Tips for buying off-the-plan properties

Off-the-plan properties may just be the solution for investors who need to organise their finances or first home-buyers who currently do not have enough capacity to purchase.

While this option heralds many benefits, it’s important for both investors and home buyers alike to perform their due diligence and understand where many trip up.

First of all, buyers need to understand the market and why they’re opting for off-the-plan instead of an established property.

While this may sound straightforward enough, Dean Berman, principal of Sydney-based buyers’ agency, 37 Property Group, outlines a number of considerations to take on board.

Tracking change

Off-the-plan apartments run on the concept of putting down a deposit today and waiting for capital growth to kick in by the time the property is completed.

To avoid a potential purchase disaster, investors need to put in the hard yards and do their on-the-ground research.

“The main thing to look out for is obviously demographics, infrastructure, whether the market is going to be over or under-supplied and to understand the economics of the area,” Mr Berman says.

Investors could talk to local councils or visit the Department of Infrastructure website in their state to find out about projects that are underway or in the planning stage.

Supply and demand

Just as it is essential to consider the amount of supply in the existing market, investors also need to be aware of those becoming available.

Equally important are population growth and job opportunities in the area.

Mr Berman recommends comparing the last Australian Bureau of Statistics census against the most recent census to get a snapshot of how an area is changing.

For investors, historical trends such as vacancy rates and rental yield growth rate are also indicators to consider.

Mr Berman says investors could look at how vacancy rates have performed over the last five to ten years and that sub-two percent is a good benchmark.

Off-the-plan contracts

Purchasing an off-the-plan property involves entering a contract to buy a property that is not yet built.

Investors therefore need to find a professional lawyer who is able to comb through the details of the contract with them.

Mr Berman says investors need to make sure they are happy with the length of the sunset clause and make sure the contract is as detailed as possible.