Property developers who construct apartments, townhouses and free standing homes often put their properties for sale before they are finished and even sometimes before they begin constructing the project. This type of sale is referred to as off-the-plan in which buyers can purchase their brand new home in advance.
Should you buy an established home or is buying off-the-plan a better idea? Perhaps, it’s one of the important considerations you’ll need when buying a property. While there’s an excitement of being the first person to live in the home with the privilege to choose your floor plan and colour schemes, there are also some common pitfalls that you have to be aware of if you intend to buy off-the-plan. There are many benefits in buying off-the-plan. However, first home buyers should also be aware of the possible risks that may arise.
Even though you may be able to see what your new home will look like when viewing a display property, you should be aware that the display properties are usually the upgraded versions of the property. Therefore, it’s a good idea to thoroughly review the contract. If a developer declares bankruptcy, there is a risk of losing your deposit.
Oftentimes, buyers are concerned about the Sunset Clause. It protects them if developers have run over time with the construction. In the majority of cases, the projects are completed before the Sunset Clause is activated. The risk involved is if a developer defaults on the Sunset Clause, the first home buyer will get the deposit back while missing out on the potential price gains. Therefore, it’s a good idea to do a background check on the developer and its past projects before signing the contract.
Most new developments such as apartments and townhouses come with higher strata levies which is your portion of the fees to cover the costs of maintenance of the common areas such as lifts, gym, lobby, etc.
This can be an issue for first home buyers as most home loan pre-approvals are only valid for a period of three months. With the constant changes in market conditions and bank lending criterion, the banks may not be willing to lend the same amount of Loan-To-Value-Ratio (LVR) if the valuations have changed since you exchanged the contract. Having a 20% deposit available at the time of settlement goes a long way in mitigating this risk.
You usually pay a significant premium for a car that has been driven out of the dealership when purchasing a new car. The same thing can also be applied to homes. Buyers may pay a premium for a new property to acquire all the new lifestyle features that an established home can’t offer.
When buying off-the-plan, there may be greater competition as foreign investors are only able to purchase brand new properties. Foreign investors tend to have higher purchasing power.
These are the things to consider when buying your first home off-the-plan. It’s recommended that you use the services of a conveyancer when entering into an off-the-plan purchase. You may also want to read more about buying off-the-plan and consider the often forgotten factors.
Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page.