The Complete Guide To Buying Off The Plan [Simple 6-Step Guide]

A buying off the plan of a house.

Table of Contents

What Is Buying Off The Plan?

Buying off the plan simply means buying a property that hasn’t been built yet or is still under construction.

As the purchaser you sign a contract to buy an apartment that is yet to be built or is in the process of being built.

You make your decision to buy based on the building plans and designs, rather than the finished product.

When making a decision about an apartment without a physical property to view, you will need to rely on plans and drawings of the space for reference.

You do your research on who has built and designed your house and have the ability to check out previous examples of their work.

Buying off-the-plan means that you are also buying a brand new home, and you will be the first person to live in that property, and therefore you have some ownership discretion on the way the home is presented.

Off-the-plan properties are eligible for financial incentives such as first home owner grants and stamp duty concessions, subject to state regulations. As well as this, developers may provide enticing benefits during the marketing phase to the contract price.

The Pros And Cons Of Buying Off The Plan

There are some key differences when buying an off the plan property compared to buying an existing property, and each difference has its own set of benefits and risks to consider.

The Pros Of Buying Off The Plan:

  • As you are buying an unbuilt property prior to construction beginning, the developer can offer  discounts on the purchase price.
  • You might have the opportunity to negotiate changes to the interior style of the property, this can be negotiated with the developer also.
  • New properties come with a builder’s guarantee. These guarantees can protect you against shoddy workmanship and early wear and tear.
  • The property could appreciate in value during the construction process.
  • In Victoria, you may be able to save on stamp duty because you’re buying a new property. This can vary depending on whether you’re purchasing a home or an investment property, and your particular contract. Check with Select Legal about the stamp duty owed, whether any concessions are available, and when it must be paid.
  • If you’re purchasing property with investment objectives, you may be entitled to tax advantages when procuring off the plan. It is advised to check any tax rules with a professional accountant or registered tax agent.
  • Those buying their first home may be eligible for the First Home Owner Grant (FHOG). You don’t necessarily need to be buying off the plan to be eligible but they’re worth bearing in mind when weighing up your options. Rules and grant amounts differ across states and territories, therefore it is important to review individual eligibility.
  • When purchasing off the plan, it is necessary to pay a deposit upon agreeing to the contract price and signing the contract of sale in order to securely acquire the property. The balance of the purchase price for the property is paid at settlement. You will have time from contract to settlement to save money which can be used for reduced borrowing, stamp duty or other upfront costs.
  • The deposit you pay may be held in a trust account until after completion and you may receive interest on this amount until settlement. Alternatively, the developer may agree to let you secure the purchase using a deposit guarantee from your bank. This may enable you to continue gaining interest on your funds during the construction of your home.

The Cons Of Buying Off The Plan:

  • When buying off plan, bear in mind that there is no opportunity to view the property beforehand, and therefore it may differ from your expectations.
  • Delays in the completion of the building may result in higher expenses or disruptions, such as having to remain in rented accommodation until the property is ready.
  • In the event that the developer goes bankrupt before completion of the project, reimbursement of deposit may not be possible. The terms of your contract will determine the outcome.
  • Interest rates and changes to income could impact the amount of money that can be borrowed and the repayments that can be managed.
  • Your lender will only value the property at completion and sometimes the final value may be less than you expected. This in turn may affect your loan to value ratio, which is the amount you need to borrow calculated as a percentage your lender’s valuation of the property.
  • If you’re buying the property as an investment, bear in mind that during the time it takes to build the development, market fluctuations and other housing developments may affect its resale value.
  • If circumstances change before your final application is approved, whether they be your personal income or the wider economic environment, you may not be able to borrow the amount you were pre-approved for which could leave a shortfall.

How To Buy Off The Plan Melbourne

1. Find An Off The Plan Development

Find a development that looks like it suits your needs. Work out what your needs are in terms of location, size and features.

This is also the time to do some research on the area around the development and to look into the developer itself.

You should visit the company website, review past and current projects as well as their financial performance to ensure that the developer is in a strong position to carry out the intended works.

You should ensure that the builders for the development are licensed and qualified and you can check this on your relevant state government website. What projects have they completed recently? Have they had any problems on other projects?

2. Submit Your Interest And Intent

Developers may contact local real estate agents to initiate interest in the development. An expression of interest payment can be lodged, however it does not guarantee that the property will be sold to you.

3. Sign The Contract And Pay The Deposit

After choosing the location and development project, a contract of sale must be signed to complete the purchase. Before signing the contract, it is important to seek independent legal advice from Select Legal to make sure all relevant terms for the exchange are included.

