Are you thinking about buying an off the plan property? Be it an apartment, a house or a townhouse, here are some of the most important things you need to understand – including risks and benefits – to make a good purchase decision.
What is an off the plan property, and how does it work?
Let’s start with the basics. Buying off the plan means that you are buying a property that is yet to be built. In other words, a property that does not exist yet. And this involves benefits but also some risks that you need to be aware of.
Off the plan buyers are typically required to pay an initial 5% – 10% deposit, and the remaining balance is to be paid on settlement. This means that there could be a long period (maybe months or even years) between paying the initial deposit and actually beginning with the loan repayment of the property as it only starts about 1 month after settlement.
What are the benefits involved in buying off the plan?
- As you might have already noticed, the first (and probably the most important) benefit of buying off the plan is that you have quite a long time before paying the entire balance, which means you will also have more time to save and organize your financial life.
- Another positive aspect is that developers start selling off the plan properties long before the construction begins. In many cases, the price rate tends to be more attractive than established properties.
- As it will take some time for the property to be fully built, the market value may increase throughout this process, resulting in capital growth even before the settlement. However, it is important to highlight that capital loss is also a real possibility once the market value is subject to decreasing too.
- Depending on the State or Territory you are buying, there might be benefits such as the First Home Owner Grant (FHOG) and Stamp Duty concession.
And what about the risks of off the plan purchases?
- Buying a property off the plan is like buying something you have never seen before. Of course, you will check the project, visit display units and do your research on the developer’s reputation. However, this is still an uncertain decision.
- The project may be perfect, but not all developers will deliver properties meeting the quality standards you expect.
- Constructions can be delayed or even not go ahead, and this means you might lose money (depending on the situation) or miss capital gain from other investments.
Having all these pros and cons in mind, it is important to say that buying off the plan is not for everyone. It depends on how much risk you are willing to take and what your current financial situation is.
For this reason, it is crucial to work with a team of experts to help you make the right decisions when it comes to finding a trustworthy developer and understanding all the terms and conditions before signing the contract.
If you consider buying a property off the plan, don’t hesitate to contact us. We will be happy to be part of this journey towards your dream house in Australia.