Why Off The Plan?
OFF-THE-PLAN vs ESTABLISHED PROPERTIES
New properties, and in particular off the-plan properties, attract many excellent benefits for both first home buyers and investors.
All types of buyers can take advantage of a range of very important dollar-saving, and stress-saving, perks when buying off-the-plan, including: building warranties, the absence of progress payments, and the opportunity to save money and earn interest during the construction phase.
Eligible first home buyers are also entitled to receive a $10,000 First Home Owner Grant (FHOG), which only applies to new properties. It no longer applies to existing properties. For further information about the FHOG, and potential stamp duty savings, see the SRO website.
Should You Buy an Established or Off-the-Plan Property?
High Depreciation: One of the main benefits of purchasing a new investment property is that the depreciation of the building and its fixtures and fittings can be claimed as a tax deduction, amounting to a significant tax benefit over the life of an investment. Many investors, in fact, are unaware of this dollar-saving tax measure. For more on its benefits, see BMT’s website.
Save More & Attract Free Capital Growth: Buying off-the-plan can be a very smart move, particularly if the property market is on the rise. While it provides an opportunity to secure a property at ‘today’s price’, settlement takes place only after an extended period of time (usually after 12 months or more). While a 10% deposit is paid to secure the property when the contract is signed, the balance is not payable until the property is complete. What happens in the meantime, especially amidst Melbourne’s growing property prices? The property’s value potentially rises, which is known as ‘free capital growth’, given there are no ongoing costs during the construction stage. This handy time lapse also gives purchasers the opportunity to save more money, and earn interest on savings, while the property is under construction. You can’t do that with an established property!
Low Maintenance Costs for Peace of Mind: Compare these benefits to buying an established property with potential hidden secrets.
- Defect Period: This is a defined period of time from the date of completion of the property during which the builder must repair any defect discovered in the property. This defect period applies to all new properties and, while it generally spans 3 to 6 months, it varies according to the individual contract.
- Builders’ Warranty: Buying a property is a significant investment. One of the great benefits of buying a property off-the-plan is that it comes with a 7-year structural warranty, bringing with it the peace of mind of knowing that if any structural defects become evident during this time, you’re covered.
- Manufacturers’ Warranties: In addition, all appliances installed in the property are covered by manufacturers’ warranties, which generally span 2 to 3 years.
First In, Best Dressed: The sooner you purchase, the better selection you have. In a property development, the apartments with the best features, floor plans, aspect and position in the building sell first. If you get in quick, you get first pick of the property that best suits your investment goals – and that’s most likely to appeal to prospective tenants.
You Should Also Expect: Compared to an older established property, you can also expect the following from an off-the-plan property:
- Generally higher rental yields
- Lower overall maintenance, and
- Greater appeal to potential tenants given the property is new
What Are You Waiting For?