Should you Buy an Off-The-Plan or New Apartment?

Buyers Agent

Should you Buy an Off-The-Plan or New Apartment?

What you need to know before you sign a contract

 

Many buyers are cautious when it comes to buying a new, or off-the-plan, apartment.

 

Little wonder when newly built apartment blocks have been receiving attention for all the wrong reasons lately. Incidents such as Opal Tower, Mascot Towers and others, have put the spotlight firmly on the very real risks that can follow from making a bad buying call.

 

But despite the potential negatives, we think there are many reasons to be positive about buying off-the-plan apartments, as well as apartments less than 10 years old.

 

That is, of course, so long as you know what you’re doing.

 

Buyers Agent

 

Look beyond the glossy brochure

 

All new units look, well, new. So it’s often hard to tell the good from the not-so-good. Here, it’s important to look beyond the shiny new display apartment and glossy brochures.

The best way to do this is to restrict your search to well-constructed apartments from reputable developers with a good track record.

We regularly help clients carry out this kind of research before they sign on the dotted line to buy a new or off-the-plan unit. For example, we:

 

1. Compile and prepare detailed reports for buyers wanting to buy apartments less than 10 years old, including due diligence of the company and directors and any previous developments they’ve built.

2. Undertake a Fair Trading licence check to see if they have the appropriate licence and whether they’ve had any disciplinary action taken against them.

3. Scrutinise strata reports to check for any major capital works and to find out about any known defects, damage or the possibility of flammable cladding.

4. Get advice from mortgage brokers to see if certain areas are on a lender’s blacklist due to oversupply.

5. Guide our clients to think beyond the unit itself. An apartment’s value will always grow more over the long term if it’s in a location with lifestyle appeal and a growing population.

6. Make sure the price is right by checking comparable sales and negotiations.

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What type of buyer does buying off the plan suit?

Thanks partly to recent laws, as well as favourable tax treatment, subsidies and other perks, there are several buyer groups who can benefit from buying off the plan or a newly built-property.

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Foreign buyers

Under the current foreign investment rules, overseas buyers may have little choice but to purchase new or off-the-plan properties. As a group, foreign buyers include temporary residents, foreign residents and short-term visa holders from any country.

 

Before they can buy property in Australia, foreign buyers need to apply to the Foreign Investment Review Board (FIRB). Non-resident foreign buyers generally can’t buy established residential properties in Australia. Temporary residents are allowed to buy one established property, but only if it is their principal place of residence. In most other cases, foreign buyers are subject to additional taxes and restricted to buying new properties only.

 

This is all part of the government’s plan to create construction jobs, keep housing affordable and, of course, raise revenue.

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First home buyers

First home buyers are another group the government actively encourages to buy new properties through stamp duty savings and the First Home Owner Grant.

 

In NSW, first home buyers can receive $10,000 towards buying a new property if it’s under $750,000. They also don’t have to pay any stamp duty on properties under $650,000 and get a reduced rate for properties under $800,000.  

 

The savings from this can be enormous. For instance, a first home buyer who bought a property for $650,000 would effectively get a subsidy of $26,857.

 

These financial incentives can act as a genuine motivator for first home buyers to get their foot on the property ladder with an off-the-plan property.

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Investors

 Investors have the potential to access into the same negative gearing benefits on newly-built and off-the-plan properties that they get on established properties. But on top of this, they can also often claim depreciation. This is effectively the cost of ‘wear and tear’ on a property and can include building costs, such as brickworks or concrete, as well as plant and equipment costs, such as carpets, appliances, blinds and more.

 

Another great benefit of buying off-the-plan is that it can give an investor the potential for capital growth even before they actually buy the property. That’s because they get to lock in today’s prices even though they won’t settle on the property until some time in the future. Obviously, the reverse can potentially happen in a falling market and an investor can lose money when prices go down.

 

For investors to get the most out of buying a new property, they should always look to get the fundamentals right. This includes making sure it’s in a blue ribbon location, that the construction quality is high, that the property appeals to a wide range of tenants and that they pay a fair price for it.

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Retirees and downsizers

Retirees and downsizers are increasingly starting to prize newly built and off-the-plan apartments for the genuine lifestyle benefits they can offer.

 

A brand-new home often comes with great modern amenities and added bells and whistles. This can include lifts, communal entertainment areas, a pool or a gym. New buildings are also typically well maintained, often have better natural light and, so long as they’re well constructed, usually won’t require as many repairs, renovations or upgrades as an older property might.

 

This can improve quality of life and reduce running costs.

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Considering buying off the plan?

As you can see, there are definite advantages to buying a new apartment, so you shouldn’t ignore the idea just because newbuilds have received some recent bad publicity. But, at the same time, the added risks of buying new mean you should never go into it blind. You need to know all the facts before you sign on the dotted line.

