One way to dip your toe in the property market if you want to buy a brand new property is to buy off the plan. This involves entering into an agreement with a developer when a property has yet to be built. It has its pros and cons but if you are considering buying off the plan there are a few things you need to get across.

“When you purchase the property, it doesn’t exist so you are relying on descriptions and a variety of other items that are being requested to approve – carpets and fittings and these sorts of things,” says chief executive officer of the Real Estate Institute of New South Wales, Tim McKibbin.

“And because you don’t actually see the property, the end result may not be what you had envisaged. But…you do end up with a new property.”

What Does Buying Off The Plan Involve?

Buying off the plan involves entering into a contract with a developer before a property has been completed or in many cases before construction has even begun. There are usually two ways you can do this:

Buying an apartment

You will need to pay a deposit, usually around 10% of the purchase price and no more than 10% in some states like Victoria, up front and pay the remainder when construction starts. The value of apartments may be slightly more volatile than that of standalone houses, meaning that there is a higher chance the value of your apartment has changed in the time it takes for it to complete construction.

Buying a home off the plan

The process for buying off the plan for an apartment and standalone are essentially the same, in that you will need to pay an upfront deposit and the remainder upon completion. There are usually increased protections for buyers when buying off the plan for both houses and apartments depending on the state. For example, in NSW off-the-plan buyers have a 10 business day cooling off period whereas buyers of already constructed homes usually only have 5.

A contract will generally ensure a deposit is returned if an off-the-plan development fails, however it won’t usually cover compensation. Buyers may have made significant personal commitments (like selling their home) or lost the opportunity to purchase elsewhere, in a rising property market. Changing interest rates or lending conditions may also impact buyers’ borrowing ability over time.

A buyer risks losing their deposit altogether if a developer becomes insolvent and steps haven’t been taken to protect the deposit. A contract should always include a condition requiring the deposit be held in a trust account of a solicitor, real estate agent or settlement agent, and not to be available to the developer until after settlement.

Anyone considering an off-the-plan purchase should be aware of high pressure selling techniques and mindful that design concepts or advertising material may not live up to expectations once a project’s complete. Always compare the advertising material with the contract, as the developer should provide information on any expected variations or substitutions to design, fixtures and/or fittings. Carry out your own extensive research and seek independent advice from a source completely separate from the development proposal.

Further information about buying off-the-plan, please see  www.consumerprotection.wa.gov.au

In Victoria you are not required to pay a deposit of more than 10% of the purchase price and if the subdivision for the property is not registered by a time specified in the contract, or a default time of 18 months, the purchaser has the right to end the contract and get their deposit back.

Pros of buying off the plan

There can be benefits to buying property off the plan. Depending on what the property market is doing, in some cases it may be cheaper to purchase property off the plan if the value rises during the years of construction. But this is hard to predict if you don’t have a crystal ball—and none of us do. Here are some more concrete pros to buying off the plan.

Deferring stamp duty

Many states will allow off-the-plan buyers to defer their stamp duty for 12 months after they sign the agreement or until the property is completed, whichever comes sooner. In some states, like Victoria, there may be an off the plan duty concession.

Time to arrange mortgage

You will need to pay the deposit to secure the agreement but depending on when completion is planned for, you may have some time to organise a mortgage with a lender. Essentially you have more time than you would purchasing an already established property which may also be useful if you expect financial windfalls in the coming months.

More control

You may have more input in the building process and be able to choose some finishings and fittings but this will depend on the developer.

Cons of Buying Off The Plan

McKibbon says when it comes to buying off the plan buyers have to do a lot of due diligence. “It is very important to become immersed in the data,” he says. “Because there have been instances where people have made assumptions about aspects of the property, which were inaccurate.”

The property doesn’t exist yet

Essentially you are buying an idea based on a developer’s sketch or simulation and not something you’ve been able to inspect in real life.

Developer could go bust

Unfortunately this does and could happen. There are additional protections for off the plan buyers but there is a real chance you could lose any deposit paid so make sure you do due diligence on the developer.

Value could fall

Just like values can increase, they can also fall and you could end up with a property upon completion that is worth much less than what you paid for it.

Checklist for Buying Off the Plan:

  • Get a firm completion date from the developer.
  • Clarify the sunset clause. Developers are generally unable to use sunset clauses to end contracts without an order from the Supreme Court (unless the purchaser agrees).
  • Clarify how much input you will be able to have around fittings, soft furnishings, paint colour etc.
  • Ask for a proposed schedule of finishings if it has not been provided.
  • Research the developer’s history.

How can we help? if you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.


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The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

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