PROS AND CONS OF BUYING OFF THE PLAN

Buying off the plan means purchasing property where construction has not yet commenced but is past the planning stage. Builders will often provide substantial savings to attract as many pre construction buyers as possible. Financial institutions are prepared to deal with developers who presold a large stake in the forth coming construction. 

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Often builders will treat these transactions to obtain the funds to build. Another advantage often available to off plan purchasers is some variety in the features of their particular area of the building. This can include selection of flooring, countertops and appliances, color schemes and superior fittings.

The buyer can also negotiate to have the maximum price locked in to current day prices resulting in a capital gain before the owner has moved in. Depreciation tax savings are significantly more than on existing buildings and Victoria stamp duty is drastically reduced.

It should be said though that this type of buying is not without risk. One Melbourne tenant paid a 10 % deposit and signed an agreement in 2006 with a construction completion date set at eighteen months later in 2007. Three months after signing, the completion date, was extended by six months. At that time,  he paid the whole amount he owed, and soon after, the date was extended by another six months. He began to receive letters to the effect that chosen fittings and appliances could not now be used. The property was not able to be lived in or rented for one year after the final payment because of the extensions. He also found that double glazing promised to help with noise from a nearby railway station had not been installed.

The experience can be a pleasant one – a couple who bought property in the Melbourne suburb of Carlton had no problems whatsoever – everything was on schedule, the property value has grown by 20 % in three years, rental income is steadily rising and they derived substantial benefits with respect to stamp duty and depreciation.

The advice and consultation with a real estate agent or other expert is necessary to avoid trouble. Questions such as the reputation and reliability of the developer need to be answered – ‘do the projections regarding property and rental income effective’? 

The contract should be over with a fine tooth comb. It is also advisable to have the building plans checked. The building advisory services will do this for a certain fee. Display suites may not be truly representative of the finished product, and they will include in the record the overall standard of the building, whether rooms are of sufficient size and what they think of fixtures and fittings.

About the Author:

Sharon Freeman is a freelance writer who writes about Real Estate and Property tips for her local Sydney market.