Buying a property is perhaps one of the biggest and most exciting decisions you can make. One of the most common questions we are asked by home buyers is whether they should buy an off the plan unit or an established residence.
At Chamberlains we help explain the legalities involved in each type of purchase and the advantages and disadvantages so that you can decide which type of property best suits your budget and your needs.
Off the plan
Buying ‘off the plan’ is the process of entering into a contract to purchase a property, usually a unit, even though the unit has not yet been built. You are required to pay a deposit on exchange of contracts and then the balance of the purchase price is paid once construction has finished.
The main disadvantage is that a buyer does not see the finished product before entering into the contract. There may also be delays in construction times and sometimes the developer can make to make minor changes to the layout of the unit.
One of the main benefits of purchasing an OTP property is the potential Home Buyer Assistance available. Home Buyer Assistance is geared towards new construction in the ACT. Provided the contract price is within the relevant thresholds, an owner-occupier is entitled to a concession on the stamp duty payable. Further, most new units also come with a 90 day defect warranty. There may also be other benefits in a financial sense, such as having time to save money before settlement and in some cases an increase in property value between the date of exchange and settlement.
Buying an established property is more straightforward. A buyer can plan around a more reliable settlement date, but more importantly, the buyer can inspect the property before exchanging contracts. As a rule of thumb, what you see is what you get. A buyer can thoroughly inspect the property and be fully aware of what they are getting in to.
Although there is Home Buyer Assistance in the form of a stamp duty concession, the concession is means tested and asset tested.
What’s the better choice?
Both options will appeal to different people. We find a lot of clients tend to use the Home Buyer Assistance and current market conditions as the decisive factor when purchasing an off the plan property. On the other hand, some clients will prefer a property they can actually inspect before committing to the purchase.
The decision is ultimately up to each buyer, but we strongly recommend discussing the implications that will apply in your personal circumstances. If you, or somebody you know, are looking to purchase their first property, give Chamberlains a call to discuss.