Risks vs. Rewards of buying off the plan. Everything you need to know.
The potential value of buying property off-the-plan from a reputable builder or developer is huge. But it’s important to have done your research and understand the risks. A buyer’s agent’s market expertise, ongoing research into buildings and developments, industry connections and experience with various different types of buying scenarios could prove to be hugely beneficial for someone thinking of buying off-the-plan.
What is buying off-the-plan?
Buying off the plan is the process of purchasing a property before it’s built or during the construction stage. The buyer would typically pay a 10% deposit and the remaining amount on completion of the project. There are many pro and cons to consider when going down this rout and its important to understand where the building industry is at.
Consider some of the pros and cons to buying off-the-plan:
| Pros of buying off-the-plan | Cons of buying off-the-plan |
| Delayed payment: Pay a deposit of around 10% to secure the property and pay the remainder on completion of the project, allowing more time to save. Customisation: In some cases, you may have the option to choose finishes, fixtures, and sometimes even floor plans, allowing a degree of customisation. Government Incentives: Some governments offer incentives or concessions for off-the-plan purchases, such as stamp duty reductions or first home buyer grants. Potential Tax Benefits: Investors may benefit from tax depreciation on the new building and fixtures. Potential for Capital Growth: If the property market is on an upward trend, the value of the property could increase before it’s completed. | Uncertainty in the Final Product: You are essentially buying based on a plan and perhaps a show home. The final product might not match your expectations or the marketing materials. Market Fluctuations: The property market can fluctuate, and the value of the property upon completion may be lower than anticipated. Delays in Construction: Construction projects can face delays due to various reasons, such as weather, council issues or economic downturns. This can affect your move-in date and financing arrangements. Potential Quality Issues: There is a risk of subpar construction quality, and it may be challenging to assess the workmanship until the project is completed. Changes in Finance Conditions: The lending landscape or your financial situation may change between the time of purchase and completion, potentially affecting your ability to secure a mortgage. |
Successfully buying off-the-plan for clients, exclusive off-market developments in QLD.
Jordan and James Navybox’s recent off-market purchases of Graya’s Kloud apartments in Queensland serve as an excellent example of how to successfully purchase off-the-plan..
Kloud is a new development currently under construction by the multi award winning architect and builder Graya, who have left an indelible mark on the South East QLD market since 2013.
Graya boasts award-winning houses and developments such as ‘Maison’ in New Farm, Brisbane. Jordan and James previously bought into these developments for their clients, and saw those investment almost double in value just 12 months after completion. Purchasers who bought off-the-plan at around $3,000,000 saw comparable apartments in size sell between $4,850,000 and $5,000,000 12 months post construction.
Not all off-the-plan purchases can provide this kind of return, however it is a testament to Jordan and James’ research, experience and verification of the builder’s reputation and product quality.
Fortunately, Cohen Handler’s Brisbane team has built a relationship with Graya in recent years which has enabled clients to gain early access to their prized developments
Proactively manage the downsides
State governments are addressing many of the issues that have flared up in the quality and delivery of new developments. The New South Wales State Government for example is trying to address these concerns with new legislation and powers given to inspectors. NSW Building Commissioner David Chandler believes that the new powers that allow inspectors to enter construction sites at any time will enable owners to raise formal disputes sooner.
Cohen Handler’s buyer’s agents will work with an extensive network of developers, builders, and experts such as building inspectors and lawyers during the due diligence process to minimise the risk of buying off-the-plan.
Each state government has information for you to consider when buying off-the-plan, linked below for you:
Gain early access to exclusive developments
With Cohen Handler’s industry relationships to reputable developers such as Graya, you may gain early to access to exclusive projects off-market and with our guidance make a better informed decision.