Investing in property off-the-plan is a unique way of buying property in a new development which has not yet been completed and is usually in the concept stage, design process or under construction.

Buying property off the plans is rapidly increasing in popularity as there are many benefits over existing real estate.

Best opportunity for capital appreciation

Since the property is still in the pre-construction phase or in the early stages of construction, developers understand that buyers cannot physically see the property. Consequently, they use lower prices to attract buyers. As construction progresses, the property’s value begins to rise, so early investors will invariably see the greatest returns.

Best selection of units

Purchasing early allows the buyer to choose the most sought after properties in any given development. A wider array of choice means a greater opportunity to make sure you purchase an apartment with a superior position and better layout. The best units usually offer higher capital appreciation in the shortest time frame and can often command the higher rental incomes.

Secure a property with a minimal deposit

Typically the buyer will secure a property with only a 10% deposit upon signing a contract while the balance of the purchase price is payable upon completion. In the meantime, especially in a rising market, you can enjoy the benefit of any capital growth that occurs on the property.

Future settlement

If you purchase off-plan or in the early stages of construction, you do not have to settle for up to 18 months, or in some cases even longer. In a rising market, you are purchasing at today’s prices in anticipation of higher prices in the future. The deferred settlement allows you to experience capital appreciation without a mortgage payment (or paying the entire purchase price) before you legally own the property.

Tax benefits

If the property is for an investment, depreciation on the new building and fittings may translate to tax deductions. Tax benefits are greatest when the property is brand-new so buying off-the-plan maximises your available tax deductions.

Stamp duty savings

The biggest benefit is the stamp duty benefit. You pay duty based on the price you pay for the property less the cost of the works that are yet to be completed meaning the earlier you buy into such developments, the greater duty benefit you’re going to have. Stamp duty calculations are State specific so it’s best to get proper legal advice about this aspect and how it would apply to a purchase in your state.
There are also risks too to be considered when purchasing off the plan properties, such as market prices falling in the period between signing the purchase contract and taking possession, or the builder not finishing the construction due to financial problems, or project may not proceed at all. The biggest risk for most people is that they’re buying something they haven’t seen and the finished product may not what you expected. But with increased risk, comes potential for increased returns, and with proper advice and due diligence you can enter an off-the-plan contract with confidence.

Here are some tips as a guide for buying off the plan:

Investigate the bylaws, restrictions and rules of the property, such as those relating parking and access entitlements to common properties. Look into the arrangements for the management and caretaking for the building, as well as your financial obligations towards a sinking fund and levies.

Get proper legal advice on your purchase contract and examine it for things penalties for withdrawing, whether the builder can vary the unit area from the original floor plan. Look for appropriate insurance cover against the risk of the building not being completed.

Check out the developer and look carefully at work already completed by the builder, seek references from previous developments and ask about the quality of workmanship and adherence to construction schedules.

Do some research on the value of the property. Inspect nearby similar apartments, have a look at price trends in the area and consider the proximity to public amenities like transport and schools.

Put a plan in place to ensure that you can pay early if construction is completed ahead of schedule.

Look carefully at the plans for the internal features of the property, such as fittings and fixtures, ceiling height and aspect. Find out if you can customise some of these features so that they’re more in line with your style. Getting in early to secure one of the first apartments will give you more choice.