Is buying off the plan a good investment?
If you are considering buying property off the plan, then you may be wondering whether properties off the plan are a good investment? The beauty about buying off the plan is the number of incentives and benefits they offer as well as allowing you to get your foot in the property market today at a more affordable price.
It’s not just property investors benefiting from off the plan properties though. First home buyers, next home buyers as well as foreign buyers are also enjoying the benefits that only new off the plan properties bring.
What is Off the Plan?
Buying off the plan, put simply is where you purchase a property before it is built or under construction. You rely on price lists, floor plans and images to make your decision and must pay a 10% deposit initially to secure your chosen property, whether this is an apartment, townhouse or even house and land package.
As with everything in life, there are benefits as well as risks when buying off the plan properties, but the benefits far outweigh the risks making off the plan a good investment choice. However, it is important that you are aware of these risks and can mitigate them properly to ensure your property investment is successful.
So why are off the plan properties a good investment? Here are 14 reasons why.
14 reasons why off the plan is a good investment
1) Buy at today’s price
One of the great attractions of off the plan properties is the fact that you can lock in a property at today’s prices, for just a 10% deposit. This makes a property far more affordable, whether you are an owner occupier or investor.
2) Capital gains
By purchasing at today’s price, you could also benefit from capital gains. With settlement usually two years away, this gives your property ample time to grow in value, meaning that you can benefit from a good amount of price growth without having to pay anything else like mortgage repayments.
3) Time to save
With a longer settlement comes a greater amount of time to save, whether this is to raise a larger deposit or to build up your savings again for a rainy day, helping to relieve any financial pressure.
4) Government incentives
There are also plenty of government incentives to make the most of, whether you are a first home buyer or an investor. First home buyers can make the most of the first home owner grant, where you could save $10,000 in NSW; whilst eligible buyers could also save on stamp duty. To find out how much you could save, it’s best to check on the government website as each state differs and the value of your property will also dictate what you receive.
5) Tax benefits
As an investor, there are many tax benefits to make the most of, but it is important that you do not invest in property just for the sake of saving tax. Depreciation and negative gearing are two of the largest tax benefits you can utilise whilst other tax savings include property management fees, legal fees, council rates, water rates and repairs and maintenance costs. This is a key reason why buying off the plan makes a good investment opportunity.
6) It’s new
One of the reasons why off the plan makes a good investment is because the property is brand new and everyone loves new. The property is generally easier to rent out and can fetch higher rental prices for this luxury, whilst you also tend to attract a more professional demographic.
7) High demand for new property
With the population of Australia rapidly growing, there is increasing pressure to build new properties to house our growing population. With land becoming scarcer, the need to build upwards is becoming a regular sight, particularly in Sydney and everyone needs somewhere to live.
8) More energy efficient
New off the plan properties also tend to be more energy efficient as they use the latest technology. This makes the property more affordable to run in terms of heating and cooling and caters for modern day living.
9) Less maintenance work and costs
New off the plan properties also involve less maintenance work and costs compared to an established property which might need new plumbing or suffer from damp. The likelihood of needing any urgent repair works in the nearby future is low, helping you to save money here.
10) New technology
Buying off the plan today is becoming far easier due to new technology including 3D virtual reality. This allows you to get a feel of the apartment by walking through it and allows you to visualise the layout and how large the apartment actually is. 3D technology is making the off the plan purchase more emotional and helping to seal the deal.
11) Good location
The great thing about buying property off the plan is that generally your property will be close to all of your key amenities such as public transport, retail, dining and schools. This allows you to get around with ease, whilst have everything you require close by to lead your day to day life. A good location also proves popular with rental tenants who want everything within easy grasp.
12) Safer investment
Property also tends to be a safer option and less volatile compared to shares for example. It is also easier to understand, whilst people always need somewhere to live so there will always be demand for it.
13) Builders’ guarantee
Buying off the plan also allows you to benefit from the builders’ guarantee. If there are structural or interior building faults that occur in the first seven years, these must be repaired by the builder.
14) Greater choice
Buying off the plan also makes a good investment due to providing greater choice and also provides you with first pick of apartments. This allows you to get the best before anyone else at an affordable price.
Although there are plenty of reasons why off the plan makes a good investment, there are also a number of factors you need to keep in mind, to ensure your off the plan property purchase is a success.
Things to keep in mind when buying off the plan
Read the contract – Make sure you read the contract carefully and get your solicitor or conveyancer to run through this with you to ensure there are no unexpected costs or conditions that could affect your purchase decision.
Variations – There might be variations in terms of the size of the apartment or the fittings and fixtures as to what you previously had envisioned. You should refer to the contract to check what is included and how much variance is allowed beforehand.
DA Approved is better – If your development has council approval then it is more likely to go ahead. If the development doesn’t go ahead, then you still get your 10% deposit back, but you will miss out on time in the market as well as any capital gains you could have earned during this time period.
Buy within budget – Buying comfortably within your budget will ensure you don’t get any nasty financial shocks down the line, whilst you can still lead a comfortable lifestyle without too much financial strain.
Research your developer – Ensuring you use a reputable developer is key so that you know who you are working with and what experience they already have. This also allows you to avoid any dodgy developers and work with the best to ensure a high level of craftsmanship is met.
Know and research the market – As well as researching your developer, you should also research the market and know what is happening. Consider the demographics, vacancy rates and rental yields. You should also think of the future and contact the local council or check online to see if there are any zoning or future developments in the area, which will impact your property later down the line.
Rising interest rates – Interest rates might be low right now, but by the time your property has completed, interest rates could well have risen. This could make the property cost you more than you initially expected, so keep in mind that interest rates are likely to rise and budget for this accordingly.
Speak to iBuyNew - Use an expert Property Consultant such as iBuyNew to get your hands on the latest property information, research and data to help you make the right decision. We have hundreds of new developments to choose from across Sydney, Melbourne and Brisbane and can find a property that makes the best investment for you.
As long as you have an open mind and are aware of all the issues that could affect your property purchase, then this will help you to consider and mitigate the risks allowing you to buy a solid off the plan property.
By working with Property Consultants at iBuyNew, we can smoothly guide you through the property buying process and highlight which off the plan properties make a good investment. Not only will a property off the plan save you money through tax benefits and government incentives, but you can also enjoy capital gains if your property grows in value, whilst make the most of a brand new property that is more energy efficient and catered for today’s modern lifestyle.
Find out more today about why buying off the plan is a good investment, by getting in touch with the iBuyNew team. Call us on 1300 123 463 and discover more.