Purchasing off the plan – is it for you?
Whatever your property purchasing background, the concept of moving into home where you are the first to trial its European appliances, the first to cook in its chef’s kitchen or the first to bathe in its Italian marble bathroom is always a difficult proposition to turn down.
Purchasing off-the-plan also means the buying process is smoother with no stress-inducing auction process to endure and no previous sales figures to pore over.
Then there’s the financial advantages, with off-the-plan buyers finding they are not having to tie up grotesque amounts of capital straight away. Typically you will only be required to pay a 10% deposit, with the remainder due when the development is completed, which may take months or some cases years.
There are also government stamp duty concessions and incentives such as the First Home Owner Grant available on new developments in most states and territories, potentially saving you thousands of dollars when compared with buying an established home.
If you’re an investor buying off-the-plan as a way of increasing your property portfolio and plan to lease your new home to renters, you could also be eligible for big tax deductions. Getting a full depreciation schedule from a quantity surveyor once your property settles, makes it easier to claim deductions on your home’s fittings and fixtures at the end of the tax year.
According to Commonwealth Bank sometimes the purchase price on an off-the-plan development can be less compared with an established property, as “developers typically offer lower prices and financial incentives early on” in order to secure the project, especially before construction starts.
It also goes without saying that a brand new apartment, if built by reputable experienced builders, will not need the ongoing maintenance that an older property often needs.
Yet despite these obvious advantages, a recent report by not-for-profit group Australian Apartment Advocacy (AAA) showed only around one in three (31%) Australian investors and owner/occupiers purchase their apartment before it is built.
According to the survey around 30% of apartment owners nationally were able to see a display apartment, so they could see its size and how it was fitted out. Yet seeing a display apartment had no impact on whether or not they bought off the plan. Those who did and didn’t see a display apartment bought off the plan in similar proportions, the survey showed.
The findings indicate there is a need to build a greater degree of trust between the developers and buyers so that there is a higher level of confidence about buying off the plan.
Finance groups such as banks and other property experts suggest those anxious about buying off the plan gain some feeling of control back by researching things such as current vacancy rates, rental yields and proposed future developments to ensure there is nothing that could potentially impact their property purchase, should they go ahead.
Likewise, ANZ and Commonwealth Bank say purchasers should always make sure to read their chosen developer’s terms and conditions very carefully before signing a contract. They recommend seeking professional advice from a lawyer or conveyancer prior to signing on the dotted line.