Closed borders, investor behaviour and tenancy rates have had some interesting effects on the property market. The Australian Construction Industry Forum’s May 2021 forecast predicts a growth in new apartment construction over the next four years, which may see many Australians looking to buy an off the plan apartment.
With soaring detached dwelling and land prices, it seems apartments may be the way of the future for those looking to invest or enter the property market. There are apartments and units to suit all tastes and lifestyles, but for buyers looking to reap the benefits of buying new, an off the plan apartment may be the right move. We’ve created a comprehensive guide to buying an off the plan apartment to help you decide if it’s right for you.
What is an ‘off the plan’ apartment purchase?
Buying an off the plan apartment is all in the name – you’re purchasing an apartment that is still in the planning or construction stage, based on the plans alone.
How long does it take to settle?
Unlike a traditional property purchase, the settlement time in an off the plan apartment purchase can vary widely – and can take months or even years. The settlement time is dependent on how long the build will take and what stage of construction you signed on the dotted line.
What to look for in new developments?
Because there are some risks involved with buying an off the plan apartment, it’s vital to be able to determine the difference between a good investment and a bad one without even stepping foot into the property.
Where the apartment is situated within the block plays a significant role in how liveable the place is. A north or north-east facing apartment is the ideal positioning to soak up the Australian sun. Look for elements that harness the sunshine, like floor to ceiling windows or a balcony.
Smaller blocks are considered better investments as they are more boutique and less mass- produced. In addition, developers of smaller blocks are more likely to show greater attention to detail. Generally, smaller apartment blocks are more pleasant to live in, offering a community feel and avoiding that hotel vibe larger blocks sometimes have.
Of course, in an apartment’s limited space, the layout can be make or break, so look for a layout with a good flow and clever design features which make the space as functional as possible.
How to inspect a display suite
For buyers who need that tangible walk-through experience before pulling the trigger on their off the plan apartment, a display suite will scratch that itch. Display suites are fully furnished replicas of your soon-to-be apartment, which are open to inspection so you can get a feel for your potential new home.
What to look out for
An apartment’s layout can be the difference between a comfortable home or a pokey apartment. If you are considering an off the plan apartment that is part of a larger block, there are usually multiple layouts to choose between. Make sure you inspect every potential layout to decide which one is right for you.
Display units often represent the best of what the developer has to offer, so remember to cross-reference with your plans to make sure your apartment will have the ceiling heights and grand master bedroom you fell in love with during the walk-through.
There is the possibility to customise the finishings of your off the plan apartment – but it usually comes at an extra cost. Don’t assume the finishes in the display unit are what will be in your apartment; check your contract and talk to the developer. The base package and price will be advertised, and the price will increase if you opt for more luxurious light fixtures, floor coverings etc.
Triple check that the high-end appliances used in the display off the plan apartment will be included in your package. If not, you may have to pay a little more for an upgrade.
What to be wary of
Buyers will often be given several choices for their off the plan apartment’s final colour scheme, which vary from the palette used in the display unit. Talk to the developer and read the fine print to see your colour options.
Don’t assume the amenities will be presented the same way in your apartment as the display off the plan apartment – they can vary greatly in terms of finishes and quality. A walk-through is an excellent opportunity to ask as many questions as possible about your future living space, and amenities should be on the top of the list.
Position of apartment
A display apartment is there to sell, so it will be positioned to capture the most sunlight or best views. Check if your off the plan apartment will have a similar aspect or if you’ll be greeted each morning with views of the supermarket next door.
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List of must-haves
Do not compromise on the following things:
- Storage – whether in your apartment or elsewhere or both!
- Parking – for you and your visitors.
- Security – don’t settle for anything less than a state-of-the-art security system, including security doors, key
- passes or codes.
- Quality appliances – upgrading appliances can be a costly task. Make sure you are happy with what’s included in your contract before signing off.
- Natural light
- Rubbish – will rubbish be disposed of in a convenient location, and will rubbish chutes be out of sight and smell?
Why buy new?
- A new building is a perk in itself. Not many people get to move into and make their mark on a brand-new home.
- There are potentially big savings to be made, as often the earlier you sign onto the off the plan apartment development, the lower the price.
- New builds may give you access to government grants and tax benefits.
- Getting in early will allow you to pick the best of the bunch in terms of positioning, layout, size etc.
- Maintenance costs should be low, considering everything is shiny and new.
- Any faults and issues should be covered by warranty for the first six years.
- Live it up in the state-of-the-art amenities – think pools, gyms, spas and more.
- New builds have the latest security measures meaning you can rest easy.
- For investors, tenants are more likely to pay more for new buildings.
What is a sunset clause?
A sunset clause outlines the agreed-upon settlement date, which, if not reached, both parties can walk away from the contract – with the buyer getting their refund in full.
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Why is a conveyancer important?
Buying a property, especially off the plan, can be a stressful and complicated situation. A conveyancer will help you lodge legal documents, understand the contract and carry out the proper research on the property. A conveyancer will also assist with transferring the property title, placing your deposit in a trust and facilitating rate and tax payments.
How to find a conveyancer?
Your relationship with your conveyancer should be built on trust and effective communication. It’s suggested you research the conveyancers in your area and conduct interviews to see if you have a good repour, as they will be guiding you through a very stressful event in your life. Check that their mode of communication is quick and efficient, and remember that rates can vary widely from conveyancer to conveyancer.
What to look for in a contract of sale?
- Clearly sets out terms and conditions for seller and buyer
- The names of both parties
- States the date of settlement
- The deposit process
- Whether the property will be vacant or leased
- Which fixtures and fittings are included in the sale
- Settlement conditions
- A cooling-off period
What are the pros and cons of buying off the plan?
- Lower overall price
- Finishes and appliances are customisable
- Smaller deposit
- Lower stamp duty
- Potential tax benefits for investors
- Longer time to save your deposit and get your finances in order
- The longer settlement period means your property could potentially increase in value before you step foot in the door
- Getting the keys to your brand-new home
- First Home Owners Grant and stamp duty concessions may be available for new dwellings
- Signing an off the plan apartment contract without a physical dwelling
- Buyers may be liable if construction costs blow out
- The developer can potentially change the design or layout without buyer approval – check the fine print
- The extended settlement period means your property could potentially decrease in value before you get the keys
- You are relying on the goodwill and reputation of the developer to produce quality work
- The whole process can be stressful
- Construction could be delayed, meaning settlement delay
- Interest rates could rise before settlement
- The quality of work may be worse than expected
- Developers can go bankrupt, and investors can lose their deposit
- The apartment may be smaller or have a different layout than you expected
Words by Nell Matzen
- High land prices will push people back into apartments
- Buying an off the plan apartment
- How buying off-the-plan works
You don’t need to leave the house to get an eChoice consultation. We will discuss your options over the phone, as we are here to make your home loan journey easier.