Off-The-Plan - Liviti Property

Discover the Benefits of Different Types of Property in 2024: Off-Market, Off-Plan, and Established Homes

Luke Cheng on August 13, 2024

Ever wondered which types of property will give you the best bang for your buck in today’s real estate market?

Whether you’re eyeing hidden gems before they hit the public market, dreaming of customising a brand new home, or seeking the charm and stability of a well-established residence, understanding the unique benefits of off-market, off-plan, and established homes can unlock opportunities tailored to your needs.

Dive into our guide to discover the best type of property to invest in or purchase, and learn how each property type can align with your goals and enhance your real estate journey.

Discover the Benefits of Different Property Types: Off-Market, Off-Plan, and Established Homes

Whether you’re a seasoned investor, a first-time buyer, or someone looking to diversify your portfolio, knowing the ins and outs of different property types can significantly impact your success and satisfaction. Among the many options, off-market, off-the-plan, and established homes each offer unique advantages and considerations that can align differently with individual goals and market conditions.

Understanding these property types is not just about recognising their definitions; it’s about grasping how each can fit into your broader real estate strategy. Each type has its own set of benefits, risks, and market dynamics that can influence your investment strategy, return on investment, lifestyle choices, and overall satisfaction.

Different Types of Property in Australian Real Estate Market

Off Market Properties

Off market properties are not publicly advertised or listed on traditional real estate platforms. These properties are often sold privately, either through direct negotiations or through exclusive networks, and may include homes that are in the early stages of being sold or those that are intentionally kept out of the spotlight for various reasons. The appeal of off-market properties lies in their potential to offer unique opportunities that are not available to the general public.

Benefits of Off-Market Properties

One of the primary benefits of buying off the market property is the reduced competition. With fewer buyers aware of the listing, you may encounter less bidding wars and have a greater chance of negotiating a favourable price.

Additionally, off-market deals can sometimes result in faster transactions, as the process is often streamlined compared to traditional listings. Buyers may also gain access to properties with distinct or unique features that might not be as readily available in the general market.

Key Considerations Before Buying Off-Market Properties

When buying a property off market, it’s essential to thoroughly assess several key factors to ensure a sound investment.

Begin by determining the property’s value through a professional appraisal and comparative market analysis to gauge its fair market price. Conduct a thorough property inspection to uncover any hidden issues and review the maintenance history or have a professional inspector do this on your behalf.

Understand the seller’s motivation and urgency, as this may influence your negotiation. Additionally, perform a title search to confirm there are no legal encumbrances and carefully review all legal documents related to the property, or have a lawyer do so for you.

Consider financial implications, including financing options, additional costs, and renovation expenses. Develop a strategic negotiation plan and work with an experienced property consultant, along with legal and financial advisors, to navigate the transaction effectively.

Addressing these considerations will help you make informed decisions and manage risks in the off-market property buying process.

Potential Drawbacks

Off-market properties might not always come with comprehensive market comparisons, making it harder to assess their true value. There may also be limited information available about the property’s history and condition.

As with any real estate transaction, conducting thorough due diligence and working with experienced professionals is crucial to navigating these potential pitfalls.

Are Off-Market Properties the Property For You?

Off-The-Plan Properties

An off-the-plan property is a real estate investment purchased before construction is complete, based on architectural plans and renderings rather than a finished product. Buyers often benefit from lower prices and potential customisation options, such as choosing finishes and layouts. However, this type of purchase can involve risks, including potential construction delays or changes in the development plans. It’s crucial for buyers to understand the current market to make an informed decision and manage potential risks effectively.

Benefits

By purchasing before construction is completed, buyers often enjoy lower prices and potential discounts compared to completed homes, as developers seek early commitments.

Additionally, off-the-plan property purchases can provide opportunities for customisation, allowing buyers to select finishes, layouts, and design elements to their taste. This can lead to a more personalised living space.

Moreover, investing in off-plan properties can result in significant future value appreciation, especially if the property is in a growing or emerging area.

Buyers also benefit from staged payment plans aligned with the construction timeline, making it easier to manage finances or even save more of a deposit with certain off-the-plan deposit opportunities..

Key Considerations Before Buying Off-The-Plan Properties

Before buying off the plan property, ensure the developer has a solid reputation and a track record of completing projects on time and to a high standard.

Conduct a thorough market analysis and compare the property’s projected value with similar completed properties to gauge its potential return on investment.

