Buying off the plan much more than it used to be
Buying property off the plan has never been as popular as it is now, with purchasers of all ages responding to much more sophisticated ways of marketing, selling and delivering the product.
The increase in off-the-plan sales has been driven by demand, says Nigel Edgar, NSW general manager of Australand's residential division.
“It's a secure way to buy a new apartment in what's a popular market segment with limited supply,” he says. “And our research has shown us that people prefer to buy from reputable developers.” The advantage of buying exactly what you want, rather than having to compromise on existing property is now properly understood, says Murray Wood, director of agents CBRE Residential in NSW.
“People are keen to get into a project early so they can choose the pick of apartments off the plan, rather than waiting until it's built and then just buying what's left."
"It allows the opportunity to secure a property without having to settle for between 18 months to potentially four years for some developments, such as the Greenland Centre in Bathurst Street, Sydney."
“They can study floor plans and floor plates and research everything and know they can have the best, like the biggest balcony or the sunniest garden, and what suits them best. It's about having a bit of control, and knowing the timing.”
When life throws up a curve ball, such a purchase can give more flexibility. If a buyer is suddenly transferred to another city, they can sell their interest to someone else, says Wood.
In addition, the construction period gives people more time to save up funds, says Andrew Hall, an associate director of CBRE Residential in Melbourne, with younger, first-home buyers always hoping they might receive a promotion and a wage rise in the interim – or more time to get the courage to ask parents for a loan.
“We've found younger people and investors comfortable about buying off the plan for a while, but the more mature demographic, who traditionally shied away from that form of purchasing, are now coming into the market,” says Hall.
“We have projects selling all over Melbourne to an older and more sophisticated buyer who's looking to downsize from a traditional home.
“Young people have always liked it, for the time it gives them to save up, and the grants they can get now, and investors like to claim depreciation and stamp duty exemptions. But now a much wider market is getting it too.”
Buying off the plan worked so well for Jarrod Farey the first time, that he repeated the process twice.
He now owns a townhouse in Preston where he lives, and a townhouse and a house from a house-and-land package in Tarneit, near Werribee.
“I did it the first time mainly because of the cost savings,” says Farey, 30, a project manager. “I saved on stamp duty which is a big one, and I wasn't in a position where I wanted to move into it straight away. So that gave me 12 months more to save.
“By the time it had finished, it had gone up in value, too. So that capital growth also made buying off the plan very attractive to me.”
Farey checked the developers closely and worked out what he could ask for and change about the plans to suit himself. He says he's been lucky each time in that the developments turned out extremely well.
“I gave one developer a hard time!” he says. “But you never really know. Sometimes you have developers who have done lots of projects before who go under. There are no guarantees.”
NSW Ambulance Service worker Jackie Levett had been searching for an investment apartment for two years when, on a whim, she looked at a new development around Homebush Bay. As she sat sipping coffee in the piazza that is the centrepiece of Wentworth Point, she decided she liked it so much, she would not only buy a unit off the plan but probably live there.
“It had a really nice feel as a new community,” says Levett, 35, who is renting in Drummoyne. “I thought I’d like something new rather than having to renovate something old – and the models and all the planning looked good.”
Levett paid $545,000 for a one-bedroom unit on the top floor of one of the four buildings in the 642-unit complex The Address, designed by architects Turner.
Her father, a project manager and civil engineer, checked everything at the site and quizzed developers Sekisui House to make sure it would be a sound investment.
“It will be finished by the end of next year and so I’m happy that, by putting down my deposit, I’m now in the property market with time to save,” says Levett.
Five reasons to buy off the plan
1. If you think that new car smell is heavenly, just wait until you breathe in the air of your new, never-before-lived-in home, and admire the gleam of the new appliances, the virgin walls and the pristine floorboards, carpets or tiles.
2. Provided you buy well, it can be cheaper than buying an existing property, as well as savings on stamp duty and grants for buying new. In Melbourne, a payment of up to $10,000 is available for eligible first home buyers as long as the price of the property or construction of the home does not exceed $750,000. There is also a 40 per cent reduction on stamp duty for new homes worth $600,000 or less. In Sydney, first home buyers are eligible for a $15,000 grant if buying a newly built place for less than $650,000. They are also exempt from stamp duty if the value of the new home is less than $550,000 (or land valued less than $350,000), or a concession on stamp study if the value is between $550,000 and $650,000.
3. The design of new apartments and townhouses has improved hugely since the days of cramped, dark interiors with wasted corridor space, little storage and no balconies.
4. If the market is rising, the value of your apartment might have soared by the time it is finished and you have to pay for it – after saving for the two years of construction – and move in.
5. You get the latest in technology and finishes which may keep strata levies down, or great resort-style facilities which may mean you never have to leave home for entertainment again!
Five things to look out for
1. Check the developer. Look at what buildings they've developed before. Make sure there have been no problems, and do the same due diligence with the builder, architect and financier.
2. Look at the local plans and phone the council to make sure any open space is not zoned for another development.
3. Make sure the estimated levies are realistic to pay for the services and facilities promised. You don't want the levies to go up when it is discovered the bills are higher than predicted.
4. Avoid one-stop-shop situations where the developer, strata manager and building manager are basically the same company. When conflicts arise, you need someone on your side.
5. Read the proposed bylaws to ensure they suit your lifestyle. There is no comeback, for example, if the real estate agent told you it was pet friendly but the bylaws ban animals.
Posted by Sue Wellings - Domain (The Age) on 26th November, 2013 | Comments | Trackbacks
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