Buying properties off-the-plan has become a popular way for home buyers and investors to purchase property. However, when buying a property that is yet to be built, there are some important considerations to think about before signing a contract. Here are some pros and cons to consider before buying off-the-plan.
If you purchase your property early enough, you might be able to secure a discount. When developers are trying to put a new project together, they are typically required to secure a number of presales to help cover their debt. Many will offer a discount to get early sales over the line, which shores up the project.
Buying off-the-plan allows buyers to customise certain aspects of their property before it is completed, such as fittings and fixtures. This can give buyers more personalisation and control over the feel of their new home.
Potential capital growth
In a rising property market, buying off-the-plan can offer the potential for capital growth. As the property is not yet built, buyers can benefit from any market growth that occurs during the construction period, which may result in a higher valuation upon completion. This can also be an advantage given that the buyer might only need to put down a small amount of money initially.
Off-the-plan developments allows buyers the opportunity to purchase a brand-new property, which can offer advantages such as a modern design, energy efficiency and lower maintenance costs. Newer properties are also often easier to rent out, which means you can potentially attract higher-quality tenants.
One of the biggest risks with buying off-the-plan is that completion may be delayed. Because developers need to secure pre-sales before they can access the finance to pay for construction, there can be delays with starting. It is possible to use a ‘sunset’ clause to protect yourself, if construction doesn’t begin in a timely manner.
While buying off-the-plan can offer the potential for capital growth, it also carries the risk of market fluctuations. If the market declines during the construction period, the property may be worth less than the purchase price upon completion. It might also be hard for you to secure finance if the market value of the property declines before it is completed.
Changes to plans
Developers may make changes to the plans during the construction process, which can impact the final outcome of the property. Buyers should ensure they have a clear understanding of any potential changes before signing a contract.
In recent years, there have been issues with some apartment developments in Australia and you can never truly know what you’re getting if you buy something off-the-plan. Buyers should research the developer’s track record and inspect their previous projects to ensure they have a reputation for quality. It’s also worth doing the same for the builder that is being used.
Given the potential risks involved with buying off-the-plan, it is vital that buyers do their research before making a purchase. As well as assessing the historical quality of both the builder and developer, you should also analyse the state of the market in that area. See how many developments are coming through and how the influx of new properties might affect the market.
Be sure to seek professional advice from a mortgage broker and lawyer so you know what you’re signing and what the implications are. If there is anything we can do to support you, please contact us.
*This information is general in nature and does not take into consideration your individual circumstances. Please contact us for further information.