Five reasons why now could be a good time to buy off the plan

Purchasing an off-the-plan apartment in Australia is quickly becoming a popular option among property seekers, due to housing demand, affordability and the low maintenance lifestyle offered by apartment living. As one of the largest off-the-plan property platforms in Australia, Urban.com.au has noticed growing confidence among those seeking off-the-plan apartments and townhouses and has helped many buyers secure their dream homes and investment properties.

If you’re looking to make a savvy property purchase in the next 6 to 12 months, now could be the best time to buy off-the-plan for the following reasons:

Building regulations are stricter today

Australia has experienced a series of construction failures recently (including faulty cladding and structurally unstable foundations), which has led to a more stringent approach to planning approvals and building practices. As a result of this, the quality of new developments today is likely to be of a higher quality than some of the past. 

Urban.com.au provides some great resources for buyers to research off-the-plan properties and prior developments delivered by Developers, Architects and Builders.

Many buyers may be eligible for stamp duty concessions

If you’re looking to purchase a new apartment which will be your primary residence for 12 months or more, then you may be eligible for an off-the-plan stamp duty concession. While Stamp Duty concession policies vary state-to-state, the concept generally means that the duty you’re required to pay on the property you’re purchasing is heavily subsidised to account for construction costs.

For example, if you were looking to purchase a $500,000 off-the-plan apartment, but $400,000 of that is to be spent on construction costs, the dutiable value of your home would be $100,000*.

*Stamp Duty = Property price, minus construction cost

House prices are forecast to increase over the next 12 to 24 months

One of the differences with purchasing off-the-plan is that the value of the property purchased may change prior to settlement as the broader market conditions change. This can have a negative impact if you buy at the top of the market and then experience a downturn prior to settlement. The inverse of this provides a significant upside for buyers, as you can secure a property while prices are low and see the value appreciation prior to settlement. Currently, Australian property is at the lower end of the market – meaning it might not be an ideal time to sell, but could be a great time to buy. 

Mortgage serviceability has become easier for buyers

Urban has been tracking the changes made by the Reserve Bank of Australia to the official cash rate, which is currently at a record low of 0.75%. What this means for property buyers is that home loans can be secured at a lower interest rate, making mortgage serviceability more attainable. Term deposits and savings accounts are likely to accrue less interest due to the cash rate cut, meaning property could be considered a more lucrative investment. 

Finance is easier to acquire due to APRA’s loosened lending constraints

Earlier this year Australian Prudential Regulation Authority (APRA) announced that it would be reducing the minimum interest rate serviceability buffer, providing home buyers with the option to purchase off-the-plan property with a smaller deposit. This gives home seekers on a lower income a greater opportunity of securing a loan, which consequently makes it easier to enter the property market.

Lead image: The Siding by Deicorp