Developers sell off the plan to entice as many sales commitments as possible to then secure from their lender the finance they need for the build. Because buyers are essentially handing over their deposit for the promise of an apartment they won’t see for one to two years (or more), prices are set at current market rates with incentives often offered to entice buyers. This adds to the capital gain potential, but price rises are never guaranteed, as we have seen in past years.
In exchange for your deposit, the developer should provide a contract that outlines the details of your particular purchase, the completion date for the development and the deadline for when a decision must be made as to whether the development will go ahead. That decision usually hinges on whether sufficient finance has been secured. If the developer pulls the pin or passes the decision deadline, you should be entitled to a refund of your deposit, but this depends on the conditions of the sale contract, so it pays to read this document carefully and if required seek financial or legal advice. Full payment for the property is not required until settlement, which is usually one to three months post completion.
While buying off the plan looks great on paper and can reap rewards, getting in on the ground floor of new development is not always a fast track to making money. Blue Wealth looks at how you can make the most of the opportunity and avoid some of the common pitfalls.
Blue Wealth's research methodology has been developed by a team of industry professionals and combines years of experience, study and analysis. It is the country's most comprehensive, up-to-date research methodology.
Our research methodology adopts a 'macro to micro' approach and has four steps:
Step one - Market timing
This step uses historical price data to determine a property markets position in its cycle together with forward-looking gauges of a market's potential for capital gain such as growth in sales volumes, investor lending and supply and demand analysis
Step two - Macro research
This step uses macroeconomic analysis to identify geographical regions that are likely to experience strong capital growth. Our research indicates that the following factors impact the property market.
- Employment and Economic Growth
- Population and Demographic Changes
- Infrastructure and Government Spending
- Supply and Demand
Step three - Micro research
Once a region has been identified as having strong growth potential, Blue Wealth's process of micro research is then conducted. Our micro research analysis includes:
Step four - Blue Wealth index
Every property is then rated on a scale of 1-10 for its potential in:
- Cash flow
Growth is the key for creating long-term wealth, however, we recognise that many clients are sensitive to cash flow and as a result Blue Wealth only approves properties that have scored at seven or above for both these categories. The Blue Wealth Index provides investors with a simple way to compare investments and ensure they acquire properties most suitable for their portfolio.