Buying off the plan is an increasingly popular way to enter the Australian property market. Whether you are a first-home buyer looking for a modern home or an investor seeking capital growth and rental returns, purchasing a property before it is built can offer real advantages. However, it also carries unique risks that require thorough preparation.
The key to a successful off-the-plan purchase lies in doing your homework, understanding the financials, evaluating the design carefully, managing the construction waiting period, and seeking professional guidance where needed. This guide covers practical tips to help you navigate each stage of the process with confidence.
Do Your Due Diligence
Research the Developer
The developer is central to the success of your off-the-plan purchase. Before signing anything, take the time to research their background thoroughly.
Check their track record: Look at the developer's history of completed projects. Visit their previous developments if possible to assess the build quality firsthand
Review their financial stability: A developer in strong financial health is far less likely to encounter issues that could delay or derail your project. Look for publicly available financial information or ask your solicitor to investigate
Search for complaints or disputes: Check consumer protection websites, building dispute tribunals, and online reviews for any red flags. Speak with previous buyers if you can
Research the Location
The location of your property will have a significant impact on its long-term value and liveability. Consider the following:
Current and planned infrastructure: Look into transport links, schools, shopping centres, parks, and any planned infrastructure projects that could enhance the area's appeal
Neighbourhood character and growth potential: Research the demographic profile, crime statistics, and the trajectory of property values in the area
Supply levels: Be aware of how many similar developments are planned or under construction in the area. An oversupply of apartments can put downward pressure on prices and rents
Scrutinise the Contract
The contract of sale for an off-the-plan property is typically more complex than for an established home. Pay close attention to:
Sunset clauses: Understand the completion deadline and what happens if the developer does not meet it. In some states, laws have been introduced to prevent developers from exploiting sunset clauses to cancel contracts and resell at higher prices
Variation clauses: Know what the developer is permitted to change during construction and what level of change would give you the right to terminate the contract
Deposit protection: Ensure your deposit will be held in a trust account as required by law, and understand under what circumstances it can be released
Understand the Financials
Secure Pre-Approval
Before committing to an off-the-plan purchase, obtain pre-approval from your lender. This gives you a clear understanding of your borrowing capacity and shows the developer that you are a serious buyer. Keep in mind that pre-approval is typically valid for a limited period, and your financial situation will be reassessed at settlement.
Factor in Extra Costs
The purchase price is only part of the total cost. Budget for the following additional expenses:
Stamp duty: While concessions may apply, you should confirm the exact amount for your state or territory
Legal fees: Solicitor or conveyancer fees for reviewing the contract and handling settlement
Body corporate fees: For apartments and townhouses, ongoing strata levies can be a significant expense
Connection and moving costs: Utility connections, internet setup, and removalist fees for a new property
Consider Deposit Alternatives
Some developers accept deposit bonds or bank guarantees instead of a cash deposit. This can free up your funds during the construction period, allowing you to keep your money in a savings account or offset account. Discuss the available options with your solicitor and financial adviser to determine the best approach for your situation.
Evaluate the Design and Finishes
Review Floor Plans Carefully
Study the floor plans in detail. Consider the room sizes, layout, natural light, ventilation, and storage. Compare the plans with the display suite if one is available, keeping in mind that display suites are often styled and furnished to make spaces appear larger than they are.
Pay attention to the orientation of the property. North-facing living areas receive the most natural light in the southern hemisphere, which can significantly affect comfort and energy costs.
Scrutinise the Inclusions
The schedule of finishes and inclusions is a critical document. It outlines exactly what will be provided in the finished property, from the brand and model of appliances to the type of flooring, benchtops, and tapware. Review it carefully and ask questions about anything that is vague or unspecified. Ensure that what is shown in the display suite or marketing materials matches the schedule of inclusions in the contract.
Visualise the End Product
Artist impressions and 3D renderings are marketing tools designed to present the property in its best light. They may not accurately represent the final product. Where possible, visit the developer's completed projects to get a realistic sense of their build quality and finishing standards. Ask to see a sample of the materials and finishes that will be used in your property.
Manage the Waiting Period
Stay in Touch with Construction Updates
Many developers provide regular construction updates to buyers, including photographs, progress reports, and milestone notifications. Stay engaged with these updates and keep records of all communications. If updates are not provided regularly, request them. Being informed about the progress of construction can help you plan ahead and identify potential issues early.
Plan for Delays
Construction delays are common in off-the-plan purchases. Weather events, supply chain disruptions, and labour shortages can all push back completion dates. Build a financial buffer to accommodate potential delays, and avoid making commitments such as ending a lease or selling your current property based solely on the estimated completion date.
Prepare for the Pre-Settlement Inspection
Before you settle on your off-the-plan property, you will have the opportunity to conduct a pre-settlement inspection. This is your chance to walk through the finished property and check that it has been built in accordance with the plans and specifications. Engaging a professional building inspector for this step is highly recommended.
