What does it mean to buy “off the plan”?
Explore our previous article to find out.
This article aims to summarise some of the many perceived benefits in buying off the plan.
Lower purchase price
Real estate property developers are often keen to sell as many properties as early as possible, and so prices are usually very competitive. In addition, demand may increase as the development takes shape and, if so, similar properties purchased closer to completion may be more expensive than those purchased early.
Lock in the price
The price of the property is locked in as at the contract date. One or two years down the track you hope to watch the value of your property grow relative to market movements. Property values may increase between the period of buying off the plan (signing the contract) to the date the development is completed.
Transfer duty savings
Transfer duty, formerly known as stamp duty, is a State Government tax on property transfers. A lower purchase price (see above) brings with it lower transfer duty because transfer duty is an ad valorem tax – the higher the price, the more tax you pay.
Some purchasers buy off the plan because of possible tax benefits in the form of depreciation tax savings that may be greater than those available on existing buildings if purchased for investment purposes.
In addition, a rental property is negatively geared when it is purchased with the assistance of borrowed funds, and the net rental income, after deducting other expenses, is less than the interest on the borrowed funds.
You should seek advice from a qualified and experienced accountant before buying off the plan for an investment.
A new property with your choice of finishes and fittings
Although most new residential developments come with a standard set of finishes and fittings, many developers allow buyers the opportunity to choose from a range of colour schemes or a selection of fixtures and fittings. With the developer’s consent, and at a negotiated price, the buyer may be able to substantially customise the property to their taste.
And the con’s?
In a future blog post we’ll examine the risks of buying off-the-plan in more detail.
Before committing to an off-the-plan purchase you should seek legal advice. As your independent settlement lawyers, contact us to book a 30 minute consultation ($198) or a 60 minute consultation ($385).