Buying off the plan

Buying off the plan in Brisbane? What is it?

When a purchaser enters into a contract to purchase a property before the property title is created and the building is constructed, it is called ‘buying off the plan’.  This can be done with vacant land, house and land packages, and also strata properties.

When buying a property off the plan, there are several benefits:

  • Securing a property may only require a 10% deposit to the developer and the balance is not paid until completion of the property, which could be up to 18 months away. The time between signing the contract and before a purchaser has to settle on the contract means that you may have extra time to save funds.
  • The property being purchased may actually increase in value before you have to pay for it at settlement -earning you a capital gain.
  • Many developers offer various incentives and you may also be able to lock in a lower price to buy the property before construction has begun.
  • Buying off the plan allows you to choose the location of your property within the development itself and some developers will allow you to personalise it with your own choice of floor plans and finishes.
  • As a property investor buying off the plan, there are significant depreciation tax savings which can be realised and Stamp Duty exemptions that are not usually available on the majority of existing buildings.
  • A purchaser buying off the plan will also gain from the builders’ guarantee, where structural or interior building faults that occur in the first seven years must be repaired by the builder.

There are of course risks that need to be carefully considered when buying off the plan, and you should have the contract checked carefully by your solicitor or conveyancer.

Some things to look out for are unexpected costs or conditions that may affect your decision to buy, for example: no pet bylaws or covenants which restrict what type of house design is allowed.

In some cases, the project may not go ahead or it is completed much earlier or much later than expected, and you should understand how this would affect you and your finances.

You will want to research the developer and builder to give you comfort that the property will be built to an acceptable standard.  You should carefully review what you can afford to do should the property market fall or interest rates rise between the time you sign the contract and the project is completed, as these things may end up costing you more than you originally expected to pay.

Buying off the plan has many advantages but also potential pitfalls, and so before signing a contract and committing funds, it’s important to ask questions and seek professional advice.