Contracts should include a cooling off period, the project plans, all inclusions and exclusions, all finance considerations and all building inspection and liability considerations.

Off the plan contracts typically require a 10% deposit. Payment is due upon signing the contract. Building construction can be lengthy, thus you may need to pay a deposit and wait one or two years before you can move in.

The remainder of the purchase price for the property is typically paid at settlement, with the payment typically coming from the lender.

A 20% deposit is considered the standard size in Australia. Anything under 20% means you may have to pay lenders mortgage insurance (LMI), which can cost thousands or tens of thousands more.

4. Pre-Settlement Inspection

When the building is almost finished, you will be able to inspect it. The builder will arrange this for you. This is the time to check the project has been completed to the standard you agreed to in the contract.

Check the inclusion list in your contract and make sure everything is there. If there is anything missing, or any defects, now is the time to get the builder to fix them.

5. Get Your Home Loan Organised

Settlement is when you take possession of the property and the money changes hands. Before this, you’ll need to actually get your home loan organised.

Some Australian lenders may be reluctant to provide finance for off the plan purchases because the property may be sold for more than it’s worth. In an uncertain market, the property value might decline between the signing of the contract and the completion of the build.

6. Happy Days

Once the settlement is complete, you can begin occupancy; the builder, however, must still provide follow-up support. The builder typically has a 90-day maintenance period during which they must repair any defects or other issues.

But not everything wrong can be considered a defect. There may be cases where a feature you identify as a defect falls within the builder’s acceptable standard of workmanship.

What Should You Look For In A Great Off-The-Plan Property?

First and foremost as with all property, the consideration is location, location, location.

Maybe look to build in established suburbs as these areas almost always enhance a property’s value and liveability.

Look for good nearby amenities, public transport, schools, parks etc. Things that you need if purchasing as an owner-occupier, and things a potential tenant might want if purchasing as an investment.

Look to see how the building is designed and the shared amenities it presents which can indicate the neighbours you can expect to share a building with. Likewise, it is important to consider the neighbourhood in the building and surrounding the project. Who lives in the area, and do they align with your lifestyle.

Aesthetically look for a building that is unique and completely different from other projects in the area. Something timeless and fashionable, that has a charm and isn’t ‘disposable’. This point of difference has a flow-on effect and most definitely impacts the value of the property, not just the price, but also the lifestyle and quality of living.

Look for is clean floor plans. Avoid purchasing a property with wasted space. Ensure that the property has been designed to utilise every inch of space with little to no intrusion from structural pillars or the like.

Look for advantages within that florrplan: Air conditioning and heating, decently high ceilings, ample storage, optimal room sizes bedroom, living and dining room sizes, built in and functional robes and bathrooms.

Understand and ask questions about the materials being used in the build. This is key to ensuring longevity, less chance of having to forgo more money for repairs at a later date and generally, ups the comfort level of a home.

It may be best to avoid developments solely geared towards investors. These properties are the first to be affected in a downturn, and you may experience challenges with securing a tenant. This also means understanding the level of supply in the suburb which you’re purchasing in. An over-supplied suburb is not only going to impact your rental performance but also dilute the potential price growth that’s achieved over time. Property price growth is a function of supply and demand; therefore, it’s critical to consider both current and future property supply before investing.

From a Finance point of view, any property that is 50 square metres or larger will allow you the greatest choice of lenders. Serviced apartments or Student Accommodation can be very problematic from a Lender perspective.

Select Legal Helps In Legal Matters When Buying Off The Plan

When buying off the plan, you need to be aware of many potential legal issues.

We are a leading real estate law firm in Melbourne, with targeted experience in buying off the plan conveyancing and contracts. 

Our lawyers are highly experienced in advising clients on all aspects of  property transactions, including lease agreements, sales contracts, purchase & sale agreements, construction contracts, project management, development projects, land acquisition, and more.

Contact Select Legal today for all your property needs or request a quote which will only take a few minutes.

Get A Free Quote

Fill out the form below to get your fixed fee quote within 24-hours.

Why Choose Us?

Get A Free Quote

Fill out the form below to get your fixed fee quote within 24-hours.

Quality, Fixed-Fee Conveyancing from $990*

Experience peace of mind with a personalised conveyancing service from a seasoned lawyer.

Select Legal Logo In Yellow & White

Get A Free Quote

Fill out this form to get a fixed-fee quote within 24 hours.
Conveyancing fees from $990*

Fill out this form to get a fixed-fee quote within 24 hours. Conveyancing fees from $990*

***Prices Starting From $990 + GST + Disbursements***