Off-the-plan purchases are a great way to get into a property. But they can bring risks. Learn how to protect your investment!
The Queensland Government recently formulated a $3.1 billion The first, the Housing Availability and Affordability (Planning and Other Legislation) Bill was passed through State Parliament on 16 April, and the second was introduced on 20 March via amendments to the Economic Development Act 2012.
The plan will support the construction of 1,300 dwellings within the next five years, along with the approval of 15,000 homes in priority development areas. This supports the State Government’s long-term target of 1 million new homes by 2046.
The new legislation also brings about the possibility of exciting opportunities for prospective homeowners and investors – including increasing opportunities for off-the-plan purchases.
An off-the-plan purchase – or ‘buying off the plan – is simply where you ‘buy’ a completed property (by entering into a contract) before the building is actually completed. These are typically unit or townhouse developments and you will enter into a contract to buy the property based on the plans (and possibly an already constructed example property).
The contract is a legally binding between the buyer and seller of the property – who is often the builder – in the same way that it would be if you were buying an established home.
Off-the-plan purchases can be a great way to get into a property that is purpose built and brand new. You might also get a discount on stamp duty, or even some extra tax benefits. And one of the most significant advantages is that you’ll have an extended timeframe before settlement, which means you’ll have more time to save and prepare financially.
But off-the-plan purchases can also have pitfalls and risks. For example:
Your off-the-plan property purchase is an investment. And it’s up to you to protect that investment. Here’s how you can do that.
Off-the-plan contracts are notoriously complicated, so it’s vital that you have legal representation before signing anything. Many of these contracts could have clauses that could significantly impact your rights and obligations, such as sunset or variation clauses. Engage a solicitor experienced with these specific types of contracts so you have the right guidance.
Financially, you need the right support as well. Securing a mortgage on an off-the-plan purchase can be challenging. And loan approvals typically only last for 90 days, while the settlement on these types of properties can often be months or even years into the future.
This timing mismatch means that you have to be prepared to reapply for financing, potentially under different economic conditions or life situations.
Since buying off the plan could expose you to more risk that the purchase price could go up over time, it’s important to maintain a financial buffer. We suggest building in a buffer of at least 10% of the purchase price. This will let you lock in costs and minimise the risks of price inflation during the construction phase.
While off-the-plan builds offer the appeal of brand new properties, they come with certain risks. And the deals can be quite complex. Before making the jump, take a look at purchasing an already-completed new build or even an established home.
These options eliminate many of the uncertainties associated with construction and will likely get you into your new home faster.
If you’re considering making the jump into an off-the-plan property purchase, be sure to do all your homework first. And be sure you get the right support.
Our team is on hand to help you with understanding your financial position. And with over 40 lenders on our books, including lenders happy with building and off-the-plan loans, we’re in a unique position to help!
Gayle, I found the legislation around this very confusing. I think I’ve got it right, but your expert oversight would be much appreciated!
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