Before you sign on the dotted line, consider the top 10 issues related to this type of property purchase.
Blogger: Paul Bennion, managing director, DEPPRO
Buying apartments off-the-plan has become very popular with property investors throughout Australia over recent years.
For a relatively small deposit, they can secure an apartment and then look forward to future capital growth as the development is constructed.
In particular, property investors have been very active in the off-the-plan apartment markets in Sydney and Melbourne over the past three years because property prices in these two capital cities have been on an upward trajectory.
More recently, DEPPRO has recorded greater activity by property investors in the off-the-plan markets in Brisbane and the Gold Coast because they believe property values in these areas may increase over the next two years.
If you are considering buying off-the-plan, then you should be aware of a number of key issues related to this type of property purchase.
- Buying off-the-plan is very different from buying an established property because you cannot physically see the exact property you are buying. The size of the property is important because spacious homes are quite often easier to resell than homes with limited space.
- If the developer has recently constructed a similar type of property, ask for a viewing so you can see their work and get an idea of what a similar purchase may look like. In particular, check the size of the bedrooms because many people look for large bedroom space.
- It is important to ensure that the product you are proposing to purchase is reflective of the plan. For example, when the development is completed the colour scheme and finishings of the property may not match the images presented on brochures during the marketing program. A good tip is to check with the developer's previous clients to find out if they were happy with the finished product. For extra peace of mind, ask as many questions of the developer as you feel you need to prior to actually making the purchase.
- Take the development plans and visit the site to determine the potential views of your property. If you are buying an inner city property, river views, for example, can add thousands of dollars in value. However, if the apartment is facing other buildings the resale value may not be as great.
- When reviewing plans for the property, you should make yourself fully aware of the layout. Look for issues such as the size and location of windows and the entrance to the property, as these can have an impact on attracting potential tenants and future buyers.
- Compare the price of the off-the-plan apartment you intend to buy with similar established apartments in the local area. This will give you a good idea of its current market value.
- If you are buying an apartment off-the-plan, make sure it is allocated a car bay. Lack of a car bay can reduce the value of an apartment by a significant sum in inner city areas.
- Check the fine print of the contract to ensure that you are protected against any price rises in construction costs.
- You should also check that there are no clauses allowing the developer to vary the construction of the development. Simple issues such as small changes to the size of a balcony can have a major impact on the value of the property.