A professional pre-settlement inspection can identify defects and discrepancies that you might miss on your own. It provides documented evidence that can be used to negotiate repairs or rectification with the developer before you settle.
Leverage Professional Guidance
Navigating an off-the-plan purchase is best done with the support of experienced professionals. Consider engaging the following:
Property solicitor or conveyancer: To review and explain the contract, advise on your rights, and handle the settlement process
Financial adviser or mortgage broker: To help you understand your borrowing capacity, compare loan products, and plan for settlement
Building inspector: To conduct a thorough pre-settlement inspection and provide a detailed report on the condition of the property before you finalise the purchase
Buyer's agent: If you are unfamiliar with the market or the off-the-plan process, a buyer's agent can provide independent advice and help you assess the value and suitability of the property
Frequently Asked Questions
QCan I take advantage of low interest rates when buying off the plan?
You can lock in a purchase price at the time of signing the contract, but your mortgage interest rate will be determined at the time of settlement, which could be one to three years later. Interest rates can change significantly during this period. Some lenders offer rate-lock products for a fee, but these are typically only available for a limited period. Speak with your mortgage broker about your options.
QWhat happens if zoning laws change after I sign the contract?
Zoning law changes can affect the development and the surrounding area. If changes affect the development itself, such as restrictions on building height or density, the developer may need to modify the plans. Your contract should outline what happens in this scenario. If the changes affect the surrounding area, this could impact the value and liveability of your property, but it would not typically give you grounds to terminate the contract.
QCan the developer alter the plans after I have signed?
Most off-the-plan contracts include variation clauses that allow the developer to make certain changes during construction. These are often limited to minor changes that do not materially affect the property. However, the definition of "minor" can vary. Your solicitor should explain the variation clause in your contract and advise on your rights if significant changes are made.
QHow can I verify the developer's claims about the property?
Visit the developer's previous projects to see the quality of their work. Speak with owners in those developments about their experience. Compare the marketing materials with the schedule of finishes in the contract. Engage a solicitor to review the contract and ensure the developer's promises are legally binding.
QAre there specific loan products for off-the-plan purchases?
Some lenders offer loan products designed for off-the-plan buyers, which may include features such as extended pre-approval periods or progressive drawdown facilities for house-and-land packages. Your mortgage broker can help you identify the most suitable product for your circumstances and compare options across different lenders.
QCan I sell the property before construction is completed?
This depends on the terms of your contract. Some contracts allow nomination or assignment, which means you can transfer your rights under the contract to another buyer before settlement. However, this may be subject to the developer's approval and could attract additional fees or tax implications, including capital gains tax. Seek legal and tax advice before attempting to sell before completion.
QWhat happens to my deposit if the market fluctuates?
Your deposit is held in a trust account and is protected by law in most Australian states and territories. If the market declines and you choose not to settle, you may forfeit your deposit unless you have a legal right to rescind the contract, such as under a sunset clause. If the market rises, your deposit remains the same and you benefit from the increased property value at settlement.
QCan I negotiate the sunset clause?
Yes, in many cases you can negotiate the terms of the sunset clause before signing the contract. You may request a shorter sunset period to reduce your exposure to delays, or include provisions that require the developer to provide regular progress updates and evidence of construction activity. Your solicitor can advise on appropriate sunset clause terms for your situation.
QWhat recourse do I have if the property is not as expected?
If the completed property does not match the plans and specifications in the contract, you have several options. You can request the developer to rectify the defects before settlement. If the issues are significant, you may have grounds to delay settlement or negotiate a price reduction. In serious cases, you may be able to terminate the contract. Australian Consumer Law and state building legislation provide protections for buyers. A professional pre-settlement inspection report can serve as documented evidence to support your claims.
QHow do I choose the right floor plan in a new development?
Consider your lifestyle needs and how the space will be used day to day. Look at the orientation for natural light, the separation between living and sleeping areas, storage space, and the position of the property within the building or development. Visit the display suite with a measuring tape and compare the room sizes with your current home. Think about future needs as well, such as whether the layout can accommodate a growing family or work-from-home arrangements.
Key Takeaways
- Thoroughly research the developer's track record, financial stability, and past projects before committing
- Have a solicitor review the contract, including sunset clauses, variation clauses, and deposit protection
- Secure mortgage pre-approval and budget for all additional costs beyond the purchase price
- Carefully evaluate floor plans, inclusions, and finishes against the contract specifications
- Plan for construction delays and maintain a financial buffer
- Engage a professional building inspector for a pre-settlement inspection before finalising your purchase
- Seek professional guidance from a solicitor, mortgage broker, and building inspector throughout the process
References and Resources
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