers (particularly of residential product) and emphasised the
importance of the enforceability of pre-sales contracts against a
background of shifting market conditions and values.
Background
Litigious activity focused on pre-sales in projects completing
during and after the GFC shows that buyers will seek whatever
mechanisms are available to them to avoid a accepting an asset with
diminished market value and to mitigate their changed financial
circumstances. Large projects that may run for an entire property
cycle have been particularly exposed to this attitude.
New projects face considerable implementation thresholds (well
in excess of pre-GFC requirements) in limited or patchy markets,
uncertainty about future values on completion and high pre-sales
and debt cover ratios. Pre-sales remain a keystone for project
underwriting but recent experience has raised scepticism about
their value if
