When buying a new home there are a tonne of options to consider. One option that should be at the forefront of your decision making is buying off-the-plan.
Off-the-plan refers to purchasing a property before it is constructed. Most of the time this means you will be buying a property while it is just a hole in the ground, and while it may seem crazy to buy something that has not been built yet, there are many benefits to purchasing an off-the-plan property:
- One of the biggest benefits of buying off-the-plan is having the ability to customise the finishes and fittings in the home to suit your personal needs.
- Since stamp duty is calculated based on the value of the land and the building, you will essentially only have to pay based on the value of the land, because there is no building yet!
- In terms of an investment property, the depreciation tax savings are greater for an off-the-plan property, as the newer the building is, the greater the savings are.
- You have the ability to lock in the price that you will pay, which is financially beneficial as there is a good chance the property will increase significantly in value by the time of completion.
- The extra time you have while you wait for your new house to be built will allow you ample time to sell your existing home.
- If you are a first home buyer, you will be able to benefit from the First Home Owners Grant, as well as stamp duty exemptions.
- Newly built properties in Australia come with a 7 year builder’s guarantee, which means any faults must be repaired by the builder.
- There is always a risk that you will not get what you have already paid for. That is why it is important to have a comprehensive contract detailing all features, fixtures, fittings and time frames to ensure you have a leg to stand on when expectations are not met.
- Since there is no way to see your apartment before purchasing it, there is a chance that you simply might not like it. Once completed it may look different to your expectations and it will be too late to change anything.
- If your circumstances change during the build and you are no longer able to buy, it is important to act quickly and ensure you find another buyer to purchase from you at settlement.
- A risk of having a locked in price is the uncertainty of the property market. Your property may suddenly lose value but you will still be paying the agreed price for it.
Things To Do
- Make sure that it is definitely the property you want. This includes the size, suburb, orientation, and whether it is on a level you want to be on.
- Visit the property site regularly and check if there are any other constructions occurring that may obstruct your view.
- Carefully inspect the display home, including fixtures, fittings and finishes.
- Research the market conditions and get advice from professionals on the right time to buy.
- Research the developer. Do not be afraid to ask detailed questions and inspect other projects completed by them in the past. You may even want to talk with a past client to gauge satisfaction.
- Have a legal professional look over all contracts and translate key points to you in laymen’s terms.
- Make sure you have a lender that has agreed to financing. A lot of lenders are reluctant to finance off-the-plan properties given their high risk and the chance that the lendee will sell the property for a high price straight away, meaning the lender will lose interest.
- Check that your deposit is going into a trust account, and do not let that money be released to a personal name to help build the project. This is a sure fire way to lose a lot of money very quickly.
Essentially, when buying off-the-plan, make sure you do the appropriate research to make sure it is the right option for you!
Emily Blatchford, Huffington Post, Buying A House Off The Plan: The Things You Need To Know, http://www.huffingtonpost.com.au/2016/02/18/buying-off-the-plan-australia_n_9269506.html, Accessed April 7th, 2017.
Oz Property Law, Buying Property Off-the-plan, http://ozpropertylaw.com/buying-property-off-the-plan/?gclid=CKqb2qX4kNMCFUcKKgodLqkF-g , Accessed April 7th, 2017.
Real Estate View, Things to Consider when Buying Off-the-plan, https://advice.realestateview.com.au/buying/things-to-consider-when-buying-off-the-plan/, Accessed April 7th, 2017.
Tim McIntyre, Your Investment Property, The Trick to Buying off the Plan, http://www.yourinvestmentpropertymag.com.au/buying-property/the-trick-to-buying-off-the-plan-148257.aspx, Accessed April 7th, 2017.