Is it better to invest in an off the plan property?

October 31, 2017
Benjamin Williams

New research from Mortgage Choice has revealed that a majority of investors are opting for established homes over off-the-plan properties.

The company’s annual Investor Survey found 76.9% of Australians bought an existing dwelling, compared to 23.1% who bought a new build.

In 2015, 75.8% of investors said they bought an existing property. In 2016, that number had risen to 76.7%, and now we know that almost 77% of investors would prefer an established dwelling.

There are a number of reasons why investors are increasingly choosing to buy an established home.

First, established dwellings can be bought and tenants moved into straight away. When investors purchase an off-the-plan property, they may have to wait several years before they can access it and generate income from potential tenants.

Secondly, depending on the location and the condition of the home, existing properties can sometimes be more affordable and provide property investors with more room to negotiate on price.

Thirdly, investors can renovate an older property, which allows them to add value to the dwelling over the long-term.

Lastly, there have been examples where the valuation for an off-the-plan property has come back short, forcing borrowers to make up the difference.

For example, an investor might sign a contract this year to buy an apartment for $600,000, but by the time it is finished two years later, the bank may value the property at only $500,000. As a result, the investor will have to find an additional $100,000 to pay the developer.

If you’re considering purchasing an off-the-plan property, it’s important you’re aware that the market is quite complex at the moment. Lenders are particularly conservative in the type and location of properties against which they are prepared to lend and they have tightened their lending terms for investors.

At the end of the day, there is no right or wrong answer when it comes to choosing a particular property type to buy as an investment.
Whether you choose an existing home or a new build, it all comes down to personal preference.

You should buy a property that meets your current needs and budget, as well as the needs of your future tenants.

Make an appointment to speak to your local Mortgage Choice broker who can assist with your property investment needs.

Posted in: Property investment

Contact us today.

Additional Comments? * :