Top tips for buying brand-new homes off the plan

Some people value buying a brand-new property off the plan, where they may even make capital gains before it's completed, while others regard the strategy as risky. Here are some top tips for buying brand-new homes off the plan. 

Benefits of buying a brand-new home off the plan 

Insiders said the properties off-plan could suit first-time buyers trying to get into a market with a reasonable price point or those who want to stay in the same suburb. Sometimes an off-the-plan property has particular appeal, they added.

Buyers also have a say in the apartment types, aspects, and locations, depending on the contract, the color scheme, fixtures, and fittings.

There may also be financial benefits to purchasing homes off-plan, as explained by experts specializing in residential developments for about three decades.

Buyers only need a 10% deposit for off-the-plan properties rather than the completed properties, as explained. Buyers can secure the property before the market keeps getting ahead of them, and then they have time to save enough money for equity and stamp duty. 

Investors, meanwhile, can enjoy tax depreciation benefits only associated with brand-new properties.

The one clear bonus is the developer taking on the risk and headache of producing the project.

"If there's an issue with the builder, the developer has to tackle that," a property insider said

The property may increase in value while it's being built.

A few risks of buying a home off the plan

Relying on the assumption that property prices will increase during construction is a risky move, cautioned by experts, as it can easily lead to negative consequences.

Moreover, market conditions are subject to rapid changes, which can also impact lending criteria.

Property insiders say buyers who purchase an off-the-plan home can arrange for financing afterward. However, they cannot assume that the bank will lend them the necessary funds when the settlement time arrives.

Furthermore, if their circumstances change or interest rates rise, they may need to meet the qualifying criteria for a loan. In such a scenario, they may either sell the property and hope for a buyer or forfeit their deposit and face a possible lawsuit from the developer.

Top tips for those buying homes off the plan

According to experts, most dangers of purchasing off-the-plan homes can be controlled and minimized.

Choose a prominent and prestigious developer

Developers with a long track record will continue contracts due to market fluctuations. The property experts advised buyers to conduct thorough research on the developer and their builder (which are sometimes different), including reviewing their previous projects.

The build has started prior to making a purchase 

Off-the-plan properties often have a five-year timeframe, allowing developers sufficient time to sell several units, secure financing, obtain council approval, and commence construction.

Some individuals may feel more comfortable purchasing after these initial stages have been completed, and construction has begun.

Seek legal counsel for off-the-plan deals

Some property insiders emphasized that contracts for off-the-plan deals can be highly intricate and generally favor the developer.

To ensure that you are well informed and protected, it is advisable to consult with a conveyancer who specializes in off-the-plan deals. They can assess the contract before you commit, identify potential risks or special provisions, and assist you in negotiating more favorable terms.

Select a location where the demand exceeds the supply

To maximize your chances of capital gain while your property is underway, avoid suburbs with numerous comparable projects in progress. For investors, it's crucial to avoid areas where others compete for tenants. 

Advisors suggest purchasing property in buildings intended mainly for owner-occupiers. It requires asking the appropriate questions and having the ability to determine which market the property is most suited for.

Make sure to calculate all your sums

With the uncertain inflationary environment and the risks of purchasing property off-plan, it is crucial to spend some cash in reserve.

It's also prudent to consult a mortgage broker before committing to getting an understanding of what you can afford.

Buying an off-the-plan home may not be a good decision if buyers are apprehensive about their finances, jobs and interest rates. However, if you

However, buying off the plan can be profitable if you make informed decisions and purchase a property that doesn't stretch your budget too far.

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