What does buying “off the plan” mean?
Often, buying off the plan means that the land hasn’t been subdivided yet. The developer will have plans in place, but the subdivision won’t be registered.
An “off the plan” purchase may include the construction of a house. This is usually referred to as a “house and land package”. The contract will include plans and specifications showing what is intended to be constructed on the land.
Off the plan contracts allow a longer period of time from the signing of the contract to finalisation of the sale. The land will need to be subdivided and/or the house constructed, which will take time. Depending on the size of the project, it can take between 6 months to several years.
What are the risks involved in buying “off the plan” vs buying a pre-existing property?
The development can be delayed due to bad weather or unforeseen issues with trades and materials.
Longer delays occur if the developers don’t have enough sales to fund the development. Most developers are required to sell a large portion of the development “off the plan” before receiving funding to commence the development. If sales are slow it could mean a delay in completion of the subdivision and the sale of the land.
If the subdivision hasn’t received final approval by the local council there will be delays in obtaining approval. The council may even require changes to the original plans which could affect the land that you are purchasing.
The developer can make minor changes to the plan of the land and/or house during the development. However, if such changes result in a substantial difference between what you agreed to buy and what has been completed, you may have the right to rescind the contract and receive a refund of your deposit.
In the worst case scenario, the developer could go broke. In such circumstances, the development may not be completed. Any deposit held by the real estate agent would be refunded to you. Although you will receive your deposit back, if it has been some time since your purchase, land value may have significantly increased costing you more for an alternative purchase.
These risks do not exist if you purchase an existing property.
What are the benefits of buying “off the plan”?
The major benefit of entering into an “off the plan” contract is the savings. The land is usually cheaper than if the subdivision was already completed and ready immediately.
The delay in a settlement will give you time to budget for the purchase and save additional funds for completion.
If you are purchasing a house and land package you may have the benefit of choosing the finishes and fittings.
Off the plan purchases can result in significant benefits when compared with purchasing an existing property. However, such purchases are not without risk.
We recommend that you fully understand what you are committing to before entering into any contract. Contact our team to discuss your prospective “off the plan” purchase.