While many people go through the regular private treaty route of purchase at auction when buying a house, there is another option that Australians can take up.
Buying off the plan is one way that many house hunters get ahead in the market however, it’s important to consider all risks and benefits.
What is buying off the plan?
Rather than purchase a property that has already been built, buying off the plan means you secure real estate when it is still in the development process. It could be a house, an apartment, a duplex or something else entirely.
They might not be ready to live in but they can be ready for you to buy.
You’ll usually have a detailed look at architectural blueprints and developments plans, with you or your representative in contact with developers, builders and agents to work out the sale. It has a series of risks and benefits, which are important to research in detail before making a financial commitment.
When you buy property off the plan, you can actually have input into the development process. This is perfect when you want specific, tailored features, or desire a completed home that aligns with your vision, all while skipping the renovations process (and perhaps protecting your savings account a bit).
With market fluctuations, there is the chance that you can buy a property that then substantially increases in value by the time it is completed. This can be an excellent way to kick start a property investment portfolio.
Due to this, you can make significant savings on stamp duty, which is determined at the date of contract, rather than when the property’s construction is completed. Additionally, you get a foot in the door on a brand new development!
Risks to consider
As above, the property market can be fickle. You may find that a property actually decreases in value between contract and completion, resulting in a net loss and perhaps more stamp duty than if you had purchased the home upon completion.
Due to the ongoing building process, there can be unexpected halts in the delivery of the development, which means you could be without a home for longer than expected. This is especially important to consider if you are also selling your current home and plan to move into this off-the-plan property.
Also, you won’t see exactly what you have bought until it is completed. Sometimes the reality of a development might not be exactly what you imagined upon viewing the plans but because you have already signed the contract, it’s unlikely that you will be able to exit this agreement simply because it differs from the plans you signed on for.
Is it a good investment?
As with any decision, it’s important to remember that no two people have the exact same situation when purchasing property however, the opportunity to secure a new piece of real estate at what can be a cheap price is temptation enough for many.
It’s vital to use a home loan calculator, and obtain relevant legal advice before you fully commit to an off-the-plan property purchase.