If you like the thought of having a sparkling new property that no one’s lived in before without the hassle of building yourself, then buying off the plan might be for you.
There are some important differences between buying a home and purchasing off the plan; some that might work in your favour and others that you need to be careful of. To help you work out if buying off the plan’s for you, here are some pros and cons to consider before taking the plunge.
Benefits to buying off the plan
Incentives and grants
With governments around the country trying to boost the construction industry, many are providing attractive incentives to encourage the purchase of new homes, including new builds and off the plan. Check your state or territory government’s website to find out if you’re entitled to a reduction on stamp duty or new home grant. First home buyers might even have additional grants available, so make sure you look into what you’re eligible for.
The early bird catches the worm
Developers are often under pressure to get the first sales on the board and recoup some of their costs, so the first properties sold are often the cheapest. Getting in early also means you have pick of the bunch, and can choose the place with the great view, northerly aspect or furthest from a busy street.
Time to get your finances in order
Typically a 10% deposit is all that’s needed to secure an off the plan property until settlement when the property’s been built. This will give you time to get the remainder of your finances in order, or save more money so you can get a smaller home loan.
Equity without the interest
If the market grows between paying your deposit and settling the property, that’s capital growth you’ve earned without even having a loan to pay any interest on!
Risks to buying off the plan
Paying above market value
If the market dips or there’s an oversupply of stock through other developments in the area, you could find your property value flattens or is worth less than you’ve agreed to pay. This could impact your ability to secure finance, so make sure you check with council to see what other developments are pending and approved.
Element of surprise
You can’t physically walk through, touch or see what you’re buying, so the finished product might not be exactly what you expected. Make sure you know what specific fixtures, fittings and finishes you’re getting even down to the brand, and ensure they’re included in your contract.
Rising interest rates
Depending on the length of time between paying your deposit and settling your new property, it’s possible that interest rates may have gone up
Most contracts will have special conditions that allow them to cancel the contract under certain conditions, which will leave you property-less.
Key things to consider
- Check out the developer – Do a thorough background check, review past and present projects and read online forums to investigate their track record. Visiting recently completed developments can give good insight into the standard of their work.
- Contracts – off the plan sale contracts are different to normal contracts, so make sure you seek legal advice before signing on the dotted line.
- Pre-inspection – make sure you get to inspect the property before settlement to help avoid any nasty surprises.
Have you bought off the plan? What do you wish you knew before going through the project?
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