Off-the-plan property is a dwelling — usually an apartment or townhouse — purchased from a developer before construction is complete, or sometimes before construction has even commenced. The buyer signs a contract based on plans and specifications, with settlement occurring when the building is finished and a certificate of occupancy is issued.
Potential advantages:
– Lower entry price compared to completed properties in the same development
– New build depreciation benefits (significant for investors in high tax brackets)
– Extended settlement period allowing more time to arrange finance
– Stamp duty concessions available in some states for off-the-plan purchases
Key risks for investors:
Valuation risk. By the time settlement arrives (12–36 months after contract), property values may have fallen. Lenders revalue the property at settlement, and if the valuation comes in below the contract price, the buyer must fund the shortfall from their own equity or cash.
Developer risk. Developers can become insolvent before completing the project. While deposits are typically held in trust, the loss of time and the cost of finding an alternative property can be significant.
Quality and specification risk. The finished product may differ from the plans in ways that reduce value or liveability — using substitute materials, changed layouts, or reduced finishes.
Oversupply risk. High-density apartment projects often result in large numbers of new properties settling simultaneously in the same building, creating competition for tenants and suppressing rental growth.
Finance risk. Lending policies change between contract and settlement. A buyer who was eligible for finance when signing may find their circumstances or lender policy have changed at settlement.
