If you’re looking for a new home or investment, you’ve likely faced the choice of buying either off-the-plan or established. An off-the-plan purchase means a property that hasn’t been built yet. Instead, you are choosing to go off the building plan, hence the name. An established home has the benefit of being fully completed, giving you the convenience of moving in right away. On the other hand, an off-the-plan purchase may be cheaper in the long run, with savings on stamp-duty, and greater flexibility in home design changes. Both options have clear strengths and weaknesses, with our guide unpacking the right option for you.
What is Buying Off-The-Plan?
If you are buying off-the-plan, that means you’re buying a property that hasn’t been built yet or is still under construction. These are usually purchased directly from a developer and include the cost of the land and the cost of building your home. This could be a duplex, townhouse or apartment that’s yet to be completed.
When you choose to invest off-the-plan, you won’t be able to view the completed property. Instead, you’ll need to make your purchase decision based on available blueprints and floor plans. Some developers may have already had their plans approved and won’t make further changes, while others may offer the flexibility to customise your new build.
What is Buying an Established Property
Unlike buying off-the-plan, purchasing an established property means it’s already built or previously occupied. This could be an older home that requires renovations, or a newer house that has just hit the market. This is typically the more common option for new home buyers nowadays, with the convenience of moving in quickly without the added stress of construction.
Pros and Cons of Buying Off-The-Plan vs Established
Both off-the-plan and established homes offer unique benefits when compared to each other. To help you make the right choice, we have compiled the following list of advantages and disadvantages:
Pros of Buying Off-The-Plan
More time to save
When you are purchasing an off-the-plan home, you usually only need 5-10% of the property price to put down as a deposit upfront. You can then pay the rest of the balance once your construction is complete. This can be a great option for buyers, because it gives you extra time to save up before you need to settle. With new builds taking months or years, you can spend that time saving up your money and getting your finances in order.
Constructing a modern home
Choosing off-the-plan means you benefit from a modern home. For example, with the National Construction Code (NCC) increasing the minimum energy rating for new builds from 6 to 7 stars, your home will have impressive energy efficiency. To reach this minimum star rating, the design must incorporate energy-efficient features, such as double-glazed windows providing an insulating barrier. The improved efficiency of new builds also means lower power bills, with your home maintaining a more comfortable temperature and reducing reliance on heating and cooling appliances.
Customisation
Choosing an off-the-plan build also means you may be able to alter the design of your new home before it’s built. Depending upon your developer, you may be able to make decisions over fittings and fixtures, colour choices or home layout. These are decisions that can’t be made when purchasing an established home.
Possibility for capital growth
The housing market is rapidly changing. When you choose to buy a house off-the-plan, you are paying the current market value for that property. However, in a rising housing market, your property’s value could increase while it’s still being built. This means you may move into a home that’s worth more than you originally paid, representing great potential for capital growth. This may not be the case for every home, and it’s important to conduct your own research for your area.
Stamp duty savings
One of the biggest reasons for buying off-the-plan is your potential stamp duty savings. Stamp duty is the payment you have to make to your state or territory government when you purchase a house or property. Since this payment is based on the property’s value at the time of purchase, without anything being built, you may pay less stamp duty because you’re only paying for land. This may lead to significant savings, especially when compared to buying a fully completed house.
Spend less on renovations
When you buy a property off-the-plan, you won’t have to fork out on any repairs because everything is brand new. Especially when compared to buying an established property, where you may have to engage in extensive renovations to get your property up to scratch. Furthermore, your new off-the-plan purchase will likely have a form of builders’ warranty. This protects your home against potential issues, making it the builder’s responsibility to fix any defects. If any construction problems arise, you won’t be held responsible.
Cons of Buying Off-The-Plan
Construction timelines can vary
While developers aim to meet agreed timelines, the nature of construction means delays can occasionally occur. Material shortages, poor weather or labour issues can all affect progress, even with the best planning. Being aware of this can help you manage your expectations to feel more prepared for your eventual move-in date.
Your financial position may evolve
There’s always a chance your financial position could change between paying your deposit and reaching settlement. If it worsens, you may not be able to borrow the full amount needed to service the loan. Rising interest rates can also increase home loan repayments, which may affect your ability to meet your mortgage obligations. It’s always a great idea to engage with your broker early to ensure your confidence in your finances once settlement approaches.
Pros of Buying an Established Property
Immediate availability
Buying an established property means your home is available right away. This means you won’t have to worry about waiting around for construction to finish; you can move in or rent it out for immediate cash flow.
Enviable Location
Established properties are the common choice for popular areas, such as suburbs close to a city centre. Meaning if you choose to buy established, you can benefit from being in a well-established area. Can include better access to shops, amenities and transportation networks. If you want to buy off-the-plan in popular regions, you may have to invest in high-rise apartments or townhouses.
Inspect the property
When you buy off-the-plan, you are essentially banking on the future. However, when you choose an established home, you can physically inspect everything about the property. This can be useful for assessing the property’s condition, with a building and pest inspection helping you identify any work that’s needed.
