Buy Off The Plan

What is Buying Real Estate Off The Plan?

Purchasing real estate prior to, or during construction, is commonly known as ‘Buying off the plan’. It means you enter into a contract to purchase a property before a title is created and the building is constructed.

Why would I buy real estate this way?

Our valued clients who purchase ‘off the plan’ have enjoyed considerable increases in capital value, during and after construction. It’s because they were astute and were prepared to spend a little time exploring the different options available.

Some have selected Pacific Lifestyle Property to on-sell the real estate prior to settlement to realise their gains. Others have decided to keep the real estate, lease it out, and leverage their newfound equity to purchase another with us.

Why does real estate increase in value?

Historically CPI has pushed up construction and land costs but favorable market conditions are created by lots of factors including; insufficient land supply to meet demand, population/demographic shifts and the broader economic state of affairs.

Since the start of this Century, real estate has enjoyed an impressive run in South East Queensland which has been geared primarily by the explosion in population growth due to interstate migration. The Gold Coast in particular has experienced a shortage of land appropriate for residential development causing prices to keep rising. And with a strong Australian economy the bull run has been further strengthened.

I have seen may instances over the years where, purchasers had speculatively bought off the plan and then sold the property prior to settlement becoming due and in the process realising a substantial profit, often with having outlaid very little money because the purchaser has paid his or her 10% deposit by a deposit bond or bank guarantee.
"Buying Off The Plan", 10 May 2004
Lou Farinotti
Partner
Holding Redlich Lawyers

Are there any other benefits?

Aside from the potential windfall you stand to achieve there are other tangible benefits.

Depreciation benefits could mean you pay less tax
Tax deductions are available for investors who own income producing property via depreciation allowances. New property attracts the highest depreciation allowances. The building, fittings & fixtures, common plant items (i.e. Air conditioners) and furniture purchased for your property may be depreciated. We can refer you to a quantity surveyor who can prepare a depreciation report for your property. The depreciation report shows allowances for deductions when your accountant prepares your tax return. This could mean you pay less tax. We suggest you speak with your accountant about it, you may be surprised at what you could save.
Minimise Transfer Duty
In Queensland, when you purchase a property you pay transfer duty, a state government tax, on your purchase price. Let’s assume you decide to on-sell the property you purchased off the plan, at a price higher than your purchase price, to someone who was prepared to wait until the property was complete before they purchased. They will pay transfer duty on your selling price.
Customise to your hearts content
Most developers provide a selection of finishes allowing you to choose the style of your apartment. Some will even be happy to let you work with the architects to fully customise the property which could further enhance it’s desirability if you decide to sell.
Captial Appreciation
If real estate markets appreciate during construction you could make enjoy a considerable increase in the value of your property.

What about the Risks?

Like any investment, there are risks and buying off the plan is no different. Like all risks, they can be moderated with diligence and good planning and by getting independent advice from your solicitor, accountant and financial planner.

Risks include a drop in capital value due to unfavorable market conditions or the quality of construction not living up to your expectations. To mitigate these risks, we partner with development companies who have a stable history and a good reputation.

The properties we bring you have unique and scarce features set in leading edge areas with a history of strong demand and capital growth. The quality of the building matches the price.

For your further peace of mind, new properties in Queensland attract statutory warranties protecting you from defects. Fittings and fixtures are complete with valid warranties.

We are able to show you artist impressions of the completed development, examples of the anticipated finishes throughout the property and a display suite for you to visit.

How is it done in Queensland?

Essentially buying off the plan is 4 step process:

You consider the development building plans, compare different floor plans, finishes and features and undertake research
Review and sign the sales contract offered if you like what you see
Organise finance using a bank guarantee, cash deposit (or in some circumstances a deposit bond) equal to 10% of the purchase price.
Settlement occurs once the development is complete and a property title has been registered with the Department of Natural Resources and Mines.

When is duty payable in queensland for off the plan sales?
Transfer duty is paid when you settle your purchase