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Pros and cons of buying off-the-plan

When looking for a property, buyers need to decide if they want to purchase off the plan or buy an established home instead.

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Buying off the plan is tempting, especially when you consider the glossy marketing materials, illustrations and sales pitch from the developer. Without a physical property to inspect and chatting to real estate agents, buyers base their new home ambitions off plans and renderings of how the property might look coupled with information about previous projects and prior sales from the developers.

There are some key differences when buying an off-the-plan property compared to an existing property, and each difference has its own set of pros and cons to consider.

Pros to buying off the plan

Purchase price discounts

If you get in early enough to secure a property off the plan, you may be offered a discounted purchase price on the property. In some cases, if the developer is desperate to move stock you may also be eligible for a purchase price discount.

Capital growth

In a rising market, buying off the plan can also be a good strategy because you only have to put a deposit down and settle when it is completed. If the market rises in the meantime you can make a capital gain while investing very little capital. Some people even on-sell their property before settlement and achieve a windfall profit.

Tax benefits

If you’re going to buy for investment purposes, you may be eligible to receive tax benefits such as depreciation on your items like fixtures and fittings. Make sure to consult an accountant or tax professional first, to determine whether you are eligible for any benefits, or read our handy guide on tax benefits of investment properties.

Stamp duty savings

Many state governments provide incentives for first homebuyers to buy newly-built homes. Visit your state or territory government’s website to see if you’re entitled to a stamp duty reduction for buying off-the-plan. You can also find out more about stamp duty in our state-by-state stamp duty guide.

First home buyer concessions

If you’re buying your first home, you could be eligible for the First Home Owner Grant (FHOG). You don’t necessarily need to be buying off the plan to be eligible, but it’s worth bearing in mind when weighing up your options. Rules and grant amounts vary depending on the state or territory, so be sure to check your eligibility carefully.

Builder’s guarantee

New properties generally come with a builder’s guarantee. How the guarantee works and what it covers varies based on the location of the property, so it’s important to check this element of an off the plan property carefully to see if a guarantee is available and how it could protect you.


It’s not often that you can buy more time to get your finances in order when diving into the property market, however buying off the plan can allow this to occur. Generally you will need to put down a 10% deposit as a base to secure the contract and in the meantime you can use the extended construction time to save up the outstanding balance.

Cons to buying off the plan

Low property value

Generally your lender will only value the property at completion of construction and sometimes the final value may be less than you expected. This may affect your loan to value ratio (LVR), which is the amount you need to borrow calculated as a percentage of your lender’s valuation of the property.

When you buy an established home it has traded hands before and there are local comparable sales to use as a price guide, making it much easier to value. When you purchase a property off the plan, true comparable sales are much harder to find.

The developer declares bankruptcy

There are some things in life that are out of your control. The construction of a property may not be completed for a variety of reasons but it can sometimes be because the developer goes bankrupt. In this case, buyers typically lose their deposit because they have to wait in line with all the other unsecured creditors.

While researching property market conditions is important, it is also necessary for buyers to do their due diligence on the developer before they sign a contract. This is necessary as the biggest risk prospective buyers face when buying off the plan, is losing their deposit if the developer goes into administration.

Buyers looking to buy off the plan should ask the developer for evidence of past projects, contact people who have previously used them, check for negative media reports, and, if possible, visit previous projects to assess the quality of the developer’s work. 

Construction exceeds the ‘sunset clause’

It’s not uncommon for the construction of the property to be delayed due to unexpected problems. Generally if your new home isn’t completed on time, there is likely to be increased costs or inconvenience such as paying more rent depending on your living arrangements.

One of the most significant risks with buying off the plan is developers evoking the sunset clause. The sunset clause is a statement in the contract of sale that effectively puts a time limit on the contract’s validity. Should the developer fail to complete the project by the date outlined in the sunset clause, the contract is declared void and the deposit is returned to the buyer. 

If there is a likelihood that your property will take longer than expected, ensure your developer updates your contract so that the sunset date falls after construction completion.

Your financial position may change

If circumstances change before your final application is approved, whether they be your personal income or the wider economic environment, you may not be able to borrow the amount you were pre-approved for which could leave a shortfall.

Your expectations may not be met

When buying off the plan, you are unable to physically see what you’re purchasing which means you might not receive what you had expected or what you were promised by the developer. Your new home may even be smaller. If this is the case and the size of your new home is more than 5% smaller than the plans and contract state, you have the right to renegotiate the price.

Tips for buying off the plan

  • Minimise your risks when buying an off-the-plan property by performing extensive research on the history of the developer, the contract and the plan itself. You can also check with the developer to see if they offer any benefits or discounts as discussed.

  • Make sure you have your finance pre-approved, so you are in a strong position to negotiate with the developers, and are able to settle when required.

  • Understand the process involved to fix any defects that have been identified when your property has been completed.

  • Ensure you are covered if the developer goes bankrupt before completing the project. 

  • Read the terms and conditions carefully before signing any contract - it is a good idea to seek advice from a third party before you sign the dotted line so you can understand any costs or risks involved.

If buying off the plan or building your home instead of buying an existing property sounds like a great option, find out more about our range of competitive low-rate construction loan options.

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About the article

As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.

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