Buying off the plan in Australia involves purchasing a property before construction is complete, typically based on architectural drawings, a display suite, and the developer's marketing materials. It can be a smart strategy when market conditions favour price growth, as you lock in today's price for a property delivered in the future. However, the risks are significant: construction delays, market downturns, quality discrepancies, and developer insolvency can all affect your outcome. A pre-settlement inspection before handover is one of the most important steps you can take to protect your investment.
The Australian off-the-plan market has grown rapidly in recent years, particularly for apartments in Sydney, Melbourne, Brisbane, and the Gold Coast. For some buyers, the potential for capital gains, tax depreciation benefits, and the ability to customise finishes make it an attractive option. For others, the uncertainty of buying something that does not yet exist, combined with the risk of defects in new builds, makes it a gamble. This guide helps you weigh both sides so you can make an informed decision.
What Does Buying Off the Plan Mean?
When you buy off the plan, you enter into a contract to purchase a property that has not yet been built, or is still under construction. You typically pay a deposit (usually 10% of the purchase price) and then wait for the development to be completed before settling and taking possession.
During the construction period, which can range from one to three years or more, the developer builds the property according to approved plans and specifications. The final product you receive should match the contract documents, but in practice, there are often differences between what was promised and what is delivered.
The Advantages
Potential for Capital Gains
The most commonly cited advantage of buying off the plan is the opportunity for capital growth during the construction period.
- You lock in a purchase price at today's rates. If property values in the area increase during construction, the completed property may be worth more than what you paid.
- The deposit you paid works as leverage: a 10% deposit secures a property that may appreciate by 10% to 20% or more before settlement.
- In a rising market, this can result in significant equity gains at settlement.
Tax Benefits
Off-the-plan purchases can offer specific tax advantages for investors:
- Depreciation deductions: new properties have higher depreciation schedules for fixtures, fittings, and the building itself. A tax depreciation schedule can maximise these deductions.
- Stamp duty savings: some states offer reduced stamp duty for off-the-plan purchases, as duty may be calculated on the land value alone rather than the completed property value. Check your state's current concessions.
- Interest deductions: if the property is an investment, loan interest may be tax-deductible from settlement.
Tax laws change frequently. Always consult a qualified tax professional or accountant before making financial decisions based on expected tax benefits.
Customisation
Buying early in the development process may allow you to choose certain finishes and layouts:
- Floor plan options (where the developer offers variations)
- Kitchen and bathroom finishes, tile selections, and colour schemes
- Upgrade packages for appliances, flooring, or fixtures
The Risks
Construction Delays
Construction projects are subject to delays from weather, supply chain issues, labour shortages, and regulatory hold-ups. Delays can mean:
- Months or years of additional waiting before you can occupy or rent the property
- Increased holding costs if you are renting elsewhere while waiting for settlement
- In the worst case, developer insolvency can leave the project incomplete
Market Risk
Property values can decline during the construction period. If the market drops:
- The completed property may be worth less than what you agreed to pay
- Banks may only lend based on the current valuation at settlement, not the contract price, leaving you with a funding shortfall
- You may face negative equity from day one
Quality and Defects
Buying something that does not yet exist introduces uncertainty about the final product:
- The finished property may not match the display suite or marketing materials
- Common defects in off-the-plan apartments include waterproofing failures, poor finishing, non-compliant work, and substandard materials
- Checking workmanship quality is impossible until the building is complete
Advantages vs Risks at a Glance
Pros
- Lock in today's price with potential for capital growth
- Higher depreciation deductions for new properties
- Possible stamp duty savings in some states
- Ability to customise finishes and layouts
- Brand-new property with modern building standards
Cons
- Construction delays can extend timelines by months or years
- Market downturns can leave you with negative equity
- Final product may differ from marketing materials
- Developer insolvency can leave the project unfinished
- High rate of defects in new apartment buildings
Practical Tips for Off-the-Plan Buyers
Research the developer
Check the developer's track record. Look at their completed projects, read reviews, and search for any history of disputes, delays, or quality issues. A developer with a strong reputation reduces your risk.
Get independent legal advice
Have a property lawyer review the contract before you sign. Pay attention to sunset clauses (which allow the developer to cancel the contract after a certain date), variation clauses, and defect rectification obligations.
Understand the contract specifications
The contract should include detailed specifications of finishes, materials, fixtures, and layout. Any deviation at settlement should be documented and addressed.
Get financial advice
Consult a mortgage broker or financial adviser to understand your borrowing capacity at settlement, not just at the time of signing. Banks assess lending based on the property's valuation at the time of completion.
Arrange a pre-settlement inspection
Before settling, engage a licensed building inspector to conduct a pre-settlement inspection. This identifies defects, incomplete work, and deviations from the contract specifications before you accept the property and make the final payment.
