Off the plan property refers to property that hasn’t yet been built on at the time of purchase. The buyer pays a deposit for the property and then gets into an agreement to pay the balance after completion of the building.
The main advantage of this agreement is that the buyer pays less stamp duty (in Victoria, on new properties) as compared to when the buyer buys property that has already been built on. The buyer also has more financial flexibility as the upfront cost of purchase is lower. Generally, the properties are sold below the market value of a comparable existing property. A 10% deposit is held in escrow by a solicitor and the balance is paid upon completion of construction. The stamp duty is payable within three months of entering into the contract.
There are other advantages to purchasing “off the plan” property. In some cases, the buyer has more control over the building process, such as choice of fixtures and fittings and colour schemes. The purchase price is “locked-in” at the time of the contract; therefore the buyer also stands to make capital gains in the event of a rising property market. This makes it lucrative for investors who would stand to make capital gains while paying only a fraction of the value upfront. When purchased for investment, the buyer can also claim depreciation tax savings on the building, furniture and fixtures.
The obvious disadvantage with purchasing off the plan
property is that you pay for a property that hasn’t been built yet.
Before committing to a contract, the buyer needs to research the property
and seek professional advice.
To view property listings, please visit the Property Investor portal:
Off the Plan Victoria (VIC)