Buying off the plan means entering into a contract with a developer to buy a property before the completion of construction. Since there is no physical property to inspect or see, you view the design and building plans to get an idea as to what the property will look like on completion, although you can often inspect or see other properties completed by the developer or builder to get a good idea of what the finished product will look like.

Benefits of Buying Off The Plan

There are many benefits of buying a new home off the plan. Let’s run through some of the key ones.

• A better price
  Often the price of a property rises after completion. When you buy off the plan, you are paying the current market price for a property, which will be completed in the future. Developers sometimes offer yet to be built property at lower prices to encourage sales before construction starts and/or to meet loan criteria set by funding groups like banks. Buying a property at this time saves you money because the price can often gradually rise over time, and once the property is built you have a tangible product to see and touch. The completion of the build often boosts the value of the property.

• Stamp duty savings
  You can often make substantial stamp duty savings if you buy off the plan. Some state governments in Australia offer bonuses and reductions or have reduced stamp duty to encourage new development. In Victoria, the full rate of stamp duty applies on fully built homes, however you can receive generous concessions when you buy off the plan. The further along the construction of the property the less the stamp duty savings you get. In Victoria, if you entered a contract after 1 July 2013 to build or purchase a new home, a payment of up to $10,000 is available for eligible first home buyers. You can find out more about stamp duty savings on the State Revenue Office website.

• Tax benefits
  Some people invest in off the plan properties to take advantage of tax breaks. By buying the property brand new you can claim the maximum benefit of depreciation expenses for furniture, fittings and wear and tear of the dwelling. This usually applies to investment properties rather than your own home or principal place of residence, so check with your accountant or solicitor before factoring that in to any numbers you might be calculating.

• Increasing property value
  Property prices generally rise over time (though not always). When you buy a property off the plan, you are able to secure the property at the current market price, but not take possession of the property until months or years later, during which time the market may have experienced growth. This means that the value of your off the plan property may have increased by the time construction is complete. Also, when you buy off the plan, you often only pay a deposit of 10 percent and the remaining amount on completion of construction. Thus you don’t have large chunks of your money tied up in a property but can enjoy the benefit of capital growth of that property if the market is rising.

• More choice
  You have more choice when buying off the plan, potentially allowing you to purchase a home with a superior position with a better view, floor layout and finishes such as stone bench tops or hardwood flooring. You may be able to choose the colour paint you want, and many other smaller details that you can’t change once the home is built.

Buying off the plan can be a way of securing a good quality home at a fair market price, and then influencing how it will be finished so it suits your style and needs. If you have any other questions about buying off the plan please comment below, give us a call or send us an email at love@fastlovehomes.com.au

Buying off the plan continues to be a popular property investment option for many people. Buying off the plan means entering into a contract to buy a property before it is built. Since there is no physical property to inspect or see, you usually view the design, floor plans and sample pictures to get an idea as to what the property will look like on completion. Often you can inspect or see other properties completed by the developer or builder to get a good idea of what the finished product will look like.

The contract of sale should spell out what you are getting for your money. It is a good idea to get your legal adviser to take a look over it before you sign it.

Usually the sales contract requires you to pay an initial 10 percent deposit of the purchase amount, which is held in a trust account. Then on completion of the construction, you must pay the balance and take possession of your new property.

An off the plan contract is drafted slightly differently from a standard property contract for obvious reasons – there is no physical property to exchange yet. It is important to check that the following things have been included in the contract:

• Adequate plan disclosure
  In an off the plan contract, a developer is required to include plans, specifications, and timeline of what they plan to construct as the final product. It is important to review these plans so that you are satisfied with the level of disclosure and the standard of the finishes.

• Cooling off period
  In most Australian states, a cooling off period of two to three days applies to an off-the-plan contract, which means you are free to alter your purchase decision during this time. Try to find out if there is any termination penalty if you decide to withdraw during this time. Remember, you are legally bound to buy the property when the period ends.

• Finance
  Before buying off the plan in a new property development make sure you are fully aware of your financial position. If you are planning on borrowing money from a lender to buy your property make sure you check with them about how they treat off the plan sales. Most lenders have different policies and ways of dealing with off the plan sales. Check with your lender if you can get approval for financing before the completion of the project.

• Stamp duty
  As a buyer, you must pay stamp duty on your property within the required time period. Check if you are eligible for any concessions or exemptions available to those who buy residential property. You may need to get some legal advice on how much you may need to pay or what discounts you could be eligible for. Further information about stamp duty discounts in Victoria can be found on the State Revenue Office website.

• Inclusions and warranties
  Inclusions are basically all the things that will be included in your property when it is finished. You don’t want to buy a property off the plan and then find out it doesn’t include doors or windows! An inclusion list will cover all the things that will be built into your home or as part of the development. Common things are the type of doors, floors, benchtops, cupboards, paint colour, door handles, oven and much more. Make sure you are clear about what you are paying for and what you will get. You also need to confirm what warranties you might be covered by. In Victoria, a newly built home comes with a three month period where defects will be corrected. This might be doors that stick, windows that don’t close properly or other things that pop up after you move in. The house will also be covered by a builder’s warranty, so if there are structural problems you can get them fixed.

• Completion
  The contract should identify the estimated time when the property should be completed. Make sure you understand what happens if there is a delay or if the project gets cancelled. If the project gets cancelled you should get your deposit refunded. You should also be aware the timeframe for settlement once the property is ready for you to move in. Usually it is 14 days after completion.