 

We can help guide you through the buying process, making sure what you buy is a quality product that suits what you’re trying to achieve. More importantly, we can make sure you secure it at the best possible price.

 

Get in touch to find out more.

 

 


Buyers Agent Eastern SuburbsPurchase of the Week

45 Cowper St Randwick - Read Report

 

 

Articles by TBAS®Auction Bidding Service

5 Tips for Auction Success

 

 

Recent Media for TBAS®Buyers Agent Sydney

Daily Telegraph: The ScoMo Effect: Driving the Housing Bounce

Financial Review - Buyers Starved of Property are Pushing Prices Higher

The Real Estate ConversationThe Rise & Rise of the Buyer's Agent

 

 

Need Help Buying Property?

Contact Rodney McLoughlin – Director

TBAS® Buyers Agents

rodney@tbas.live – 0418 474 304


 

 

Subscribe to TBAS® Auction Reports

5 Tips for Auction Success

Auction Bidding Service

5 Tips for Auction Success

How to win at Auction

Worried about bidding at a property auction? You’re not alone. Auctions can be extremely daunting if you don't know what you're doing or have arrived unprepared.

Auction Bidding Service

There are many auction strategies you can employ – from starting low and keeping on bidding to placing your best and final bid first. Here are five expert tips, from our years of experience attending thousands of auctions, to help you buy the property of your dreams.

 

 

Tip 1: Know the real price guide  

Something many buyers don’t realise is that the reserve price can be whatever the vendor decides on the morning of the auction, regardless of the price range supplied by the property’s real estate agents. Moreover, agents often underquote the indicative price range (then increase it gradually through the auction campaign) to get more prospective buyers through the door and create a greater illusion of competition. Don’t waste precious time and money on building and pest inspections, strata searches and contract reviews if a property isn’t actually in your price range. By doing thorough market research in advance you can also avoid bidding over and above what you should. In the weeks leading up to the auction be sure to find out everything you can about the values of similar property types in that location and set a bidding limit that is realistic and in line with current market values.

 

Tip 2: Get the inside scoop 

The key to not overpaying is being certain of the likely selling price going in. TBAS® Buyers Agents have analysed the data from thousands of auctions to establish reliable probable selling prices. We know the average number of bids, average number of bidders and, most importantly, the percentage over the agent’s price guide properties sell for and so we can make sure you have the information you need going in. 

 

Tip 3: Do your due diligence

While it can seem like a waste of money to pay for building and pest inspections if you don’t end up buying a property this is not the place to cut corners. Given the major investment your property will represent, such costs are a drop in the bucket that can save you from financial ruin if it turns out that the property has a major flaw. Make sure that your inspection is done by a reliable building inspector with good credentials and reviews and that their report covers pests, water damage, foundations and electrical work. If buying a unit, obtaining a strata report is essential. Your solicitor or conveyancer should also make enquiries to find out if there are any submitted or approved development applications in the area or any major infrastructure developments in the works. Your research should extend to checking out the area’s history, doing a walk through at different times of day and night to check things such as noise levels, and talking to the neighbours.

 

Tip 4: Take emotion out of the equation

 Let’s face it - emotion and drama is what makes an auction so entertaining. But the single biggest reason most people overpay at auction is emotion. Frequently, they’ve gotten their heart set on their “dream home” and logic flies out of the window in the heat of the moment when they fear losing it. Real estate agents know how to play on these emotions and get people bidding. A good buyer’s agent will insulate you from high pressure selling agents. They will be able to provide detailed information and data to support the potential sale price and will ensure you stick to your budget and not pay over the odds. Auctions are extremely stressful and emotional, so it’s important to have someone representing you who is not emotionally attached to the property.

 

Tip 5: Get expert representation  

If you are planning on buying at auction, you should have a professional representing you on the day. Remember that the vendors have a selling agent representing their best interests and advising them every step of the way. If you don’t, you’re not on a level playing field. A professional buyer’s agent will prepare and execute a bidding strategy that's tailored for the property you are buying and have the experience to alter the strategy if required. If the property is passed in, they will be instrumental in the negotiations post auction.

 

An expert buyer’s agent can guide you through the auction process with ease. Contact us for your road map to auction success.


Buyer Agent Eastern SuburbsPurchase of the Week

19 Anglesea St Bondi - $3,800,000 - Read Report

 

 

Recent Media for TBAS®Buyers Agent Sydney

Daily Telegraph: The ScoMo Effect: Driving the Housing Bounce

Financial Review - Buyers Starved of Property are Pushing Prices Higher

The Real Estate ConversationThe Rise & Rise of the Buyer's Agent

 

 

Need Help Buying Property?

Contact Rodney McLoughlin – Director

TBAS® Buyers Agents

rodney@tbas.live – 0418 474 304


 

 

Subscribe to TBAS® Auction Reports