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Tips for buying off the plan

By Steven Chen (Director of McGrath Projects)

Purchasing property off-the-plan can provide significant financial and lifestyle benefits for prospective investors or owner occupiers.

From a practical perspective, buying off-the-plan allows prospective home owners to plan and have sufficient time to ensure they have their finances in place, sell an existing asset prior to completion and secure the optimum home loan to suit their circumstances.

For investors, an advantage of buying off-the-plan is the ability to have an early pre-selection of the project. Off-the-plan purchases only require a 10% deposit with no progress or top-off payments until settlement, which is often between 18 months and three years. This means that a buyer is able to pay at today’s price, and if the market is rising, they can achieve capital gain with an initial 10% outlay. We have seen clients achieve exceptionally strong return on investment by selling pre-completion, though we do not encourage that buyers speculate. In 2012, a two-bedroom apartment at The Pacific in Bondi Beach sold for $1,070,000. The buyer on-sold the property in October this year for $1,550,000; showing a 45% gain.

If purchasing for investment purposes, buyers can also benefit from depreciation for items including fixtures and fittings.

For the owner-occupier, there are also advantages with regards to lifestyle and surrounds of the property to suit their requirements. With off-the-plan purchases, in some instances, a buyer has the ability to customise floorplans and finishes to best suit their own individual requirements. Buyers also have the opportunity to select from a range of dwelling types and essentially choose their preferred layout, positioning and colour scheme.

Tips for buying off-the-plan

Whilst there are many real and compelling advantages to buying off-the-plan, it is imperative that buyers have a solid understanding of what’s required and to minimise any potential risk.

As with any significant purchase, it’s important to thoroughly research the market, current values, potential for growth, and lifestyle benefits of the immediate and surrounding areas.

Buyers should carefully look into the area for future development as the apartment you may consider purchasing could have its views or natural light reduced, or even eliminated. Future development may also impact your property’s re-sale value both in a negative and positive manner.

Another important task to safeguard your purchase is to research the developer and their prior development experience. It is also important to ascertain who the builder is and what projects they have previously completed to gain an understanding of the quality of workmanship and ability to deliver the project.

It is also encouraged to spend time examining the floorplan to better understand the scale of the residence. Check the ceiling height and dimensions of bulkhead areas, which typically conceal air conditioning units and utilities, as these can have an effect on the overall aesthetics.

Furthermore, engage a lawyer who has experience in off-plan contracts and providing the relevant information to safeguard your purchase decision.

State of the market: New developments

Property prices in Sydney continue to be buoyant with demand for quality new developments strong.  Erskineville, Parramatta and Liverpool are significant growth areas for our business with new infrastructure having a very positive impact and providing stimulus for new residential projects.

Over the past 12 months we have noticed an upsurge in demand for off-the-plan property in South East Queensland, particularly from interstate and international investors.   These buyers are attracted to both the Gold Coast and Brisbane for long term capital growth. In many instances buyers have been able to purchase up to three apartments for the same value as one in Sydney.

With an undersupply of housing in the key CBD and outer rings of Australia’s major metropolitan cities, off-plan purchases are becoming increasingly prevalent. Developers are not waiting to finalise their product, but rather, sell off-plan. While there are many satisfied and extremely happy off-plan purchasers, it is important buyers do their research, understand the product they are purchasing and be comfortable with their interest repayments.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Published on: Monday, November 23, 2015

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