When buying off the plan, it is important to closely review the contract details to make sure you understand exactly what you are signing up for, and also that you get what you pay for when the property is built.

If you have any other questions about buying off the plan please comment below, give us a call or send us an email at love@fastlovehomes.com.au

Buying a property off the plan using finance from a lender like a bank is a bit different to buying an existing home. It is easy for a lender to value an existing property. It is a bit harder to value something that has not yet been built. This is mainly due to the fact that the ‘value’ of the property may increase or decrease between when you sign the contract and when you settle. If you do your research and buy in good locations you can minimize or eliminate the risk of your property decreasing in value.
Banks may be a little more cautious loaning money for off the plan properties particularly apartments and house and land deals in large residential housing estate developments. In Melbourne following the so-called Global Financial Crisis many apartment complexes and house and land deals actually dropped in value. Those buyers that signed contracts before the downturn found they were obliged to buy a property that was worth less than what they had agreed to pay for it.

Valuation or purchase price?

Most banks use market value, not purchase price, to assess your final loan amount and Loan to Value Ratio (LVR). Some others require a review of the pre-approval that was issued at the time of signing the contract before finalising your loan.

Some banks, including Suncorp, Westpac, and Commonwealth, offer long-term loan approvals under the condition of an ‘on completion’ valuation, which would be conducted 90 days prior to settlement. This helps them to re-evaluate the applicant’s financial condition and work out that the property value is stable. Some banks offer financing for eligible borrowers but flag the valuation at the time of settlement as a risk to be carried by the buyer.

How Much Can You Borrow?

Every lender has different criteria on how they calculate what they will loan you. It will depend on many things like your income, assets and any other loans. Typically most lenders will loan around 80 percent of the value of a property to protect themselves from potential loss, but this is not a hard rule.

If settlement is more than 18 months away, you may find it hard to apply for a mortgage. Though you may get pre-approval from some lenders at the time of signing the contract, they may ask for a reassessment of your application at the time of settlement. Any change in your situation or their lending criteria may affect your application so make sure you know what the impact may be, particularly if you have entered into a sales contract.

Certificate of occupancy

You can apply for formal approval with some lenders when the building construction is about to be completed, while some others require completion of the property before they order a bank valuation. Typically developers issue the certificate of occupancy two weeks prior to settlement. In most cases, lenders require you to show them your certificate of occupancy before settlement.

When a bank accepts your application to finance an off the plan property investment, it commits to something proposed on paper at the initial stage. This means the approval is subject to a satisfactory on completion market valuation before settlement.

Having deposit

When you are buying off the plan, you will often be asked to make a deposit of 10 percent so you will need to consider how you will get the money for that. Having a healthy deposit (more than 10 percent) will also open up more lending options for you as the risk is lower for lenders.

Buying off the plan can be a great way to gain some early equity in a property if it increases in value between the time you buy and the time you settle. If you are looking to get finance to buy an off the plan property make sure you understand how it works and what you can commit to.

If you have any comments about getting finance for off the plan properties please leave a comment below or email love@fastlovehomes.com.au

When it comes to buying a new home, there are plenty of choices to select from. These days, a number of people are interested in buying off the plan – where you purchase a dwelling that hasn’t yet been built. With no physical property for you to inspect, you see the proposed plan and designs on paper and through pictures. One of the biggest advantages of buying a house off the plan is that you will be the first owner of the property and get a brand new dwelling built just for you. Depending on what stage you buy the property you can also influence the colours, fixtures and other finishes on your home.

Benefits of Buying Off the Plan

There are quite a few benefits of buying a new home off the plan. These include:

• Price

  When you buy off the plan you pay the current market value, which may rise in the future when the construction is completed. When you sign the contract with the developer, you are usually required to pay a 10 percent deposit of the total price of the property. The remainder of the balance will be paid upon completion, which may take months or years. As a result, you have ample time to organise your finances and personal affairs such as selling your existing home. As the property value may rise in the future, you may also benefit from the difference in the lower price you paid initially and what the property is valued at upon completion (depending on whether the market has risen). This is known as equity. So if the market has risen and your property is worth more than what you paid for it, you have gained some equity in the property.

• Secure A Quality Property

  If you act quickly enough you can often secure a quality property, perhaps the best on offer in the development, with only a 10 percent initial deposit. The balance will be paid on completion of construction. In the meantime, you can enjoy the benefit of any capital growth on the property.

• Tax Benefits

  There are significant tax benefits when buying a property off the plan, as many state governments offer stamp duty savings and incentives for buying newly built homes. You can often enjoy higher tax deductions via depreciation allowances. The benefits are greater when the property is new, so when you buy off the plan, it can maximise your tax deductions.

• Your taste

  When buying off the plan, you have greater choice in deciding the design, furnishing, fixture, finishes, colours, and layouts. You may be able to custom design the property. So you can purchase a property with a superior position, floor plan and finish. As a result, your property has greater potential for strong capital growth.

• Savings

  While you are often required to pay the initial deposit of 10 percent when you sign the contract, you can use the extra time before final settlement to save money. What’s more, you can enjoy the benefits of any capital growth that may occur during the period.

• Time

  With ample time before final settlement you can avoid the stress involved in getting things in order before you actually move in. Things like selling your existing house or ending a lease take time to sort out, so having plenty of time to get ready can help minimise the impact of these when it comes time to move in to your sparkling new home.

If you have any comments or suggestions about buying off the plan please comment below or email us at love@fastlovehomes.com.au