Risks and Benefits to Buying Off The Plan
Buying real estate off the plan is fast becoming one of the most affordable ways to get your foot into the property market. We’re here to help you make the right decision and explain the pros and cons of buying off the plan.
Buying real estate off the plan is fast becoming one of the most affordable ways to get your foot into the property market.
At Caydon, we’ll help you find the ideal off the plan home to suit your lifestyle and budget. That said, it’s still important to do your due diligence before signing on the dotted line. We’re here to help you make the right decision and explain the pros and cons of buying off the plan.
What does buying off the plan mean?
Buying off the plan means committing to purchasing a property that hasn’t yet been built.
In lieu of a physical property to inspect, you’ll base your decision on artist impressions, floor plans, brochures and display suites. Once you’ve chosen your new home, you’ll enter into a contract and pay an initial deposit, with the remaining balance due once the build is complete.
What are the benefits of buying off the plan?
There are plenty of reasons why people loving buying off the plan. It could be a much lower entry price into a tightly held suburb, the confidence of brand new appliances and fixtures, or financial reasons. Here are some of our top benefits for buying off the plan.
1. Lifestyle and location
The median price of an off the plan home is usually significantly lower than an established property, which makes buying in your desired location far more achievable. From picture-perfect apartments to soaring skyhomes, our developments offer affordable living in some of Melbourne’s most sought-after suburbs. Depending on your choice of project, you can also enjoy extras that are usually only available in extremely high-end homes. Caydon homes often include access to shared spaces like a pool and gym, lush gardens, recreation and entertainment spaces. Plus, our developments are never further than 10km from the CBD, ensuring that all of life’s necessities are well within your reach.
2. Lock in current prices
The market value of your off the plan home is locked in from the moment you sign your contract. This means that the price won’t change, even if the property increases in value throughout the build.
3. More time to save
Need a little more time to get your finances in order? When buying off the plan, you only need to pay a deposit - sometimes as low as 5 or 10 per cent - with the remaining balance due once the property is complete. This means you’ll have more time to save for a larger deposit and still lock in today’s market value for your home.
The difference between your purchase price and your deposit is called a loan to value ration or LVR and with a lower LVR, you’ll end up paying far less over the life of your loan. For example, if you buy a $500,000 property with a 20% deposit instead of a 10% deposit, with an interest rate of 4.5% you’d save a little over $90K over the course of a 30 year loan.
In reality, it’s a little more complicated than that and interest rates change too, but if you lock in today’s prices and use the time during construction to save a larger deposit, you could save yourself thousands in the long run.
4. Repair cost savings
A brand new off the plan home requires little to no maintenance compared with an existing property. At Caydon, our apartments are made with brand new, high quality appliances, fixtures and fittings, designed to stand the test of time. As soon as settlement rolls around, your new home is ready to move into and enjoy straight away. If something isn't perfect, there's no need to worry as your new home comes with a builder's guarantee - usually one year for fixtures and fittings and five years for bigger issues.
5. Government grants and stamp duty savings
In Victoria, eligible first home buyers are entitled to the First Home Owner Grant (FHOG), a one-off payment of $10,000 to put towards your home loan. The grant only applies to newly constructed homes, including off the plan. You may also be eligible for an off the plan stamp duty exemption or concession, potentially saving you thousands. Read more about government grants and schemes for first home buyers.
6. Tax benefits
Investors, you’re in luck. When buying a new property, like an off-the-plan apartment, you can claim higher depreciation reductions compared to an established property, and may benefit from thousands of dollars’ worth of tax deductions.
7. More choice
Buyers who can see the potential and buy before construction starts will have their first pick of floorplans and, if available, will be able to choose a colour scheme for their apartment (once construction reaches a certain point, these are set per apartment and can’t be changed).
How can I avoid the potential pitfalls of buying off the plan?
Buying off the plan is a different way to buy property than many people are used to, but if you do your research and start your journey prepared, you can avoid getting caught out.
1. Be realistic
Buying off the plan means committing to a property that doesn’t yet exist, and depending on when you sign your contract, the build time could be around 24 months or more. Here at Caydon, we have a 100 per cent rate of delivering our apartments, so you’re in safe hands, but if you’re itching to move in as soon as possible, we do have limited apartments remaining in our completed and soon-to-be completed developments.
2. Research your suburb
Before committing to an off the plan purchase, make sure that the location suits your lifestyle. Spend plenty of time exploring the area, visiting local restaurants and cafes, and even mapping out your potential work commute. Even if you’re not planning on having kids soon, making sure there are plenty of good schools nearby will make your property desirable if you sell in the future or to potential tenants. Learn more about how we choose locations for our developments.
3. Visit the display suite
You might not be able to walk through your off the plan apartment before purchase, but that doesn’t mean you can’t get a good feel for the space. In addition to floor plans and artist impressions, Caydon’s display suites feature prototype kitchens, bathrooms and living spaces. As well as getting to touch and feel all the fixtures and fittings of your new home, you can also see what views to expect from different floors and aspects, discuss upgrades and ask the team any questions you may have.
4. Seek advice
Before signing on the dotted line, you should seek independent advice to ensure you understand your legal rights and obligations. A solicitor or conveyancer will be able to talk you through the ins and outs of your contract, so you can enter into your off the plan agreement with absolute peace of mind.