Buying off the plan means entering into a contract with a developer to buy a property before the completion of construction. Since there is no physical property to inspect or see, you view the design and building plans to get an idea as to what the property will look like on completion, although you can often inspect or see other properties completed by the developer or builder to get a good idea of what the finished product will look like.
Benefits of Buying Off The Plan
There are many benefits of buying a new home off the plan. Let’s run through some of the key ones.
- A better price
Often the price of a property rises after completion. When you buy off the plan, you are paying the current market price for a property, which will be completed in the future. Developers sometimes offer yet to be built property at lower prices to encourage sales before construction starts and/or to meet loan criteria set by funding groups like banks. Buying a property at this time saves you money because the price can often gradually rise over time, and once the property is built you have a tangible product to see and touch. The completion of the build often boosts the value of the property.
- Stamp duty savings
You can often make substantial stamp duty savings if you buy off the plan. Some state governments in Australia offer bonuses and reductions or have reduced stamp duty to encourage new development. In Victoria, the full rate of stamp duty applies on fully built homes, however you can receive generous concessions when you buy off the plan. The further along the construction of the property the less the stamp duty savings you get. In Victoria, if you entered a contract after 1 July 2013 to build or purchase a new home, a payment of up to $10,000 is available for eligible first home buyers. You can find out more about stamp duty savings on the State Revenue Office website.
- Tax benefits
Some people invest in off the plan properties to take advantage of tax breaks. By buying the property brand new you can claim the maximum benefit of depreciation expenses for furniture, fittings and wear and tear of the dwelling. This usually applies to investment properties rather than your own home or principal place of residence, so check with your accountant or solicitor before factoring that in to any numbers you might be calculating.
- Increasing property value
Property prices generally rise over time (though not always). When you buy a property off the plan, you are able to secure the property at the current market price, but not take possession of the property until months or years later, during which time the market may have experienced growth. This means that the value of your off the plan property may have increased by the time construction is complete. Also, when you buy off the plan, you often only pay a deposit of 10 percent and the remaining amount on completion of construction. Thus you don’t have large chunks of your money tied up in a property but can enjoy the benefit of capital growth of that property if the market is rising.
- More choice
You have more choice when buying off the plan, potentially allowing you to purchase a home with a superior position with a better view, floor layout and finishes such as stone bench tops or hardwood flooring. You may be able to choose the colour paint you want, and many other smaller details that you can’t change once the home is built.
Buying off the plan can be a way of securing a good quality home at a fair market price, and then influencing how it will be finished so it suits your style and needs. If you have any other questions about buying off the plan please comment below, give us a call or send us an email at love@gehde.com.au
