Buying off the plan

Generally its very risky and not for me personally.

Pros:

1. Buy at today's market rate (albeit some are over priced) 

2. Secure a property tody but do not need to settle until later say 1 or 2 years until the the property is completed

Cons:

1. One firesale in the complex and the valuation of your purchase will come down at the time of settlement

2. When valuation is done close to completion this could come back lower which means potential issues with settlement

3. Strata starts off relatively low but will increase rapidly as its a new complex

4. Don't know what type of finish you will get. The contract will have the actual finishes but doesn't show worksmanship

Regards

Shahin

Again it comes down to doing your due diligence very carefully. 

One advantage in Victoria is if you buy a property off the plan you are only charged stamp duty on the land component, so its possible that if you buy a $500,000 apartment you may only pay a few thousand dollars for stamp duty. Now if you buy anywhere else in Australia stamp duty is based on the contract price.

The only other advantage is you buy the property at a good price, in many cases people over pay with off the plan.

So all you really need to do is look at current sales and properties on the market and compare the prices. Personally if you are still unsure I would get a sworn bank valuation.

I'm not a huge fan of off the plan.

The single biggest issue in my mind is valuations not stacking up upon settlement – which can be a huge mess, particularly if the buyer has a small deposit.

For investors, there can also be an opportunity cost because needing to settle on an off the plan property in the future may mean that they are unable to take advantage of other investment opportunities in the present (because it may effect their ability to finance the off the plan property at settlement).

Cheers

Jamie

Only problem with arranging your own val is that it won't be considered by the lender – and because settlement is so far out, the market could change between exchange and settlement.

Cheers

Jamie

Agree – it certainly doesn't hurt.

Cheers

Jamie

Hi,

There are several essential aspects you can’t neglect if you want to make buying off the plan a significantly more affordable alternative to buying already built property. First of all, the builder’s reputation is important. Choose a company with a solid track record in delivering on-time and on-budget projects. Pay attention to construction terms, deadlines, and overall speed of building. The schedule of finishes and a good defect clause are also things to consider when buying off the plan, in order to make sure that the builder didn’t implement cost-cutting procedures.

Cheers,

Emil

Sunbuild Invest

Schedule of finishes are one thing – workmanship is another. I have seen many OTP properties that have been quite poorly finished.

Regards

Shahin

In a market like we have now, you are able to pick up a similar established property for much less than one that is OTP. However, not everyone has the financial capacity to come up with the initial 20% and stamp duties.

Stamp duty may be seen as a worthwhile trade off when purchasing a well priced established property, but like others have said, you will need to do your due diligence. 

Getting into the market is key, and we need to be mindful that not everyone is able to afford established properties. And down the track, our Asian counterparts will beat us to owning real estate in Australia.

Perhaps you are referring to SMSF purchases? You only need approximately 8%-10% deposit for purchases.

Regards

Shahin