5 tips for buying off the plan
The decision between buying off the plan or purchasing an existing property can be difficult but also exciting for Australian home buyers. The former presents many benefits – tax, depreciation and capital gain incentives to name a few – but the concept of buying a home that doesn’t exist yet can sometimes be daunting.
Add to the mix a few scare stories of things that can go wrong and it’s likely you may be thinking off the plan is just too risky, but it doesn’t have to be. As with any property purchase, you must ensure you have the information you need to make a smart decision.
1. Do your research
The likelihood of making a good property purchase increases tenfold when you’ve done your research. By checking things like median price growth, vacancy rates, demographics, transport links and future infrastructure projects, you can buy into an area that has good prospects for capital growth. It’s also important to research the team that will actually deliver the project; that is the developer, builder, architect and even the sales agent. Check their experience and qualifications to see they have a good track record before signing anything.
2. Consider future potential
Buying a home in a prime location may not be an affordable goal for you right now, but that doesn’t mean you can’t buy in an up-and-coming area. If we take some of Melbourne’s current hot spots; places like Port Melbourne and Brunswick for example; we see that suburbs evolve and turn into prime locations over time. Factors such as proximity to public transport and upcoming infrastructure projects play a big part in determining future liveability and attractiveness of a suburb. You can find this information by staying across urban development industry news and forecasts.
3. Ask for the details
You may not be able to physically walk through the home you are purchasing, so make sure you ask all the questions you need to gain a good idea of what you are buying. This does not simply mean viewing the display suite, which should be thought of as a sample only, designed to give you an indication of what the final product will be. Ask how your property will differ from the display home and don’t be afraid to request extra details, such as a schedule of finishes, artist impressions, room dimensions and layout plans.
4. Understand the contract
Off-the-plan property purchases are no different to other property products – they’re a major investment. You need to read the contract carefully and make sure you are completely confident with all the terms and conditions before signing it. Go over the agreement so you clearly understand all parties’ commitments. Always seek professional guidance if there’s something you don’t understand or if anything doesn’t feel right. It is always better to be safe than sorry!
5. Think long term
Property should not be seen as a short-term investment to be flipped after settlement, which is the case for much of the media-focused perception of resale values. Remember that property is a medium- to long-term investment option and should be treated as such. The market is definitely cyclical, and purchasers and investors can never be guaranteed an increase or a decrease in property value within a defined period of time. The trick is to look at the historical trends of property types and locations. Use this information to make a decision that best suits your own unique situation and that will get you closer to your financial and home ownership goals.
At the end of the day, buying property without doing your homework is a risky move – regardless of whether it’s off the plan or an established house. In either case, if you take some time to do the research, gather relevant information and ensure your expectations correspond with the contract of sale, there is no reason to be scared of the process.
Words: Danni Addison, Victorian CEO of the Urban Development Institute of Australia