First home buyers have made a strong return to the market; a trend largely attributed to the many government incentives on offer, such as first home owner grants or stamp duty savings.
Most (if not all) of these incentives are available exclusively for the purchase of new or off-the-plan property. Even for a seasoned investor – let alone a first home buyer – buying new or off-the-plan property can be challenging, with so many factors to consider and assess.
At Ironfish, we specialise in off-the-plan property, so we understand these challenges. We also have plenty of experience and expertise to share in order to provide some insights into this often less-understood market.
What is off-the-plan property?
Buying a house, apartment or townhouse ‘off-the-plan’ means signing a contract to buy a property that is yet to be built. You can view the developer’s plans, designs and renders for the property, but can’t view a physical building.
Typically, purchasers pay an initial 10% deposit, with the balance of funds not due until construction is completed. Construction time varies, it could be only a few months or some years – with houses generally completing faster, and apartments taking longer.
What are the benefits of buying new or off-the-plan property?*
First home owner grants and stamp duty savings may be the first draw card for many, however, there are other significant factors which greatly increase the appeal of off-the-plan property, particularly for investors with a ‘buy and hold’ strategy.
New or off-the-plan property features cutting-edge architectural design which suits contemporary lifestyles and trends. Maximising space, natural light and wired for high speed internet or digital media, new property tends to have better environmental credentials as well.
With off-the-plan property, you also get choice. Being able to choose from an entire development and get your preferred view, level, floorplan or design is ideal. That said, the best view might not offer the best yield. Each purchaser’s goals are different, so it’s good to have options.
Amenity & Community
We are now seeing more and more luxury resort style facilities in new developments. Apartment buildings now feature rooftop infinity pools, private cinemas, private bars, expansive gyms, grand entrances and downstairs retail and dining experiences. Residents are treated to free yoga classes, rooftop gatherings or exclusive access to a luxury car via car-sharing facilities.
These shared spaces and events also serve to build a sense of community. With more Australians opting for higher-density living, developers are aiming to create the neighbourhood vibe traditionally found on an old-fashioned suburban street.
A quality tenant
For investors, having a great tenant – someone who is reliable and who is going to care for the property – is really important.
With beautiful designs, luxury lifestyle facilities and a great location with convenient access to key employment and transport hubs, new property can attract a higher calibre tenant, and cater for the demands of a future tenant or owner-occupier – what residents will come to expect in a property 10, 15, 20 years from now.
Government incentives to tackle housing affordability are an obvious example of the affordability appeal with new property.
There are also potential tax benefits that can help. The difference between the tax depreciation claimable for second-hand versus new properties is substantial; representing potentially thousands of dollars-worth of depreciation entitlements each year, particularly in the first 5 years.
New property can also offer an affordable entry point into an unaffordable suburb. For example, a new apartment building being built in a great suburb that currently only has houses. You might not be able to afford a house in that suburb, but you could afford an apartment.
The timing of settlement with off-the-plan property is also something that can appeal to both first home buyers and investors. In a market like Sydney, saving your 20% immediately can be tough. With off-the-plan property, you put your 10% down first, with time to save the remaining 10% of your deposit.
New homes meet much higher standards in building technology along with the security of a Builder’s Warranty against defects in construction for consumer protection.
New property is not going to need the levels of maintenance or repairs an older property often needs, particularly in the first 5 – 7 years. This not only represents potential cost savings, but it also means a longer hassle-free period compared to older properties.
Quality ‘turn-key’ new properties should be rent-ready. For investors who have no desire or time to roll up their sleeves and deal with a costly renovation or multiple repairs, new property offers a more convenient alternative.
*The big asterisk
The advantages we describe are by no means present amongst any and every new development on the market. The quality of new developments varies greatly, along with confidence around the developer, architect, builder, delivery, timings, price, location, fittings, contracts, inclusions and much, much more.
At Ironfish, we are very selective about which properties we decide to take on and recommend to our customers. Our property selection team assesses all the above factors, starting with location; looking for a great area and then looking for a stand-out development within that area. We’re also looking for properties with strong owner-occupier appeal.
We partner exclusively with leading developers – whether they be amongst the best publicly-listed or private developers from across Australia and indeed, the world. We are looking for developers who share our commitment to quality.
We also have great people and great support services in place to assist our customers with purchasing off-the-plan. We can talk you through the typical process and buffers to be aware of – for example valuation, understand the types of variations that may occur in your finished property and generally answer all your questions. We also send our customers regular construction updates, so you know exactly where your property is at in terms of completion, and have a full checklist, timeline and support to prepare for settlement.
There are many benefits of off-the-plan property which may appeal, however the confidence around not being able to see the end product can hold some people back. We’ve been in this industry for a long time – we’re looking for opportunities that other people don’t have, so that our customers can rely on us.
Ultimately, our aim is to help people to purchase with confidence, so more Australians can get their foot on the property ladder sooner and get closer to achieving their longer-term property goals.
Property investment tips
Got some more questions about buying an off-the-plan property? Throw them our way! Request a free call or meeting with one of our Strategists via this link. Our team will be happy to answer any questions you may have. Or, if you’d like to see our recommended properties list, you can register here.