Buying Off-The-Plan

Purchasing ‘Off-The-Plan’ (OTP) means buying a unit or townhouse that has not yet been completed, or where construction may not have begun, or land that does not yet have its own title (i.e. a lot on a new plan of subdivision). The term can even refer to refurbished lots such as an office building being converted into apartments, or you may be buying an empty block of land in a new estate to build your dream home.

If you decide to purchase an OTP property you will be signing a contract of sale for a product that will be completed at a future, usually unknown date. This in itself has positives and negatives. In a constantly shifting property market, buying OTP secures the price of the property you are buying upon signing the contract, plus the purchase price may be more competitive as developers have to sell a certain percentage before construction can commence. Even if the market inflates, you will not have to pay more than what you’ve agreed to in your contract of sale; however, if the property market falls you will be locked into the price you previously agreed to. For some, the prospect of a brand-new property that may require less ongoing upkeep, all new fixtures and fittings, and style choices that are often reflective of the latest market trends, can make off-the-plan purchases worth the potential fluctuations in the future value of the property.

Benefits of Buying Off-The-Plan for First Home Buyers and Owner Occupiers

First home buyers (FHB) have the added incentive of the First Home Buyer Grant (FHOG). The FHOG is only available to properties ‘not previously lived in’ i.e. brand-new properties purchased for $750,000 or less. The grant is currently $10,000 for city and suburban properties and $20,000 for rural properties- you can learn more here. FHB will also receive a stamp duty exemption on properties with a Dutiable Value of $600,000 or less.This means no stamp duty is payable. If the Dutiable Value is calculated at $750,000 or less, you can still receive a stamp duty concession. For non-first home buyers that are planning to live in the property for a period of 12 months, within 12 months of completion, you will be able to take advantage of stamp duty concessions based on the amount completed when you sign. If the Dutiable Value is calculated at $550,000 or less, you could receive a stamp duty concession.

Extra Considerations When Buying Your Off- The-Plan Purchase

Once you have signed an OTP contract and paid your deposit (typically 10% of the purchase price) it is extremely unlikely you will be able to exit the contract before the Sunset Clause.

Developments can take longer than advised therefore your deposit funds may be tied up for many years. Deposits are held in a trust account and even at settlement the interest may not be payable to you as the buyer. However, this can be part of your negotiations before signing; you could request all or part of the interest on your deposit to be paid to you at settlement, something our contract reviews team can advise you on.

Another significant consideration to bear in mind when buying off-the-plan is a change in your personal circumstances. You are essentially signing up for a large financial commitment in a few years’ time, and while your present circumstances may be able to accommodate this commitment, it’s difficult to know if you will be in the same position once you reach settlement. As with buying an established residential property, your financial situation, family circumstances, illness, injury, and the broader economy can all impact on whether committing to owning a property will be the best choice for you.

There are no guarantees of what the overall quality will be until you reach the all-important final inspection prior to settlement. You will be able to raise defect issues within a set time period (noted in the contract of sale). The builder should address the defects noted within a reasonable time but not necessarily before settlement of your purchase.