Buying off the plan means buying property with the advance of some deposit (usually at 10% of the purchase price), while the remaining 90% will be paid after the developer completes constructing the property together with the necessary certificate of completion/fitness which warrants delivery of vacant possession and occupation. This can protect purchasers against losses due to incomplete project or abandoned property project.
Nonetheless, there are some drawbacks of this plan. This is revealed in an article entitled “in Asking the right questions pays off when buying off the plan” appeared in Herald Sun written by Neelima Choahan in Herald Sun Real Estate – http://www.heraldsun.com.au/realestate/news/asking-the-right-questions-pays-off-when-buying-off-the-plan/story-fni0ckoj-1226910382891.
“New data from property consultants Charter Keck Cramer reveals the number of off the plan apartment releases soared 103 per cent from just over 7000 to more than 14,000 between 2009 and 2013. But the biggest gains have been in the outer suburbs of Melbourne where off the plan releases increased a whopping 2350 per cent from 42 to 1029 apartments, a whopping 2350 per cent jump.”
Charter Keck Cramer director Sam Nathan said Melbourne’s apartment sector had matured significantly in the past five years.
“Melbourne’s favourable planning strategy, dynamic private development sector and supply opportunities have driven the new releases,” Mr Nathan said.
However, he said the apartment market in the city fringe, inner and middle regions was still in its infancy.
Property group 360° director John Meagher said buying off the plan held a lot of financial advantages for well-informed buyers.
But for the uninformed there were many hazards that could turn the expectation of a great investment into a financial and emotional headache.
“Buying off the plan is a literal term for purchasing property that has not yet been built,” Mr Meagher said.
“In other words, it is making a decision to buy an apartment or house based on the documentation available prior to construction.”
Mr Meagher, who has just released a guide to buying off the plan, said buyers must consider the financial, technical and legal requirements before signing on the dotted line.
“Buyers should ask how much deposit needs to be paid, when the balance of purchase price is due to be paid under the contract of sale,” he said.
Mr Meagher said buyers in Victoria should investigate how much stamp duty they would have to pay on settlement.They should also find out the due date for payment and the sunset clause, Mr Meagher said.
“The sunset clause is the date by which the developer has to deliver the property to the purchasers,” he said.
“If the developer doesn’t deliver the property within the timeline, the purchaser is entitled to a reimbursement of the deposit and can walk away from the contract of sale. Alarm bells should ring if the sunset clause is too long.”
Being aware of important technical information when buying off the plan made all the difference between a good and bad investment, he said.
“Some agents will quote room sizes using measurements taken to the exterior of the building,” Mr Meagher said.
Other things to look out for were high rental guarantees used to set prices above market value and if car parking and air conditioning were included in the price.
Remember to ask the question, ‘What is included in this price?’, he said. “Don’t always assume you are buying what you see in the developers’ sales centre or brochure,” Mr Meagher warned. “Additional priced upgrades may be shown in the display.”
Buyers should check the developer’s background, obtain proof of progress and keep the contract handy during final inspection to double-check before settlement.
He urged buyers to go with experience. “You don’t want to be guinea pig, buying in a development where the developer is going through the processes for the first time and learning at your expense,” he said.
“The bottom line is you can never ask too many questions or have too much information about a property you are interested in buying.”
Practical planning pays off
BEFORE buying her new off-the-plan apartment, Euphie Rong made sure she asked all the right questions.
Despite that, the end product wasn’t quite what the financial markets client specialist imagined.
In fact, the one-bedroom abode in the CBD surpassed all her expectations.
“Thankfully, it was even better than my expectations,” Ms Rong said. “It has very good views of the city and lots of sunlight.”
Ms Rong, who has entered into the off-the-plan market for the first time, said doing her homework was the key to success.
“I looked at the plan carefully and I got as much information as I could,” she said.
“I also researched the developer and the builder to see what their track record was in terms of delivering on time and the quality of their project.”
Ms Rong also compared the established one-bedroom apartments in the CBD on offer before making her choice.
She said buyers should consider the “hard” and “soft” elements of the development before making a decision. “The hard (elements) are the construction, the quality, the material, the location — so the property itself,” Ms Rong said.
“The soft (elements) are the pricing and your own requirements.”
“No one knows the project 100 per cent — either the sales person or the project manager. But if you ask the questions, you’ll get the answers.”