Buying off the plan can offer attractive incentives for both investors and owner-occupiers. It’s an opportunity to secure a property before construction is complete, often with potential financial and lifestyle benefits.
Buyers put down a deposit (usually 10 per cent) for a house or apartment based on site plans. These commitments to buy help developers fund construction, with full payment due only on completion. The lure for buyers, is a potential capital gain if values rise during this period, but that can be a big `if’.
One of the biggest advantages of buying off the plan is time. Unlike traditional property purchases with relatively short windows to round up the total finance, you will have at least 12 months, if not longer, to settle. Savvy buyers will take advantage of this extra time to save their pennies and reduce their borrowings.
If you dream of a new home but have nightmares at the thought of building one, an off-the-plan purchase may be the perfect compromise. Although you will not get to design everything as you would with a custom-built home, most off-the-plan developments allow some customisation of finishes and fixtures. Make sure your contract outlines what you can tailor and that you are clear on any additional costs.
Various incentives are still being dangled in front of first home buyers, which may add to the appeal of buying off the plan.
Concessions vary across Australia, so visit your State or Territory website (or simply talk to a mortgage broker) for the latest information on grants and exemptions. You can also research your eligibility for stamp duty concessions on new properties using our Stamp Duty Calculator.
Off-the-plan apartments are often pitched heavily at investors due to the tax benefits that come with depreciation on new properties and rental guarantees. Tax savings will depend on your individual circumstances, but generally the newer the property, the higher the depreciation allowance for the building and fixtures.
Investors may also be offered attractive rental guarantees for a limited period. Make sure you do your homework on rental returns on similar properties in the area before accepting the developer’s terms. Be wary of over-inflated rental guarantees. Builders will sometimes promise a high-rent yield to lure investors, build the cost into the property price and then subsidise any gap themselves for a short period. When the rental guarantee expires, you may find the actual market rent falls well short of what you originally pocketed. If investing, make sure you have the option to manage the property yourself or with your chosen property manager from the time you take possession.
Many buyers get swept up on a wave of rising property prices when they hand over their deposit in exchange for a floor plan. Historically, property is a consistent long-term performer, but property prices can plateau and even wane at the mercy of economic factors.
Buyers also need to be wary of over-supply, which may devalue their property.
Make sure you consider the bigger picture when buying off the plan. Research how many other developments are planned in the area and whether any increase in apartment numbers is justified by new or improved infrastructure, such as transport corridors, business precincts, universities or hospitals.
Make sure you purchase from a reputable builder and take the time to research their previous projects. Do they use quality contractors? Do they deliver projects on time? Make a point of visiting some of their projects, so you can assess the finished product first-hand.
Whatever your circumstances, we will find the deal that’s right for you.
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