Some people say that you can’t go wrong buying units off the plan. But is this really true? There seems to be a huge amount of new building construction happening in Brisbane and really, who’s to say which one will net you the biggest return?
These properties are sold by teams of marketing-savvy real estate agents who sell a property that doesn’t actually exist yet. The buyer agrees to a price in today’s terms, and settlement occurs once the home has been completed. This could result in you losing out if market prices fall after you’ve signed on the dotted line. A way to avoid this is to make sure the price they are asking, and the price you ultimately agree on, is based on sound data, not on future or predicted pricing. Talk to a valuer to determine what the yet-to-be-completed unit is really worth. But remember, there is no guarantee.
If you’re a first home-buyer buying an off-the-plan apartment or townhouse, you will be entitled to exemptions or reduced stamp duty in states across Australia. However, you must determine whether the amount you are saving is worth the heartache if property prices decrease. Also remember that your deposit money is locked away with no investment income for the period between deposit and settlement so you are unable to take advantage of other investments with this money.
Most buyers of off-the-plan properties are investors, who are buying properties for tax benefits. It’s important to do your homework and make sure the investment fundamentals stack up for the property in questions.
There are other disadvantages to buying off the plan such as construction being delayed due to poor weather, building problems, industrial action, builder bankruptcy, or for a range of other reasons. The developer may even fail to complete the building. Also, what if the apartment is not quite what you expected? Although a display version will give you a guide to the final unit, aspects such as the view can’t be known until completion and will often be a gamble.
Buying off the plan in general carries a higher risk; both for investors and owner-occupiers so with this type of investment you want to be sure that you will receive a higher return on your investment either through rental returns or when you come to sell the property; something that has no guarantees.