Buying property is exciting and often wonderfully life-changing. Off-the-plan apartments have become an increasingly popular way to enter the market, move up the property ladder or downsize to simplify your life.
It’s important to understand how purchasing off-the-plan differs from buying an existing property at auction or through private treaty.
Off-the-plan buying can allow you to maximise your investment potential, especially in a strong market. You can reserve an apartment for a 10% deposit and then enjoy the benefits of rising values while construction is completed.
However, buying off-the-plan requires a little imagination. You’ll need to picture your new home or investment using only a floor plan and an artist’s impression of the building, unless the developer offers a virtual walkthrough.
Be aware that lenders can apply a different lending criteria to off-the-plan mortgages which needs to be planned for. As a mortgage broker, I’d be happy to help you navigate these.
Below are nine unique aspects of buying off-the-plan to keep in mind:
- If you fall in love with an off-the-plan development but are not ready to jump in, you can often reserve a unit with a refundable $1,000 deposit. That takes the property off the market for 14 days.
- Not every developer will allow you to reserve an apartment. Some seek an expression of interest only and ask for a refundable payment (approx. $500). There’s no obligation for you to buy or for the developer to sell to you.
- A full deposit is usually 10% of the property’s value. Be aware, your bank or lender will not issue a mortgage until construction is completed. So this will come out of your own funds. A lender will likely undertake a separate valuation when construction is finished.
- The developer will send their contract to your nominated legal representative. You’ll have 14 days to negotiate, clarify any issues and pay the deposit.
- Early buyers have the pick of the building in their price bracket. Those with the best views go first.
- Your choice of colour scheme, fittings and fixtures is limited. So, check what’s available and make sure you’re comfortable with them.
- With your deposit paid and contracts exchanged, the developer will provide regular updates on construction.
- You’ll be invited to a pre-settlement inspection during which you must inspect carefully and point out any issues. Contracts usually permit leeway for developers to change the floor plan and reduce the square footage.
- You have three months to complain if you’re not happy. Your developer will have homeowners’ warranty insurance to compensate you if work is incomplete or defective. This will also come into play if the developer goes broke, dies, has their building licence suspended etc..
This article is provided for general information only and does not take into account the specific needs, objectives or circumstances of the reader. Before acting on any information, you should consider whether it is appropriate for your personal circumstances, carry out your own research and seek professional advice.