It is no wonder a buyer can get swept into buying an off the plan property. It sounds appealing. Stamp duty savings… its brand new…small deposit now pay later.
But when you dig deeper down into what an off the plan property is you will understand there are many pitfalls.
Whether it be buying for investment or for owner occupied purposes, a buyer should truly understand the ins and outs of an off the plan property. Some of the negatives are:
– When the property is completed and the bank is ready to settle (after being purchased say one to two years ago), the bank will need to value the property before it will hand over the money. Unfortunately bank valuations are quite commonly coming in less than what the buyer paid for the property. This can lead to issues, especially when the buyer is borrowing most of the property purchase. We have seen time and time again of buyers not being able to settle on their property for this reason, and end up forfeiting their 10% deposit.
– At times, builders/sales persons can over promise and under deliver. Being a property off the plan, you don’t get to physically see the end result, and at times can lead to let down.
– Paying a premium for being brand new at the start can lead to sluggish or even negative capital growth. Buying an established property usually results in much higher capital growth rates.
– No guarantees that the builder will meet deadlines, at times, projects can go on for much longer than previously anticipated.
So before leaping into an off the plan property, do your research, they sound good in theory, but the negatives (especially for an investor) far outweigh the positives.