6 key benefits of buying off the plan.
With increasing numbers of residential developments taking place across the country, more Australians than ever before now have the option to buy their next property off the plan.
Purchasing a property off the plan can be a great option for buyers wanting a brand-new home without the premium price tag, while also providing numerous other advantages—financial and otherwise—for owners and investors alike.
This article looks at how buying off the plan works, along with the six key benefits of buying a property before it is even built.
What is buying off the plan?
Buying off the plan means committing to buying a property before it reaches the final stages of development. This is a legally binding agreement between the buyer and seller of the property, just as if you are signing a contract of purchase in a normal buying process.
As buyers cannot physically visit an off-plan property, the seller will often supply plans and artistic renders of how the finished property will look, along with additional information about the property and the developer.
For some new developments, a physical display suite may be established allowing potential buyers to get a better understanding of the project and a more detailed feel for a property’s fixtures, fittings and finishings etc.
Advantages to buying off the plan
You benefit from a brand-new property
As the property is brand new, there will be no need for repairs or renovations, meaning one less thing to worry about as a homeowner.
This puts you in an enviable position compared to buyers of older existing properties, who may need to set aside funds for repairs or renovations to keep their property liveable.
With changes to the National Construction Code coming into effect this year, in coming years all new properties will need to meet more stringent energy efficiency requirements than ever before.
At a time of ever-increasing gas and electricity costs this is good news for future off the plan buyers, who can expect reduced energy bills compared to owners of older, less energy efficient, properties.
You get more time to save
When purchasing off the plan, often buyers are only expected to pay a 10% deposit with the balance payable upon completion of the property. This gives buyers more time to save before moving into the property and starting to pay off a home loan.
You could make a profit before you move in
When you buy off the plan, sign the contract and pay your deposit, you’re purchasing the property at a particular date with a fixed price. From that point, until the property is completed and you make the final payment, you don’t have to worry about what’s happening in the market or the risk of property prices soaring.
As well as leading to peace of mind, if the market goes through an upward trend and the property increases in value while it is being built, this could help you make a profit before you have even moved in.
You may get a discount on stamp duty
If you are a first-home buyer, most states and territories will offer exemptions and concessions on stamp or transfer duty for buying off-plan.
Even when you are not a first home buyer, some states and territories also offer stamp duty discounts for new property purchases. In some cases, stamp duty may be waved altogether or only applied to the value of the land, not the building.
Check with your state’s Revenue Office as to the stamp duty concessions or exemptions you could be eligible for.
You could defer paying stamp duty
When you purchase property, depending on which state you are in, you generally need to pay stamp or transfer duty somewhere between settlement and several months after the contract date.
But when it comes to off the plan purchases, depending on which state you are buying in, you may be able to defer your stamp duty liability for a specified period. In some cases (NSW for example) this can be up to 12 months after you sign the agreement, or the date the property is completed or handed over, whichever comes first.
Just keep in mind that these deferral periods are usually only for those who intend to live in the property rather than those purchasing for investment.
Whether owner-occupier or investor, always check with your state’s Revenue Office as to when you need to pay stamp duty.
Investors can get extra tax benefits
For investors planning on leasing a property purchased off the plan, significant tax benefits can be available.
Newly built properties contain new fixtures and fittings, meaning investors can maximise deductions and improve cash flow in their first few years of ownership. However, deductions can generally only be claimed once the property is completed and generating an income.