“The finished product may differ to the plans or the development may not go ahead at all. Moreover, the time between the OTP sale and the completion and settlement of the dwelling means that OTP buyers are essentially paying today’s prices for a product in tomorrow’s market,” Mr Zigomanis explained.

“This makes sense when the property grows in value. But slowing price growth across all markets has seen sentiment shift. This in turn has given rise to greater settlement risk.”

He explained that when property values fall, a property may be valued lower on completion than it was at time of purchase.

“This means that the purchaser requires a larger equity contribution than initially planned. The amount becomes greater if banks are lowering their loan-to-value ratios, meaning that buyers will need to contribute even more equity to settle their purchase,” he said.

Analysis conducted by BIS Shrapnel suggests that across the inner suburbs of Sydney, Melbourne and Brisbane, OTP apartment resales have realised smaller gains than established apartment resales.

With the Melbourne market, OTP properties have lost an average of 1.3 per cent upon their resale since 2011. The average gain across all apartment resales in Melbourne was 6.5 per cent on the other hand.

“Resales of purchases in Sydney since 2015 have seen the highest gains of 18.2 per cent, while its OTP market has still done relatively well, returning aggregate 9 per cent gains on average,” Mr Zigomanis said.

“The gains seen in Sydney were driven by the more significant upturn in its market, which peaked in 2017. Meanwhile, growth upon resale of apartments in Brisbane has been muted.”

With apartment prices expected to fall further in 2019, the percentage of OTP apartment purchases recording a loss upon resale is expected to rise, he warned.

“Losses to purchasers reduce the attractiveness to subsequent investor buyers and will increase settlement risk, particularly in inner city pockets and in buildings where investors make up a large component of demand,” he said.

“If an increasing number of apartments do not settle, unsold stock will re-enter the market, often at a lower price, pushing prices further down. On a large enough scale, developers may also not be able to meet their finance commitments, resulting in more defaults and stock sold off quickly at a discount to cover debt.”

The possibility of changes to negative gearing policy upon a change of government at the next federal election may have an additional negative impact upon OTP resales, he warned.

“The removal of negative gearing benefits from established dwellings and quarantining it to new dwellings will further reduce the value of established dwellings relative to new dwellings and is likely to exacerbate resale losses,” he said.

Last year, SMSF loan providers had already started to tighten up on the types of properties that they would lend on for SMSFs, according to You’re Welcome Finance director Chris Straw.

“I think the concern that’s out there is that you’ve bought off the plan, by the time the SMSF is required to settle on the purchase, the property valuation might have gone down,” Mr Straw explained previously.

“They don’t want to have a situation where the SMSF has lost money before they’ve actually bought the property because that obviously affects people’s retirement, so it’s a good thing that they’re tightening this kind of thing up.”