The Role of Pre-Settlement Inspections
A pre-settlement inspection is your opportunity to verify that the finished property matches the contract specifications and meets Australian building standards. Given that the NSW Government found 53% of buildings registered between 2016 and 2022 had serious defects, this step is not optional for informed buyers.
| Interior | Exterior and Common Areas | |
|---|---|---|
| What the Inspection Checks | Walls, ceilings, floors, cabinetry, fixtures, paint, tiling, waterproofing in wet areas | Building facade, balconies, car park, common corridors, external finishes |
| What the Report Provides | Detailed description of each defect with photographs and references to the contract or NCC | Assessment of compliance, workmanship quality, and recommended rectification items |
The inspection report gives you evidence to present to the developer for rectification before settlement, or to negotiate with confidence.
Key Takeaways
- Buying off the plan means purchasing a property before it is built, typically with a 10% deposit.
- Potential advantages include capital growth during construction, tax depreciation benefits, and stamp duty savings.
- Risks include construction delays, market downturns, developer insolvency, and defects in the finished product.
- Always research the developer's track record and get independent legal and financial advice before signing.
- A pre-settlement inspection by a licensed building inspector is one of the most important steps to protect your investment.
- Over 53% of new buildings in NSW have had serious defects, making independent inspections particularly relevant for off-the-plan purchases.
- Contract specifications should be detailed and reviewed by a property lawyer before signing.
Frequently Asked Questions
QWhat is the typical deposit for an off-the-plan purchase in Australia?
The standard deposit for an off-the-plan purchase is usually 10% of the purchase price, paid at the time of signing the contract. Some developers may accept lower deposits (5% or even less) in certain circumstances. The deposit is held in trust until settlement.
QCan I pull out of an off-the-plan contract?
Cooling-off periods vary by state. In NSW, there is a 10 business day cooling-off period for off-the-plan contracts during which you can rescind, though you may forfeit 0.25% of the purchase price. After the cooling-off period, withdrawing from the contract typically means losing your full deposit unless the contract includes specific exit clauses. Legal advice is strongly recommended.
QWhat is a sunset clause in an off-the-plan contract?
A sunset clause sets a deadline by which the development must be completed. If the project is not finished by this date, either party (buyer or developer) may be entitled to terminate the contract. In NSW, legislative changes now require the developer to get the buyer's consent or a Supreme Court order before using a sunset clause to rescind. This protects buyers from developers who cancel contracts to resell at higher prices.
QWhat happens if the developer goes into liquidation?
If the developer becomes insolvent, the project may be delayed, restructured under a new developer, or abandoned. Your deposit should be protected if held in a trust account, but recovery can be slow and complex. Check that the deposit is held in a regulated trust account and seek legal advice immediately if the developer shows signs of financial difficulty.
QHow common are defects in off-the-plan apartments?
Defects are very common. NSW Government data shows that 53% of buildings registered between 2016 and 2022 had serious defects. Common issues include waterproofing failures, cracking, poor finishing, non-compliant electrical and plumbing work, and fire safety deficiencies. A pre-settlement inspection helps identify these problems before you accept the property.
QWhat stamp duty concessions are available for off-the-plan purchases?
Stamp duty concessions for off-the-plan purchases vary by state and change frequently. In some states, duty may be calculated on the land value at the contract date rather than the completed property value, resulting in savings. First home buyers may also qualify for additional concessions or exemptions. Check your state revenue office for current rules.
QShould I get a pre-settlement inspection for an off-the-plan apartment?
Yes. A pre-settlement inspection by a licensed building inspector identifies defects, incomplete work, and deviations from the contract before you settle. Given the high rate of defects in new apartment buildings, this inspection is one of the most effective ways to protect yourself. The cost (typically $300 to $600) is minimal compared to the cost of rectifying defects after settlement.
QCan the developer change the specifications after I sign the contract?
Most off-the-plan contracts include variation clauses that allow the developer to make changes to specifications, finishes, and sometimes even floor plans during construction. These clauses should be reviewed carefully by a property lawyer before signing. Significant changes may give you grounds to rescind the contract depending on the wording of the clause and your state's legislation.
QWhat tax benefits are available for off-the-plan investment properties?
New properties generally attract higher depreciation deductions for both the building structure and internal fixtures and fittings. Investors can also claim deductions for loan interest, property management fees, and other holding costs from settlement. A quantity surveyor can prepare a tax depreciation schedule to maximise these deductions. Consult a tax professional for advice specific to your situation.
QHow long does an off-the-plan construction usually take?
Construction timelines vary depending on the size and complexity of the development. A small apartment building may take 12 to 18 months, while large multi-tower developments can take 2 to 4 years or more. Delays are common, and settlement dates in the contract are often estimates rather than guarantees. Build buffer time into your financial planning.
References and Resources
- NSW Government - Off-the-Plan Purchases - NSW Fair Trading
- Victorian Consumer Affairs - Off-the-Plan - Victorian Government
- Queensland Building and Construction Commission (QBCC) - Queensland Government
- NSW Government - Building Defects Data - NSW Government
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Buying off the plan? Protect your investment with an independent pre-settlement inspection from Owner Inspections. Our licensed building inspectors check your apartment against the contract specifications and identify defects before you settle. We operate across NSW, Victoria, and Queensland. Get a quote today or call us on 1300 471 805.