Off the plan is an opportunity for an investor or an owner occupier to purchase a property which has not yet been built. The categories for off the plan include; House and Land, Apartments, Townhouses, and Retirement Homes.
Investors often choose to buy off the plan because it means buying a property at todayâs prices that will hopefully be worth more money by the time construction is completed in a yearâs time or more.
There are a number of benefits and risks of which you should be aware when buying off the Plan because you are entering into a Contract to buy a property without first having been able to view and assess the finished project.
Off the plan allows you to enter the property market earlier, if you were otherwise waiting to build up your deposit base through additional savings.
Achieve capital growth during the build completion stage.
Have access to otherwise unavailable financial benefits, including new home owner grants and stamp duty levies. In NSW, for example, off-the-plan buyers may be eligible for a grant of $5,000 (provided that the value of the new home does not exceed $650,000 and the value of vacant land does not exceed $450,000).
The opportunity to benefit from tax advantages. If the property is being purchased for investment purposes, the buyer may be able to claim depreciation on their tax for items including fixtures and fittings. It is recommended that buyers consult their accountants to find out whether they are eligible.
The lifestyle of new units are built to reflect todayâs tastes and preferences such as open plan living areas, larger balconies and amenities such as a pool, gym, cinemas and concierge services.
You are waiting a period of time for the property to be built or completed, prior to being able to settle and proceed with the next stage of your investment strategy.
Oversupply issues which might not yet have materialised. You can help mitigate this by researching the number of approved new dwellings for a particular area. If this has risen considerably and exceeds the estimated population growth then it might be best to stay away from this area. Examples of perceived oversupplied off the plan markets include apartments in Brisbane suburbs including; Hamilton, West End, Newstead and Fortitude Valley.
The valuation of the property come settlement is less than the original contracted purchase price. This might occur when a developer has overvalued the property price and might have factored in prospective capital growth which has not materialised.
The developer going broke and not being able to complete the build of the project. This isnât occurring on a really regular basis in Australia, however it is a risk that you need to consider. A good way to mitigate this is to discuss with your solicitor a way to put a clause in the contract which states that if this does happen, you get your deposit back.
In summary, buying âOff the Planâ involves you paying for a property where the finished product may be different from your expectations. It does however provide you with an opportunity to purchase a property with the latest developments, with potential financial benefits, and at a lower entry cost initially.
If purchasing an off the plan property aligns with your investment strategy then it would be worthwhile to consider this investment category in building your property portfolio.
Chippendale and other surrounding suburbs are candidates...