Published at: 2/3/2017 10:21:13 AM
With a hive of construction activity going on in many state capitals, a growing number of properties are being sold off the plan. It’s a purchase option that gives buyers a range of valuable advantages. But along with the pluses there are downsides to consider. Here’s what to weigh up.
In a rising market, buying off-the-plan can be a masterstroke. You’re committing to a property at today’s prices and, if all goes well, by the time the development is completed the place will have risen in value providing a rapid capital gain.
However, the reverse can also happen. If values weaken, off-the-plan buyers can be left paying more for the property than necessary.
The only way to avoid this downside is by thoroughly researching the market to make an assessment of how it is likely to behave. Bear in mind, the longer the time to completion, the harder it is to estimate how property values will move.
Valuable stamp duty concessions are often available with off-the-plan purchases. Check with the government revenue office in your state or territory to know just how much you could save on duty – don’t just rely on information provided by the developer.
A 10 percent deposit will usually secure an off-the-plan property. Once this is paid, off-the-plan buyers have a window of opportunity to ramp up personal savings and this can mean taking out a smaller home loan with less to repay each month.
Buying off-the-plan means committing to a property you cannot physically inspect, and the display suite could differ in layout, size and finishes from the apartment you’re signing up for.
Carefully check the specs outlined in the sale contract for your apartment. There is no guarantee they’ll match those in the marketing material. Ask lots of questions about finishes and fittings like blinds, curtains, tiles and carpets to get a clear idea of what you’re buying.
Consider the outlook of your apartment also. Will it be in the shadow of a far larger building for much of the day? Will the bedroom look directly into the office block next door?
Resist the urge to sign on the dotted line until you’ve had the contract of sale thoroughly checked by a solicitor or conveyancer. Off-the-plan contracts are usually more complex than for established homes – often with clauses that favour the developer. Your legal adviser can explain any clauses of concern.
On a property that hasn’t even seen the excavators arrive, you could be looking at an extended time to completion. A lot could change in that timeframe. Think carefully about anything that could impact your ability to complete the purchase further down the track. Even if you no longer want the property, you’re still committed to buying it, and bailing out can be costly.
Opting for properties backed by an established developer with a blue chip reputation doesn’t just make it more likely the end product will be high quality. If the developer becomes insolvent at any stage during construction you’ll be in a long line of other creditors trying to get your money back.
Sticking to reputable developers also provides the opportunity to check out completed developments by the same company to see how well they have stood the test of time.
When it comes to buying an apartment, size really can matter. Many lenders shy away from, or ask for a bigger deposit on, very small apartments – typically studio units with less than 50 square metres of floor space. Similarly, specific purpose apartments like student accommodation can be subject to stricter lending requirements. The key is to speak with your lender before you start looking at off-the-plan properties to know whether the type of apartment you’re considering falls outside normal lending conditions.