NewsGuidesWhat is buying off the plan and is it right for you?

What is buying off the plan and is it right for you?

What is buying off the plan and is it right for you?
Joel RobinsonJan 25, 20194 min read
For investors and first home buyers, buying off the plan can present an exciting opportunity. Buying property off the plan is a smart way to get the most from your finances and secure a brand new apartment, townhouse or house and land package for less than market value. Carrying a range of benefits, buying property off the plan is certainly worthy of consideration for those who meet certain criteria.What is buying off the plan? Buying off the plan is a method commonly used by buyers to secure a new apartment, townhouse, or house and land package. It involves buying a property that has not been built yet. Buyers pay a deposit to secure a property that is to be developed and sign a contract to pay the balance when the building is completed.Why do people choose to buy off the plan? Many individuals consider buying off the plan because they are able to continue saving during the time between paying the deposit and the settlement. Also, if property prices are expected to rise over this period, it allows them to pay less for the property than what it will be worth at the time of settlement.

How can I benefit from this? Buying off the plan may appeal to a range of people looking to invest in property. This method may be of interest to owner-occupiers looking to secure a property at an attractive price, with the additional benefit of allowing themselves more time to continue saving money.In a year or two, capital growth can make your original deposit more valuable. If you purchase in an up and coming area, you may see substantial financial benefits when buying off the plan. A long settlement period may also provide the opportunity to save money, thus, reducing the overall amount that you may need to borrow.Investors are not restricted by personal preferences in the same way and are thus more likely to benefit from buying off the plan. Investors don’t mind so much about which appliances are used or if their property is an easy commute to a workplace; their primary concern is whether the property can easily be rented out, and it’s potential to increase in value. Investors who intend to hold their property for a while are also not fazed by short-term market fluctuations – as long as the property value shows an upward trend over time.Conversely, another type of buyer – speculators – are highly interested in short-term changes in property value. They aim to make money by buying a property off the plan and selling it immediately upon completion after dwelling prices have risen. A venture that can be advantageous when buying property off the plan in an area where house prices are steadily on the rise.Savings on stamp duty are commonplace when buying off the plan as an incentive to purchase new properties and, by extension, drive the local construction industries. One great benefit of buying off the plan is that you are exempt from stamp duty on the build value for a house or townhouse, whilst stamp duty is discounted when purchasing an apartment.

Does it represent a good investment? Like all investments, buying off the plan contains an element of risk. Individuals are unlikely to find value in buying off the plan if the market is expected to fall before settlement. However, if buyers are willing to take on this risk and are able to negotiate a favourable contract with the developer – or if the market is expected to rise – then buying off the plan can be a good opportunity for prudent investors.

Are you thinking of buying a property of the plan for yourself or as an investment? Our friendly team of experts can help! Call 1800 184 284 or  today to get a comprehensive overview of what you should expect and prepare for.  
Joel Robinson

Joel Robinson

Joel Robinson is the Editor in Chief at iBuildNew, where he leads the editorial team and oversees the country's most comprehensive news coverage dedicated to the new home building industry. With more than a decade of experience in residential real estate journalism, Joel brings deep insight into Australia's evolving home building and construction landscape.

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