If you’re set on securing a property in a new development, buying off the plan could be a tempting option.
Like any decision, it’s important to weigh up the benefits as well as the downsides to purchasing a property which is yet to be built or only partly constructed. Whether you’re a home buyer or an investor, here are a few things to consider before you go ahead:
- If you buy off plan, you may be eligible for potential stamp duty savings. Duty is based on the value of the land and building on the date the sale contract is signed so, if the building isn’t complete, stamp duty may be lower than if you purchased a finished property. There may also be stamp duty exemptions or reductions if you are a first home buyer or an investor buying off the plan. These may vary from state to state, and depend on the purchase price of the property.
- If you are one of the first off the plan buyers, you may be able to take advantage of ‘early bird’ discounts developers sometimes offer and therefore potentially make savings on the purchase price.
- In a rising market, your home could be worth more upon completion than the price you paid when it was being built. Of course, the flipside is that if the market cools during the construction period you could end up paying more for the property than it’s worth – something that could impact your home loan approval.
- Display suites, brochures and plans are no match for the real thing, and you won’t get a true feel for the light, noise and outlook of your particular property until construction is complete. There is always the risk that you won’t like the finished property, and that can make buying off the plan a gamble.
- Off the plan sale contracts tend to be more complex than contracts for established homes. There may be clauses which allow the developer to change the finishes, fittings or the dimensions of the building. There may even be clauses that allow the developer to cancel the project altogether in certain circumstances. This makes it critical to have the contract of sale reviewed by a solicitor so you know exactly what you are buying into.
- Finally, remember your plans may change. The longer the construction period, the greater the likelihood that something may occur which impact your willingness or ability to complete the purchase. Interest rates may rise; work commitments could force a relocation; or family obligations may mean you need more space. If you decide you no longer want, or can afford the property, you may still be tied into a contract and bailing out may be difficult and expensive.
Think through an off the plan purchase carefully, and consider talking to your mortgage broker, lender and legal advisor to be sure it is the right choice for you.
The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at ing.com.au when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf.