Buying Off-the-Plan Apartments in Australia: Pros, Cons & Tips

Buying an off-the-plan apartment is an attractive option for many first-time homebuyers and investors in Australia. With the opportunity to secure the property before construction is completed, buyers can sometimes lock in favourable prices and benefit from market appreciation over time. However, like any property investment, purchasing off the plan comes with both pros and cons. Here’s what you need to know before signing on the dotted line. 

What is Buying Off-the-Plan? 

When you buy a property “off the plan,” you’re purchasing a property that hasn’t been built yet. Essentially, you buy based on the design plans and visuals, rather than an existing structure. This allows you to enter the market before construction finishes, often securing a property in areas with high growth potential. 

Advantages of Buying Off-the-Plan Apartments 

1. First Homeowner Grants 
   If you’re a first-time homebuyer in Australia, buying a new property, including an off-the-plan apartment, makes you eligible for first homeowner grants. These grants vary by state, but they can significantly reduce the cost of entering the property market, making homeownership more attainable. 

2. Stamp Duty Concessions 
   Stamp duty fees are one of the significant costs associated with property purchases. However, in many Australian states, if you’re buying off-the-plan, you may qualify for stamp duty concessions or exemptions, especially if you’re an owner-occupier. These savings can make off-the-plan purchases even more attractive. 

3. Potential for Property Value Appreciation 
   Property markets can shift over time, and there is a possibility that the value of your off-the-plan apartment could increase by the time it’s completed. This potential appreciation can benefit your loan-to-value ratio (LVR), which could help you avoid paying lenders mortgage insurance (LMI) if your equity is sufficient. 

4. More Time to Save 
   When you purchase an off-the-plan apartment, you typically only need to pay a deposit upfront, with the remaining balance due upon completion. This gives you extra time—often several months or even years—to save up additional funds, which can reduce the amount you need to borrow or provide a cushion for future expenses. 

5. Lower Maintenance Costs 
   Since off-the-plan properties are brand new, maintenance costs are typically lower. Appliances, fixtures, and fittings are in new condition, reducing the risk of immediate repairs or replacements and saving you money in the first few years. 

6. Customization Options 
   One advantage of buying off the plan is the opportunity to customise design elements. Some developers allow you to choose finishes, layouts, or colours, giving you more control over the look and feel of your property, making it uniquely yours. 

7. Depreciation Benefits for Investors 
   If you’re buying an off-the-plan apartment as an investment, you can benefit from tax deductions on depreciation. A quantity surveyor can prepare a depreciation schedule, allowing you to claim both structural depreciation and the depreciation of fixtures and fittings, reducing your taxable income. 

Drawbacks to Consider 

While buying off the plan has its benefits, there are also some risks involved: 

1. Market Fluctuations 
   Just as your property value could increase, it could also decrease by the time it’s ready. Market conditions can change, which means there’s a risk of your property being worth less than what you initially agreed to pay. This is why thorough research into market trends and the developer’s reputation is essential. 

2. Potential Structural Issues 
   Buying a new build doesn’t guarantee a problem-free property. Structural issues and construction defects can arise. To minimise risk, research your developer’s track record and read testimonials from previous buyers to assess the quality of their past projects. 

3. Construction Delays 
   Construction delays are not uncommon. Weather, supply chain issues, and other factors can push back completion dates, leaving you waiting longer than expected to move in. Be prepared for potential delays and have a backup plan if the timeline shifts. 

4. Unseen Changes to Plans 
   As construction progresses, sometimes developers may change the plans due to unforeseen circumstances or practical constraints. This could result in differences between the final property and the initial design you saw when making your purchase decision. 

Tips for Buying Off-the-Plan Apartments 

• Research the Developer: Review past projects, check testimonials, and ensure the developer has a good reputation for quality and timely completion. 

• Understand Your Finances: Work with a financial advisor or mortgage broker to ensure you’re financially prepared for both the deposit and final payment. 

• Seek Legal Advice: A solicitor or conveyancer can review the contract and protect your interests, ensuring you’re aware of any clauses that could impact you. 

Plan Your Investment with Property Dollar’s Portfolio Goal Feature 

For anyone considering an off-the-plan purchase, it’s essential to have a clear investment strategy and understand how this property fits into your financial goals. Property Dollar’s Portfolio Goal feature allows you to set and track your property portfolio targets in real-time, helping you stay on top of your investments and plan for future growth. This can be a valuable tool for making strategic decisions about property purchases. 

Disclaimer: The information provided in this blog is general in nature and not intended to be personalized financial advice. Please consult a financial advisor before making any decisions regarding your finances.