Australia has been experiencing an apartment building boom recently, with approvals for new residential buildings at an all-time high. But while this is good news for buyers who have more supply to choose from, recent incidents, such as the cracks in Sydney’s Opal Tower, have raised concerns about the quality of some new buildings, as developers rush to get projects completed by deadlines.
Nowhere is this more of an issue than if you’re looking to buy a property off the plan. An off-the-plan purchase means you’re committing to purchase the property (usually an apartment or townhouse) before it has been built. You generally pay a deposit to secure the property and pay the final amount upon settlement.
Because you don’t get to conduct a physical property inspection before committing to buy, it can be risky. So, if you’re considering an off-the-plan purchase, here are some tips to help you avoid ending up with an emotional and financial headache.
- Run a background check: What do you know about the developer and their track record of building high-quality buildings? Research their other projects via their website and any relevant online forums. Does anything controversial come up? Check their license details with your State Government website for information on any disciplinary actions or insurance claims. If you live near buildings that have been built by the same developer, you might be able to approach an owner or two to ask about their experience.
- Review the fine print: Go through the contract carefully to make sure you understand the terms and any restrictions. Understand the implications of withdrawing from the contract, and your rights if the building is delayed, or the finished product is different to what you expected. Consider obtaining independent legal advice, and talk to any friends or family who have also bought off the plan to get their advice.
- Allow for delays: Almost every new project takes longer than anticipated due to unforeseen delays. If you absolutely have to move in to your new home by a certain date, then perhaps off the plan is not for you.
- Budget for ongoing costs: As well as your upfront costs, you’ll need to budget for any ongoing costs such as strata fees, which could be high if the building has facilities such as lifts or a pool.
- Plan for a cooler market: One advantage of buying off the plan is that you are purchasing at today’s prices, meaning that by the time the building has been completed, it could be worth more than the purchase price – if the market has moved in your favour. On the flip side, the market could also go down, meaning your property could be worth less when it’s finished. If this happens, you might need to hold on to the property until the market improves if you’re looking to sell in the short-term.
When buying off the plan, it’s important to do your research and make a decision based on information rather than emotion. And if you need some advice on which home loan is right for you, talk to one of our experts today.