Is buying off the plan a potential money saving strategy or a calculated gamble?
Purchasing an unfinished property comes with both potential pro’s and con’s. Be sure to weigh up both.
Get started with less
One of the big drawcards of buying off the plan is only a small deposit may be required which can be 5-10% of the purchase price. That can make a purchase far more realistic especially for first home buyers. It also provides valuable time to save more of a deposit while the building is being constructed.
You may even be able to secure the property with a deposit guarantee costing just a few hundred dollars, with the balance payable on completion of the building.
Stamp duty savings
The savings you can obtain with off the plan properties can be impressive.
Stamp duty is calculated at the time of signing the contract of sale, and when purchasing off the plan, duty will be assessed on the land value because the building hasn’t been constructed yet.
Together with savings on duty, investors enjoy the full range of depreciation allowances associated with a brand new property.
Getting in Early
Developers might require a minimum number of buyers to commit to a purchase before construction gets underway. When that’s the case, early-bird buyers may be offered sweeteners including discounts that won’t be available once the building is completed.
By getting in early you also have the advantage of selecting your preferred choice of colour scheme and finishes from the developer’s range.
It can come with a risk.
For all the advantage’s, there are some things you need to take into account when buying off the plan.
One of these is that you can’t physically walk in and around the property, experience the spaciousness, listen for road or other noise, and get a real feel for the position your property will have.
That makes it important to ask some hard questions about acoustics, building materials – and even the builder’s experience with past projects.
Get Legal advice
The contract of sale for off the plan properties can be complex – certainly more so than for existing houses. Mortgage choice can have our conveyancer review the contract for you before signing giving you an extra level of comfort. Make note of any changes the developer can make once construction gets started.
Keep any eye on the property market
Even with an experienced builder and a formal contract in place, buyers can’t control how the market performs while the property is being built.
If prices fall during the construction period you could be left paying more than the property is worth. This is especially important if you are likely to borrow a high percentage of the property’s value – your ability to secure lending approval could be impacted.
Speak to John Costa from Mortgage Choice for tips on how off the plan works – and whether it is a good choice for you.