February 08, 2017
Purchasing real estate prior to, or during construction, is commonly known as “Buying off the plan”. It means you enter into a contract to purchase a property before the property title is created and the building is constructed.
Buying off the plan can include the sale of vacant land, house and land packages and strata properties.
Advantages to buying off the plan:
Time to save - For some purchasers, buying off the plan means the long settlement period gives them a chance to save for future repayments.
Property value increase - If the current trends in the property market continue, homebuyers may well see the value of the property increase at time of settlement.
First in, best dressed - Buying one of the first properties to be released in a development can usually mean good value for money as developers need fast early sales so price these early release properties accordingly.
Government incentives – homebuyers can make significant savings on Stamp Duty in many instances especially if you are first homebuyer and the property costs under $600’000. In addition, off the plan purchases can realise significant depreciation tax savings that are greater than those available on existing buildings if purchased for investment purposes.
Flexibility - Buying off the plan often allows you the flexibility to customise floor plans and finishes.
Small deposit - Buying a property off the plan usually requires a 10% deposit of the contract price. Some developers will require a bank guarantee, while others will allow you to use a deposit bond or cash deposit.
Savings on interest - Developers often credit the homebuyer with any interest made on their cash deposit.
With these advantages also comes some disadvantages. Which is why, before signing a contract and committing funds, it’s important to research the proposed property, complete inspections, ask questions and seek professional advice. There is a risk that the value of the property may decrease during settlement, so it is important to be sure about the area, not just the property. If you intend to hold the property long term, value fluctuations in the immediate future may not be of much concern to you.
How I can help? I will search through hundreds of home loans to find the one that’s right for you, calculate your borrowing power, work out repayments and answer any questions that you may have.
Expert advice at no cost to you, just ‘Ask Andrew’ by completing the contact form at the top right of this page or call on 9401 9244 or 0412 498 872 to find out what your options are and what might work best for your circumstances.