6 ways buying off-plan delivers better value
Buying a property off-plan (or before it’s been built by a developer) may seem like a risky proposition to some. When it comes to getting bang for your buck, however, off-plan sectional title purchases often have significant benefits over existing homes.
Brad Morgan, from Rawson Developers, shares the inside scoop on what those benefits are, and how buyers can use them to maximise their return on investment.
Buy now, pay later
“The financial benefits of buying off-plan are numerous,” says Morgan, “but one of the biggest is that, apart from your 10% deposit, there are no immediate, upfront costs. Bond repayments only begin once transfer takes place. That can be months – or even years – after your purchase is made, depending on the development.”
“Free” capital growth
Given that most projects by reputable developers appreciate considerably over the construction period, purchasers often enjoy significant capital growth in the time between making their deposit and taking transfer. Depending on the market and popularity of the development, this “free growth” can amount to exceptional returns on a minimal upfront investment.
“Even your deposit goes into an interest-bearing attorney’s account for the duration of the build,” says Morgan, “and grows in value while you await transfer.”
Pro tip: “To make the most of the capital growth between deposit and transfer, it’s always best to buy as close as possible to a development’s launch. That way, your property has longer to appreciate before your bond repayments kick off.” – Brad Morgan
No hidden costs
When buying an existing property, purchasers need to prepare for a number of transaction costs on top of the purchase price and deposit. These include transfer duty, deeds office fees, conveyancing tariffs and more.
Off-plan purchases, on the other hand, are not subject to transfer duty, and typically include VAT and all other major transactional expenses in the listed price.
“What you see is what you get when it comes to pricing on off-plan purchases,” says Morgan. “There are no hidden surprises waiting to take a chunk out of your paycheque. This can make them appear slightly more expensive than existing properties at first glance, but when you compare the numbers, off-plan properties are usually very competitive and easier to judge at face value.”
Pro tip: “Developers need to meet certain presales numbers to move ahead with a project, which means they always offer the most competitive purchase prices before a project’s official launch. If you can get on their mailing list to hear about new opportunities as they happen, you can snap up some exceptional deals and maximise your off-plan benefits.” – Brad Morgan
Predictable costs aren’t the only benefit of off-plan purchase prices. There are also financing benefits to consider.
“Because all the transaction costs are bundled into the purchase price for most off-plan properties, purchasers can include them as part of their bond,” says Morgan. “That means you don’t have to cough up an additional 4% – 10% of the purchase price in cash to pay transfer duty and other sundries like you would have to if you were buying an existing home.”
Pro tip: “Reputable developments will often be pre-approved by lenders, making it easier for purchasers to secure favourable financing. It’s worth asking about this when considering a purchase – pre-approval from lenders can be a good indicator of solid investment potential.” – Brad Morgan
The benefits of off-plan purchases aren’t limited to financials, either. According to Morgan, there are some serious value-adds that can only be found in the latest developments.
“Things like a 24/7 concierge, onsite gym and pool, biometric access and top-of-the-line security are just not an option in most freehold residences,” says Morgan. “Add things like double-glazing and central heat pumps for hot water, and you’re not only getting an awesome lifestyle, you’re living greener with far lower utilities costs.”
Minimal maintenance costs (with no nasty surprises)
Speaking of lower costs, off-plan properties should also require far less maintenance than existing homes for at least three to five years post purchase.
“Any workmanship flaws or material defects are covered by a combination of the developer, the National Home Builders Registration Council (NHBRC) and the Consumer Protection Act,” says Morgan. “That gives purchasers far more peace of mind than when buying an existing home – no need to budget for unexpected repairs.”
Potential tax benefits
“UDZ is exclusive to new developments as part of a drive to stimulate growth in selected urban areas,” says Morgan. “If you have the option to invest in a UDZ development, it can significantly reduce the cost of your investment, and deliver far greater returns than equivalent non-UDZ purchases.”
This benefit doesn’t apply to all off-plan purchases, but those that fall in Urban Development Zones (UDZ) can qualify for tax deductions of a whopping 55% of their purchase value.