The Pros and Cons of Buying Off the Plan: What You Need to Know
Considering buying off the plan? It's tempting, isn't it? You put down a deposit and kick back while the builders construct the property. And then, just like that, you are handed the keys to your dream home. But remember, it's not always smooth sailing. So, before your signature lands on that contract, ensure you've scrutinised the fine print.
What is buying off the plan?
Buying off the plan is defined as investing in a property that has not yet been completed. This may come in the form of an apartment or unit in a planned complex or a house and land package. In some cases, construction is already underway, while in others it has not yet commenced.
Off the plan sales attract buyers due to their discounted land transfer duty costs, fixed pricing, maximised tax deductions, and beautiful renders. However, not having a physical property to inspect when you sign the contract comes with its own risks.
The catch
Builder insolvency – the builder you decide to go with might go bust, leaving you with an empty wallet and no complete home to show for it.
Beware of renders – as there is no physical property to inspect, the end product might not meet your expectations. Look closely at the architectural plans and renders to make sure they accurately reflect what is being promised.
Construction delays – the construction industry remains under pressure from a lack in skilled labour and an increase in building costs, which could delay the completion of your home.
How to protect yourself
Consider the market – the property market is in a constant state of flux. Consider how the changing market could impact the value of your home down the track.
Do your research – research the area thoroughly and put yourself in the shoes of a tenant if you are buying the property as an investment. Is the property near amenities such as public transport, shops, and hospitals? These will make the dwelling more desirable to renters.
Check credibility – do your due diligence on the builder. This minimises the risk of the development not going ahead due to financial issues within the company.
Progress payments – negotiating progress payments that are mutually agreed upon by all parties is a wise approach. By doing so, you can ensure that you only make payments when specific milestones or components of the construction are completed.
Inspect closely – upon completion, hire a building inspector to do a thorough check of the property before signing off. If any issues are discovered, they can be rectified under your warranty.
Buying off the plan can be a smart move, but it's essential to stay alert to the risks. Take your time, do your research, and review the paperwork meticulously to minimise any potential pitfalls.
