Guide to Buying Off The Plan Apartments in 2020

Guide to Buying Off The Plan Apartments in 2020
Guide to Buying Off The Plan Apartments in 2020

As more highly sustainable, well-built apartments are being constructed across Australia, purchasing off-the-plan is becoming an attractive option for discerning property seekers. It works out to be a win-win situation for both buyers and developers in many cases, as developers are able to secure capital early on in the development process, and buyers are rewarded with low deposit rates, and sometimes early-bird financial incentives. Buyers are often also offered a range of government subsidies when purchasing off-the-plan – including stamp duty concessions, first home buyer grants and more.

If you're considering buying off-the-plan, here are some tips that will help you with the process of acquiring your new home.

1. Know your budget

Guide to Buying Off The Plan Apartments in 2020

Purchasing an existing property is a huge decision, and requires you to save up a substantial deposit and budget for weekly mortgage repayments. One could argue that an off-the-plan property could require even more planning, due to the ability for the property value to fluctuate during the construction period. This shouldn't put you off buying off the plan if you do sufficient research prior to purchase. Once you've paid your deposit, you'll have no formal financial obligations, other than your own savings regime leading up to settlement (which can take a number of years depending on the extent of the build). A good way to alleviate stress once that day arrives is to make regular "mortgage payments" into a savings account during the construction period, so you'll have back up funds once you're paying the real mortgage on your new property.  

2. First in, best dressed

Guide to Buying Off The Plan Apartments in 2020

The earlier you lock in an off the plan contract, the lower the cost. One of the biggest barriers to buying off the plan is that buyers can’t actually see how the home will look and feel once completed. Instead, you have to rely on blueprints and 3D renders to decide whether the proposed development will meet your lifestyle requirements. If this doesn't phase you, then once you've decided that you like the architect and developer's previous projects, you're happy with the construction materials/fixtures used in the design, and you love the location, then you could be ready to look at placing an offer early on in the planning process.

Pre-existing dwellings require the buyer to come up with the full deposit immediately, while off-the-plan developments give the buyer the flexibility to pay a small percentage to secure the property and the rest upon completion (or at settlement). 

Finally, this longer settlement will also improve your long-term financial position. A 10% deposit might set you back $50,000 with two years until settlement. However, with standard inflation and in a growth market, 10% of that same home after those two years might be much higher. Essentially, you’re getting a future home’s equity or value at today’s presumably lower prices.

3. Read your contract, and re-read it 100x

Guide to Buying Off The Plan Apartments in 2020

Contrary to popular belief, off the plan apartments are anything but identical to one another. In fact, there is a significant amount of flexibility when it comes to finishings, fittings, and even the layout of your floor plan. Don’t assume that a display home shows you the minimum inclusions. If the display suite boasts Miele appliances and marble benchtops, it'll pay to check whether certain items will be included with the property you're specifically interested in.

Expected construction timeframes should often be taken as a guide, rather than a rule. Obstacles can occur, design changes are regularly made and council approval can hold up the construction progress. It's always a good idea to be aware of your rights, who your direct point of contact is, and how to obtain construction updates. 

It's also important to think about what happens once you move into your new house. Who will fix things when they break? What are your entitlements and warranties? What if the apartment is not as described? Has adequate consent been obtained and appropriate materials used? Can you change your mind, or are you locked in? If the building is fewer than three stories, you’ll also want to double-check that home warranty insurance is included. Remember that this is a contract that will serve you both now and several years into the future while the home is under construction, so it’s best to protect yourself early on in the buying stages.

4. Understand the legalities

Guide to Buying Off The Plan Apartments in 2020

Hiring a conveyancing lawyer to ensure the purchasing process is conducted in a professional manner is a great way to reduce the pressure of making a significant purchase, sight unseen. You'll also need to research your state government's rules when it comes to Sunset Clauses, lending criteria, grants/concessions and more. 

5. Due diligence is essential

Guide to Buying Off The Plan Apartments in 2020

Last but certainly not least, research is vital when buying any property. Without being able to see the home you're buying, you're unable to inspect the quality, design, space, outlook and future development within the area. Visit council planning websites to determine which developments have been pitched in surrounding suburbs. Will any of those potentially block your view or reduce your property value? Research the team behind the development and decide whether you like the quality of their previous projects. Seek out the developer's previous buyers and ask if they were happy with their purchase. Talk to friends, family, colleagues and seek professional advice to ensure you evaluate every aspect of the design and to ensure you don't miss any important questions.

Guide to Buying Off The Plan Apartments in 2020
Guide to Buying Off The Plan Apartments in 2019 Infographic.

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