Buying Off The Plan

By Mary Nebotakis, Managing Director, Natloans, B. Eco, Dip. Financial Services

Buying Off The Plan

What Is This?

In brief terms, ‘buying off the plan’ refers to the practice of signing a contract with a developer, which purchases a property that has not yet been built, but rather, is being planned for building, usually an apartment or complex thereof. Therefore respecting this purchase, there is no property to inspect, and the buyer is limited to blueprints and artistic renderings to make their decision upon.

Very often, there is a temptation in us all to label a decision as either ‘bad’, or ‘good’. In this article, the author will attempt to lay out the facts and conditions surrounding buying off the plan in as neutral terms as possible, so as to give the reader the most objective introduction, or frame of reference possible in forming their own opinions thereof.

What Are The Benefits of Buying Off The Plan?

There are several benefits, notably and namely;

Stamp Duty, Price
Perhaps most notable to some is the fact of a reduced price often being associated with buying off the plan. This comes from the fact that when one does buy off the plan, they do not need to pay stamp duty on the final product which has been built, that being $18,700 in the state of Victoria alone, a buyer will certainly save a very significant amount of money on account of having chosen to purchase through this channel. That being said, this alleviation applies only to the building itself, with a stamp duty still being due with respects to the land upon which it was built. Nonetheless, such a sum is no thing to sneeze at.

Low Deposit, Longer Window For Preparation
Usually a deposit for this sort of purchase will be around the 10% mark. That said, it can range as low 5% and as highly 20%. That being said, securely the contract is relatively easy, and the fact of the wait for the structure to be built means that one is afforded with plenty of time to save up for the purchase before the time comes to begin paying back.

Potential For Contributing To Design!
If you fund the building of the complex or structure, you may be able to contribute, to varying degrees, to the interior design and aesthetic of the building itself. To this end, however, one will have to verify with their developers to know for sure what is possible.

Maintenance, Condition
The fact of a building being erected more recently means that the technology which powers and maintains it is more modern, more green and more advanced. This equates to tax benefits, should something like a carbon tax ever be reinstated, but also means that the technology will be more efficient and therefore cost-effective by default on account of its advancement.

Moreover, a building being brand new means that wear-and-tear will be absent in totality, and damage from previous owners and tenants can be a concern totally unheard of! This means no, secret peeling paint and rickety floors for residents and tenants, and no dodgy plumbing or ventilation to be fixed for landlords and investors! Brilliant!

Are There Are Cons?

As with all things, with pros come cons.

Sunset Clause
This is a statement which puts a limit on the time in which the developers can finish the project for their investors. It is a plainly stated date, upon which, if the project is not yet completed, the developers will be forced to return the investors deposits.

Sounds good, right? Well, whilst the clause was initially introduced to protect buyers from excessive delays, it has been exploited in some cases by crooked developers. These developers will take the deposits, begin building the buildings, and then deliberately transgress the clause so as to terminate the contracts, and then sell the properties to other buyers for a higher price.

As stated previously, research and invest wisely. Do not turn a single stone in ensuring that your investment is solid, and that the people with whom you are working are trustworthy.

Disappointment Of Expectations
As mentioned previously, the fact of purchasing a property which is not in existence at the time of buying means that one cannot walk through and determined for themselves whether they like the place as a home or not. Thus, when reduced to only blue prints and virtual constructions, one may find themselves disappointed with the final product upon which they had waited, should it not match up to home of their fantasies.

Developer Bankruptcy
It is strongly recommended that a buyer researches the prestige and history of the developer with whom they are considering to work, so as to minimise the probability 0f one’s stepping into a contract which could serve to detriment their finances.

If a developer should go into bankruptcy in the middle of your project, you can expect to never see your deposit again, and thus, have lost what may be a rather sizeable investment. Research and invest wisely.

For More Information…

Be sure to get the best financial advice possible before embarking upon any big decision, such as buying off the plan. Here at Natloans, our team is happy to hear out any qualms you may harbour, and to provide you with a quick quote respecting the matter. If you’re interested, be sure to call us at 1300 955 791, or, check out our website for more information about home loan solutions!

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Buying Off The Plan

By Mary Nebotakis, Managing Director, Natloans, B. Eco, Dip. Financial Services