Buying properties off-the-plan has become a
popular way for home buyers and investors to purchase property. However, when
buying a property that is yet to be built, there are some important
considerations to think about before signing a contract. Here are some pros and
cons to consider before buying off-the-plan.
Discounted
prices
If you purchase your property early enough,
you might be able to secure a discount. When developers are trying to put a new
project together, they are typically required to secure a number of presales to
help cover their debt. Many will offer a discount to get early sales over the
line, which shores up the project.
Customisation
Buying off-the-plan allows buyers to
customise certain aspects of their property before it is completed, such as
fittings and fixtures. This can give buyers more personalisation and control
over the feel of their new home.
Potential
capital growth
In a rising property market, buying
off-the-plan can offer the potential for capital growth. As the property is not
yet built, buyers can benefit from any market growth that occurs during the
construction period, which may result in a higher valuation upon completion.
This can also be an advantage given that the buyer might only need to put down
a small amount of money initially.
New
property
Off-the-plan developments allows buyers the
opportunity to purchase a brand-new property, which can offer advantages such
as a modern design, energy efficiency and lower maintenance costs. Newer
properties are also often easier to rent out, which means you can potentially
attract higher-quality tenants.
Delayed
completion
One of the biggest risks with buying
off-the-plan is that completion may be delayed. Because developers need to
secure pre-sales before they can access the finance to pay for construction,
there can be delays with starting. It is possible to use a ‘sunset’ clause to
protect yourself, if construction doesn’t begin in a timely manner.
Market
fluctuations
While buying off-the-plan can offer the
potential for capital growth, it also carries the risk of market fluctuations.
If the market declines during the construction period, the property may be
worth less than the purchase price upon completion. It might also be hard for
you to secure finance if the market value of the property declines before it is
completed.
Changes
to plans
Developers may make changes to the plans
during the construction process, which can impact the final outcome of the
property. Buyers should ensure they have a clear understanding of any potential
changes before signing a contract.
Quality
concerns
In recent years, there have been issues
with some apartment developments in Australia and you can never truly know what
you’re getting if you buy something off-the-plan. Buyers should research the
developer’s track record and inspect their previous projects to ensure they
have a reputation for quality. It’s also worth doing the same for the builder
that is being used.
Given the potential risks involved with
buying off-the-plan, it is vital that buyers do their research before making a
purchase. As well as assessing the historical quality of both the builder and
developer, you should also analyse the state of the market in that area. See
how many developments are coming through and how the influx of new properties
might affect the market.
Be sure to seek professional advice from a mortgage broker and lawyer so you know what you’re signing and what the implications are.