What do I need to know about buying real estate “off the plan”?

Buying off the plan is when you sign a contract to buy an apartment that is yet to be built or is in the process of being built.

Without a physical property to inspect, buyers base their decision on plans and artistic renderings of how the apartment might look, in addition to information about the project and developer.

Advantages of buying “off the plan”

One of the most common reasons given for buying off the plan is the perceived savings in stamp duty. Stamp duty is payable on the value of the land and building as at the date of the contract of sale. Therefore, if construction or refurbishment is yet to be commenced, a reduced amount of stamp duty is payable as compared with buying an existing or refurbished building.

Some purchasers buy off the plan because of possible tax benefits. Off the plan purchases can realise significant depreciation tax savings that are greater than those available on existing buildings if purchased for investment purposes.

Another advantage is the lower purchase price when buying off the plan. Developers are often keen to sell as many properties as early as possible, and so prices are usually incredibly competitive. In addition, demand may increase as the development takes shape, the possibility that similar properties purchased closer to completion will be more expensive than those purchased early.

Buying off the plan also gives you a bit more time to get your finances in order, as you’ll generally only need to put down a 10% deposit to secure the contract, and can use the extended construction time to save up the outstanding balance.

Risks of buying “off the plan”

There are always trade-offs and for every upside to buying off the plan, there is a potential downside. There are risks associated with buying something before it is completed.

In addition to researching the current market conditions, buyers need to do their due diligence on the developer before they sign a contract, as the biggest risk they face when buying off the plan is losing their deposit if the developer goes into administration during construction.

Therefore, before committing to an off-the-plan purchase, it is always important that you seek legal advice. This is particularly so if the purchase involves an apartment building, as these have attracted a great deal of critical interest in recent times.

If you would like to find out more about your rights and options on buying “off the plan” properties, Straits Lawyers are here to help. Simply send us an email at info@straitslawyers.com or give us a call on 8410 9069 to arrange an appointment for an online interview.

Alternatively, if you would like to conveyance a property, Straits Lawyers are now offering online services at https://straits-lawyers.square.site/product/conveyancing-/2?cs=true.

Please note that this article does not constitute legal advice and Straits Lawyers will not be legally responsible for any actions you take based on this article.