In the market to buy property? If you’re considering an apartment, you’ve most likely thought about buying off-the-plan. As with anything, there are both pros and cons. But if you get it right, buying off-the-plan can allow you to buy a brand new property that suits exactly what you want, at a better price, with more time to save for it.
So what does it actually mean, and what are the things you need to consider?
What is buying off-the-plan?
Buying off-the-plan is basically exactly what it says on the label: you’re buying a property based just on a plan, and it hasn’t been constructed yet. Developers offer apartments for sale off-the-plan, and as a buyer you’re reliant on plans, rendered images and asking questions to find the right place for you.
Usually only a small deposit, such as 5 per cent of the cost price, is required to secure the property, with nothing more to pay until settlement, which could be a number of years away.
“It’s buying something now that you can’t see, that you don’t have to pay for for a couple of years, that you’ve got input into such as colour schemes, so you can bespoke it to suit yourself,” says Wayne Harriden, Executive Director at Independent Property Group.
So what are the benefits of buying off-the-plan?
Just like for anyone who has ever built their own house, buying an apartment off-the-plan often offers the ability to select a colour scheme for areas like kitchens or bathrooms, plus other choices like upgrading appliances, or even asking for bespoke additions, like moving power points around.
“If you buy early in the development, you’ve got a greater range of apartment choice. Generally, when developments are finished or nearing completion, there’s not much left. The better units sell first. So the earlier you get in, the better choice you have – you get a better view, layout or aspect,” says Wayne.
It also allows you more time to save for the property, and potentially grow your equity before you’ve even moved in.
“It gives you the opportunity to build some equity in your property without actually putting any money into it. You’ve usually got plenty of time to save a bigger deposit by the time you settle. And you’re locking in the price of your apartment at today’s prices, not in two years’ time,” says Wayne.
“Having dealt with developers for over 30 years, prices always go up during construction. In Canberra, I’ve never seen a development where prices have dropped. And generally the earlier you get in, the cheaper you buy, the better the aspect, the better the view, more choice.”
And what are the risks with buying off-the-plan?
The biggest risk with buying something for the future is that your circumstances may change between now and then.
“We certainly see births, deaths, marriages, and divorces that affect people’s lifestyle during the construction time,” says Wayne.
Because you’re buying essentially sight unseen, there’s the risk the final product won’t meet your expectations. You’ll also have to wait for construction to finish and settlement to go ahead before you can move in.
How to protect yourself when buying off-the-plan
Keen to go ahead and buy off-the-plan? There are a number of ways to ensure things go smoothly, and you get the result you want.
First, make sure you do your research on the developers and builders involved. Check their previous developments to see if what they promised is what they delivered, and if they completed the project when they said they would. Wayne also says to check the sunset clause in the contract before you sign, so you understand your worst-case scenario in terms of completion.
“A sunset clause is an extreme date in the contract to which the developer needs to be finished by. It might be 12 to 18 months longer than the developer is planning on taking. The developer wants to finish as soon as possible, because the longer it takes, the more it costs in builder fees. But there are things that happen that delay construction – COVID is a classic example. So the sunset clause is there as a worst-case scenario,” he says.
“Your agent will be able to tell you when the developer plans to finish it. And a lot of developments finish bang on time, or even maybe a month or two early.”
Wayne says to also have a look at the maintenance period offered in your contract, which is the time after settlement that the builders are liable to fix any defects you find. The standard is 90 days.
If you buy through trusted developers and their agent, you will also be kept up-to-date along the way so you know where you stand.
“Buying off-the-plan is a pretty exciting journey. At Independent, and certainly if you buy through a trusted developer like Keggins, we’ll keep you fully informed as to where it’s up to at all times. And we engage you and have buyer’s nights where you get to meet the community that you’re going to live with and form some friendships,” says Wayne.