Established market data
You can also benefit from access to more detailed information about your property’s history. This can include market trends, historical value growth, and previous rental yields. While it’s possible to make market estimates for off-the-plan properties, many investors may feel more confident purchasing an established property.
Adding value to your property
Established properties offer a better canvas to add value over time through renovations and home improvements. If you’re encouraged by the possibility of renovating your home to increase its worth, then buying an established property could be a great choice.
Cons of Buying an Established Property
Higher Price
An established property will typically command higher upfront costs than an off-the-plan property. This is usually due to the added price of stamp duty, and competition from other buyers hiking up prices. Established properties are also more likely to be in desirable suburbs, which tend to command a premium.
Outdated Designs
Depending upon the age of your established property, your new property may have outdated elements. This means it may lack the energy efficiency of newer builds, with older electrical or heating systems potentially requiring extensive renovations to bring them up to standard. In contrast, off-the-plan properties are constructed to meet modern requirements.
Design Restrictions
When you buy established, there is no room for alterations. You’ll have to deal with the property as-is, meaning you may have to fork out extra on costly renovations. This is a considerable drawback, especially compared to an off-the-plan home, which may allow homebuyers to make design changes.
Competition from other buyers
Established homes are often the preferred choice in sought-after areas, where competition for properties is already intense. This strong demand typically drives up prices, with active bidding and buyers paying a premium for a limited number of homes.
Why Choose Off-The-Plan?
Buying off-the-plan can be a budget-friendly option. Government grants and lower stamp duty can help you save, particularly when compared to an established home. You may be drawn to the potential for capital growth, which could deliver profits by the time you settle. Also, a great option if you want a modern home that’s built to your liking. Although it takes longer to move into, this added time can be a great way to prepare your finances. Overall, if you value the potential for capital growth, modern amenities and more attractive pricing, off-the-plan could be for you. Buying into a new community like Harlowe means getting in early on all our future planned amenities, services and infrastructure. With land prices expected to rise as development progresses, it’s a smart move for homeowners looking to maximise future value in an exciting community.
Why Choose an Established Property?
An established house is an ideal choice for buyers looking for somewhere to move into, or rent out, immediately. You may be someone who values certainty. Choosing to invest in an established property that you can physically inspect with clear market expectations, over the relative uncertainty of an off-the-plan purchase. This can be a great option if you don’t have budget restraints, allowing you to find a property in your perfect neighbourhood. You may also be drawn to the charm of an older architectural style, or perhaps you’re a renovator looking to restore an aging home.
Tips for Buying Off-The-Plan
If you choose to buy a property off-the-plan, consider our tips for a successful purchase:
Research the developer
Research any prospective developers. You will want to choose a reputable developer with extensive market experience to avoid any unforeseen circumstances. A simple Google search can reveal their property portfolio and customer reviews to help you better understand their track record.
Get legal advice on the contract
Off-the-plan contracts can often be difficult to understand on your own. We recommend seeking out the advice of a solicitor or an independent building consultant to ensure you understand all terms and conditions. This should include information about timelines, project costs and any warranties and insurance.
Get your finances in order
Before agreeing to any off-the-plan purchase, ensure you are ready to take on the financial responsibility. We recommend checking in with your financial advisor or mortgage broker, who can assess your finances and determine how much you can afford to borrow.
Inspect before settlement
When construction is complete, most contracts will allow a buyer a walk-through before settlement. During this walk-through, you may choose to bring a professional building inspector, who can assist with troubleshooting any structural damage. It’s important to spot any problems, as these are usually covered under your building contract and should be formally raised.
Government concessions
When you choose an off-the-plan property, you may have access to government grants and concessions to help fund your build. Especially if this is your first home purchase, you may be eligible for the First Home Owner Grant (FHOG) of $10,000 if your new build is valued over $750,000. It is important to check with your developer for the availability of any cash grants or discounts.
Understanding your deposit
It’s important to understand all aspects of your off-the-plan deposit. This is usually 10% of the purchase price, paid when you sign the contract. Some developers may even accept a lower deposit, sometimes as little as 5%, with no further payments required until settlement.
Also important to understand how your Loan-to-Value Ratio (LVR) affects your deposit. This can impact your borrowing power and whether you’ll need to pay Lenders Mortgage Insurance (LMI). A lower LVR, which can be achieved with a higher deposit amount, may lead to better loan terms that reduce your overall interest burden. We recommend discussing your LVR with your financial advisor or mortgage broker to get a clear picture of the right deposit size for your financial goals.
Your decision on whether to buy off-the-plan or establish will come down to your individual preferences. If you want an immediate place to live in a desirable region, you may want to consider an established home. Whereas if you are excited about the prospect of a new build, and the potential savings you could make on stamp duty, then an off-the-plan purchase could be right for you. For further information on buying or living in a community area like Bendigo, contact our friendly team at Harlowe. We have a range of untitled and titled lot sizes and land packages to suit your needs.