If you purchase a property off the plan, it means that you are signing a contract to buy a property that hasn’t been built or is still under construction. Therefore, you are making decisions based solely on the building plans and artist renderings of the anticipated structure rather than a finished product. Although this option has many benefits, there are also risks that need to be carefully considered before you sign the dotted line. Join us as we explore and explain the pros, cons and considerations of buying off the plan.
The pros
1. Lower purchasing price
The key advantage to an off the plan purchase is agreeing upon a price at the beginning of the process, rather than waiting for the building to be complete. Even if property prices rise significantly for that area during the time it takes for yours to be built, you still only pay the original agreed purchase price. Win!
2. Discounts on stamp duty
Often it’s the additional costs of purchasing a property that make it seem unattainable, such as stamp duty. When purchasing off the plan, the stamp duty applies only to the land value and not the finished product, which could potentially be a significant saving.
3. Save on repair costs
Purchasing off the plan means you’re moving into a brand new property when it’s complete meaning less repair and renovation costs you need to fork out. Instead, you can invest that money on the fancy new recliner chair you’ve been eyeing off!
4. A little more breathing room
Off the plan properties typically require a smaller deposit to secure the sale, giving you more time to get the rest of your finances in order. (Not sure what else you need to save/pay for when purchasing? You might find this blog helpful.)
The risks
1. It’s not always a sure deal
You’re essentially purchasing something that doesn’t exist yet, so if the developer declares bankruptcy before the build is complete, you’re at risk of losing your deposit as well as your future home. Conduct thorough research on the developer before committing to an off the plan contract. Contact past purchasers, conduct a thorough Google stalk and visit past projects to assess the quality of their work.
2. Delays can be costly
We know all too well that unforeseen circumstances can arise at any moment, such as supply shortages and other building delays (cheers Covid), which can push a completion date further along. This is a particularly important consideration if you have a lease expiring or need to sell a property. Your financial situation may also change over time if the delays are significant. This means that you may not be able to borrow the amount you were pre-approved for when you initially signed the contract. Again, do your research to better understand your developer and builder’s track record to minimise the risk.
3. Manage your expectations
As you’re investing in a property that does not yet exist, there is the possibility that it may not meet your expectations. Ensure the artist renderings are accurate and research the materials being used to avoid disappointment when you move in.
The best preparation you can do before purchasing off the plan is speaking to an expert… and luckily we know a few! We’ve been working and living in the Cranbourne and Casey area for decades, so we’re well versed with both expert conveyancing experience alongside critical local knowledge (and reputations). To arrange a complementary consultation, contact our friendly conveyancing team on (03) 5996 1600.
