Buying property off the plan offers the promise of securing real estate at today’s prices and time to save before settlement. But it also comes with risks—some of which have become more prominent due to legislative changes and market volatility. Here’s what you need to know to protect yourself.
What Does Buying Off the Plan Mean?
Buying off the plan means purchasing a property before it’s built—usually based on architectural drawings, floor plans, or display suites. This approach is common for apartments, townhouses, and house-and-land packages.
You’re buying based on a promise—what the developer says will be built—not on something you can physically inspect. Because of this, the contract, construction timeline, and financial protections become even more critical.
How It Works
- Deposit: Typically 5–20% upfront. Remainder is paid upon completion.
- Loan Process: Lenders assess your loan application at the beginning, but may revalue the property at settlement.
- Timeline: Construction may take 12–24 months or more.
- Stamp Duty: You might qualify for concessions depending on the state and your buyer status.
Pros of Buying Off the Plan
- Lower Upfront Costs: Small deposit and more time to save.
- Potential Stamp Duty Savings: Especially for first-home buyers or new builds.
- Tax Benefits: Depreciation deductions for investors.
- Customisation: Option to choose finishes or layouts (in some cases).
- New Build Appeal: Lower maintenance costs and premium rental potential.
- Possible Capital Growth: If market rises during construction, your equity could grow before settlement.
Cons and Risks to Watch Out For
- Construction Risk: Developer might delay, change plans, or go broke.
- Final Product May Differ: Quality or layout may not match what was promised.
- Valuation Issues: Bank may value property lower at settlement, requiring you to cover the shortfall.
- Market Changes: Property value could fall before completion.
- Vacancy Risk: Over-supply in a new development could lower rental returns.
- Strata/Body Corporate Fees: May be higher than expected due to shared amenities.
- Contract Terms: Some contracts favour the developer and offer little protection for the buyer.
- Sunset Clause Abuse: Developers may cancel contracts to resell at higher prices if allowed.
Critical Contract Considerations
- Sunset Clauses
Ensure the clause has limits. Can the developer extend the date multiple times? If so, you could be stuck indefinitely.
- Developer Exit Rights
Does the contract allow the developer to cancel unilaterally or transfer the project to another entity? If yes, you may have limited recourse.
- Funding & Pre-Sales
Check if the project relies on a minimum number of sales to proceed. If financing falls through, the project might never get off the ground.
- Legal Advice Is Essential
Work with a property lawyer experienced in off-the-plan contracts. They can spot red flags and help you understand what you’re really signing up for.
How to Protect Yourself
- Get Independent Legal Advice before signing anything.
- Understand Your Cooling-Off Rights (varies by state).
- Review the Developer’s Track Record and financial stability.
- Request Specific Completion Dates and limits on extensions.
- Clarify What Happens if the Developer Defaults or changes the development.
- Check for Government Protections such as first home buyer grants or stamp duty concessions.
Conclusion
Buying off the plan can be a great opportunity—but only when approached with caution, legal guidance, and a full understanding of your rights. Contracts can be complex and often favour the developer. To protect your deposit and avoid future disputes, it’s essential to:
- Vet the developer,
- Understand contract terms,
- Plan for financial changes,
- And most importantly, seek professional legal advice.
Being informed now can save you thousands later.
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The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.
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