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BUYING OFF THE PLAN

 

 

What is buying off the plan?

Buying off the plan is purchasing a property from the developer before or during construction from the plans.
 

How long does a property development take to build?

Depends.  It varies on the size of the development and whether it is apartments or townhouses.  For smaller developments it is generally anywhere from 12-24 months.  With larger developments it can take anywhere from 2 to 5 years.

 

Benefits of purchasing off the plan

  • Lock in the price of the property at todays price with the opportunity for the property to rise whilst the property is being built
  • Time to plan and save whilst the property is being built
  • Securing a high value asset for a low initial capital outlay – While a deposit is made to secure the property (usually 10%), the entire payment doesn't’t need to be paid until the property has been built
  • There is more choice in potential properties to purchase
  • Tax benefits where the ATO allows you to claim a depreciation benefit on new properties from fixtures, fittings and the building.  This is advantageous in comparison to established property.
  • Stamp duty savings in Victoria.  The savings are quite significant in comparison to purchasing an established property
  • Seven year builders guarantee – Newly built properties in Australia come with a 7 year builders guarantee which means structural or interior building faults must be repaired by the builder
  • It is a new property, new design and new build.  You have the latest in style, design and planning for current living.  Also new properties are likely to have less maintenance than existing properties

 

How we assess risk and minimise it

  • Steer away from developers and builders that have had a poor track record in going into bankruptcy or liquidation
  • Steer away from developers that have produced a poor quality development.  We regularly go to open for inspections of developers previous works to assess quality and feedback
  • Steer away from developers that have cut corners on their previous developments.  For example garden landscaping, cheating buyers on contracts of sale with fixtures and fittings.  There are some that over promise and under deliver
  • Property that is over priced based on the value proposition.  Need to be careful as it may delay starting of construction due to the developer unable to get financing.  We use our better judgement to determine whether this is the case and advise you.  Usually if perceived value is greater than the price it triggers a decision to purchase

 

Key points to consider when purchasing off the plan 

  • Ask yourself what you are looking for in a property:
    • Location that you are wanting to live or invest in
    • Type of dwelling: Apartment or Townhouse
    • No. of bedrooms
    • Amenities that are important to you
    • What is the aspect that you are wanting
    • Price budget
  • Research the developments that fits your criterion and your plans (Hot Spot Property Group will be key in this area)
  • Choose the floor plan, level, aspect within the building.  Be mindful of:
    • The layout of the property and whether it is practical and meets your wants (Hot Spot Property Group can assist you in this area)
    • Where the lifts are
    • Where the car park entrances are

 

Before you sign the contract make sure you have an understanding of the following:

  • Who the developer is and what they have developed previously
  • Who the builder is
  • What fixtures and fittings you are getting and is it documented in the contract
  • What is the owners corporation fees
  • How much rent I will be getting if it is an investment
  • How much stamp duty you will be paying off the plan
  • Expected start date, completion date and how long the property will take to be built
  • What is the sunset clause (which is the latest date for completion of the property.  If this is not fulfilled then you should be able to get out with the contract dissolved and the deposit refunded)
  • Once you have decided on the property that you want to purchase what are the terms of the sale upon contract signing:
    • Usually a 10% deposit with the balance at completion
    • The 10% deposit can be paid by cash or bank guarantee.  A bank guarantee is where the deposit money is held by the bank on your behalf with interest paid at term deposit rates and in return the bank issues the vendors solicitor with a bank guarantee

  

Items that are strongly recommended prior to signing: 

  • Visit the site and have a look to see what are the likely aspects, survey the location to see where public transport is, supermarket and shopping centres and access to freeways and main roads
  • See your finance broker to ascertain if you are able to borrow the funds for the off the plan property you are wanting.  You don’t need to get a pre-approval until 3-6 months from settlement however it is wise to get an indication from your finance broker
  • Have a solicitor review the contract.  Recommended prior to signing the contract but you can request to have a ‘subject to solicitor’s approval’ in the contract

 

 

Due diligence checklist - for home and residential property buyers