Additionally, review the architectural plans and specifications in detail to understand what you’re committing to, and be aware of the potential for construction delays or changes in design.

Assess the financial implications, including deposit requirements, staged payment plans, and any additional costs.

Finally, consult with legal and financial professionals to ensure that all agreements and contracts are thoroughly reviewed, your investment is protected throughout the construction process and that you will be able to afford the property upon completion.

Potential Drawbacks

Buying property off-the-plan comes with some potential drawbacks that buyers should be aware of. One is the risk of construction delays or changes in project plans, which can impact the expected completion date and the final product.

Since the property is purchased based on plans and renderings rather than a finished product, there’s also the possibility that the final construction might not fully match initial expectations.

Discover Investment Property Off the Plan NSW.

Established Homes

Established homes are properties that have been previously owned and lived in, offering a tangible advantage of immediate occupancy and a clear understanding of the property’s condition. Buyers can inspect these homes in their current state, allowing for a more accurate assessment of value and condition. Established homes offer stability, character, and a better grasp of local market dynamics, making them a popular choice for those seeking a move-in-ready property.

Benefits

Established homes provide immediate occupancy, allowing buyers to move in without the wait associated with new construction or off-the-plan properties.

These homes come with a clear history, which can reveal important details about their condition, maintenance, and any past issues, making it easier to assess their value and make informed decisions.

Established properties often feature mature landscaping and well-developed neighbourhood amenities, contributing to a more settled and pleasant living environment.

Additionally, they are typically located in well-established communities with established infrastructure and services, which can enhance the overall quality of life.

Key Considerations Before Buying Established Homes

Before buying an established home, conduct a thorough inspection to identify any potential issues such as structural problems, outdated systems, or needed repairs. Review the property’s maintenance history to understand past renovations and ongoing upkeep.

Assess the neighbourhood’s characteristics, including local amenities, future development plans, and overall community vibe, to ensure it meets your lifestyle needs. Check for any zoning or property restrictions that could affect your use of the home.

Additionally, research the local real estate market to gauge the property’s value and compare it with similar homes in the area. Finally, consider the home’s energy efficiency and potential for upgrades to modernise the property and improve long-term value.

Potential Drawbacks

Older established homes may require significant repairs or updates to systems like plumbing or electrical which can lead to unexpected expenses.

Additionally, established homes might not offer the same level of customisation as new builds, limiting your ability to tailor the property to your preferences. The property could also come with unresolved maintenance issues or be subject to outdated designs that may not align with modern standards.

Furthermore, the neighbourhood may face challenges such as declining infrastructure or future development that could impact property values.

A family moving to a new house bought from a different types of property

Choosing the Right Property Type for You

Assessing Your Needs and Goals

Begin by evaluating what you truly need and want in a property. Consider whether you are looking for immediate occupancy, the ability to customise, or a unique investment opportunity.

Reflect on your short-term and long-term goals, such as whether the property should serve as a primary residence or an investment. Understanding your specific needs and goals will guide you in selecting a property type that aligns with your aspirations.

Financial Considerations

Analyse your financial situation thoroughly before making a decision. This includes determining your budget, factoring in the purchase price, and understanding additional costs such as maintenance, repairs, or renovation expenses.

Assess your financing options and how they align with different property types. Whether you choose an off-market, off-the-plan, or established home, ensuring that your financial commitments are manageable and sustainable is crucial for a successful property purchase. For extensive financial advice, speak to one of our industry experts.

Lifestyle and Long-Term Plans

Consider how each property type fits with your lifestyle and future plans.

Off-market properties can provide unique opportunities but require careful evaluation. Off-the-plan properties come with a longer wait and potential construction risks, but offer modern new residences, capital gains through the build and early access pricing. Established homes offer immediate move-in opportunities and are often situated in well-developed neighbourhoods with mature amenities, but can come with unexpected costs in renovation and maintenance .

Reflect on how each option supports your lifestyle preferences, long-term plans, and how it fits into your overall real estate strategy.

How Does Capital Gains Tax Work When Buying Or Selling Off-The-Plan

Daniel Chadrawy on May 13, 2022

Ugh. Taxes. They’re not everyone’s best friend.

They are, however, a part of life. Ben Franklin once noted that in this world, nothing can be said to be certain, except death and taxes. Ben Franklin died in 1790. Over 200 years later, we’re still dealing with taxes. He was certainly on the money (pardon the pun).

