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.
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