Considering the idea of purchasing a property ‘off the plan’? While not a new concept, it’s quite a different approach to acquiring real estate, where you’re essentially investing in a home, townhouse or apartment unit that’s yet to be constructed. Instead of physically inspecting an existing property, potential buyers have to rely on the developer’s plans and specifications to make their decision. As you can imagine, this approach offers its own set of benefits and drawbacks compared to a traditional property purchase. In the following article we take a look at some of the pros and cons of purchasing a property in this way.
Pros of Buying ‘Off the Plan’ Property
While not an exhaustive list, following are some pros to buying a property before it is built.
- Potential for Capital Growth: Buying ‘off the plan’ is a popular option for both homeowners and investors looking to secure a property at today’s prices. This approach involves purchasing a property before it is built or completed, based on architectural plans and artist impressions. One of the possible advantages is the potential for capital appreciation by the time of completion. This is especially beneficial when the housing or apartments markets are experiencing growth. By locking in a property at the current price, buyers can potentially reap the benefits of rising property values in the future.
- Customisation Options: In some cases, buyers have the opportunity to customise certain aspects of the property. By purchasing early in the construction process, buyers can often choose from a range of finishes, fixtures, and fittings, allowing them to create a home that reflects their individual style and preferences. This means buyers have already ‘made the property theirs’ before picking up the keys!
- More Time to Save: Since buyers typically pay a deposit well before completion of construction, buying ‘off the plan’ can give you an extended time to save additional funds before completion.
- Modern Amenities and Features: ‘Off the plan’ properties boast sleek and modern designs, tailored to suit the discerning tastes of the contemporary lifestyle. This can be particularly important for investors, as the property can be marketed to potential tenants even before construction begins, allowing them to secure tenants quickly and start generating rental income as soon as the property is completed – allowing them to maximise their returns and achieve a steady cash flow from their investment.
Cons of Buying ‘Off the Plan’ Property
No pros list is complete without considering the flip side. Following are some of the cons involved in purchasing an ‘off the plan’ property.
- Uncertainty in Final Product: Buyers must rely heavily on marketing materials and plans provided by real estate agents and developers to visualise the finished property. These materials typically include detailed floor plans, artist renderings, and virtual tours that aim to showcase the property’s potential and appeal. Whilst we will ensure that the contract incorporates the plans and specifications, the developer always has some flexibility in changing items during final construction. Further, it is difficult for buyers to visualise the end property from plans (which some people are better than others at doing). As such, there is a risk that the buyer will be disappointed in the completed property, because it doesn’t look exactly the same as they visualised in their mind.
- Construction Delays: Construction delays in property development are a common and frustrating problem for both buyers and developers. Factors like bad weather, labour shortages, and technical difficulties can contribute to these delays. For buyers, the extended wait time can be especially frustrating as it may disrupt their financial and living arrangements. Lending arrangements may need to be re-evaluated due to delays, causing added stress. Additionally, delays can lead to increased costs for developers, affecting the affordability of the project.
- Market Fluctuations: The worth of ‘off the plan’ properties can be greatly impacted by economic factors and fluctuations in the property market. It’s possible that buyers may end up paying more than the actual market value once the property is finished. Additionally, when multiple projects are completed simultaneously, it can result in an oversupply in the market, making it difficult for investors to find tenants and potentially affecting the property’s value.
- Risk of Developer Insolvency: In the unfortunate event that the developer faces financial hardships or goes bankrupt prior to project completion, buyers may find themselves grappling with frustrating delays, become entangled in legal complexities, or even in some cases, they may suffer the unfortunate loss of their hard-earned deposit.
Exercise Caution
When it comes to purchasing ‘off the plan’ projects, it is wise to exercise caution and thoroughly review your contract, with our help. These types of contracts can be complex and may contain certain clauses or conditions that could pose challenges or risks to buyers. By seeking legal advice, you can identify and address any potential issues that may arise during the course of the project, ensuring you are well-informed and protected as much as possible.
At Mason Lawyers our team of property and conveyancing experts are here to guide you through your property transaction with tailored advice, in a way that is easy to understand, ensuring that you feel comfortable at each step along the way. With decades of experience, we have been assisting the local community in buying and selling “off the plan” properties, gaining valuable knowledge and expertise. We take pride in our ability to navigate even the most complex and demanding situations, ensuring a smooth and stress-free experience for our clients. Give our friendly team a call on (02) 4929 4499 today, or book an appointment online.