We digress, the real reason we’re here today is not, in fact, to whinge about taxes behind their back, but to inform you of the ins and outs of capital gains tax (CGT) when it comes time for the purchase or sale of an off-the-plan property. Understanding how CGT works now will help you later on when it comes time to complete your tax return after you sell.

Keep reading this article to learn about capital gain, capital losses and how off-the-plan investment properties offer a range of benefits, even when CGT is taken into account.

What Is ‘Off-The-Plan’?

Essentially, buying off-the-plan means you’re buying a property while it is still in the planning, development or construction stages. As the purchaser, before you sign the contract, you will generally be able to see a floorplan and the location of the property, as well as having some input into appliances, colour schemes and fittings, but not too much else until you settle.

How Does ‘Off-The-Plan’ Work?

Off-the-plan investors will generally be up for a deposit of around 10%-15%, but in some circumstances, it can be as low as 5%.

The balance is then paid only once the property has been fully constructed, which poses quite a few advantages to buyers.

Considering it can take 12-18 months for an off-the-plan property to be ready for settlement, this allows the purchaser more time to save before payments like stamp duty buying fees is required. On top of this, the far-off due date allows an extended period to act if you’re attempting to find a buyer for a property you currently own to fund the purchase of your new investment.

As a prospective off-the-plan buyer, it’s generally not too hard to find more information about the contract the deposit and everything in between, if you know where to look. (the Liviti website is a great place to start).

What Does It Mean To Pay Capital Gains Tax?

Alright, we’re back to the nitty-gritty tax talk. Bear with us here. It may be boring, but it’s important to know this stuff before entering into an off-the-plan contract you plan to sell in future.

Capital gains tax is managed by the ATO, calculated as part of your income tax and is applicable to all properties (with one or two exceptions, but more on those later in this article).

CGT applies to properties acquired post-1985, as this is when CGT was introduced.

For taxpayers, CGT is applied to any capital gains you’ve made within the financial year. A capital gain refers to a profit made on the sale of any assets.

Sale Price – (Purchase Price + Costs) = Profit.

For example, if you purchase a home for $500,000, sell it for $800,000 and incur $50,000 worth of costs in the process of buying, owning and selling it, your profit would work out to be $800,000 – ($500,000 + $50,000) = $250,000. That $250,000 is what you would pay CGT on.

What Is The Ideal Amount Of Capital Gain Tax?

It’s important to realise that there really is no specific capital gains tax amount that is ideal, on the whole. It truly does depend on individual circumstances.

As your capital gain increases, your capital gain tax will also increase and will depend on factors like the amount of time you’ve owned the property, your marginal tax rate, and more.

How To Calculate Capital Gain Tax

We’re going to try and simplify this as much as we can because nobody wants to spend time reading tax info. Here goes…

By law, you pay CGT as part of your annual income tax. Essentially, there’s no specific CGT tax rate applied, but the tax rate is subject to your total income which will include any applicable capital gains (or capital losses).

Here are a few examples of different ways one might complete their CGT calculations…

1. Discount Method

This method allows you to reduce your capital gains if you sell the asset after a period of more than 12 months of holding it. A discount of 50% may be applied in this case.

So, if you make $205, 000 profit, you would only pay CGT tax on the $102, 500 gained.

Follow this formula…

Asset Sale Price – Cost Base = Capital Proceeds
Capital Proceeds x 50% = Capital Gain

2. Indexation Method

This allows you to increase the cost base by applying an indexation based on the Consumer Price Index (CPI), up to September 1999.

Follow this formula…

CPI for Quarter of CGT Event ÷ CPI for Quarter when Expenditure Occurred = Indexation Factor
Capital Proceeds x Indexation Factor = Capital Gain

No matter how you plan on calculating CGT, it’s super important to consult with a tax specialist so you don’t end up with the tax department hot on your heels.

Capital Gains Tax For Foreign Residents

If you are a foreign resident and an investor in off-the-plan property in Australia, your CGT calculations will slightly differ.

You will be required to pay GCT on taxable Australian properties that you sell, worth more than $750,000.

Unfortunately, some CGT exemptions and discounts will not be applied. For example, when being taxed you will likely not be eligible for the 50% CGT discount when you make a capital gain after holding the property for more than 12 months (unless you purchased the property before 8th May 2012).

The good news is that any assets signed over to you in an acquisition before CGT started on 20 September 1985 are not subject to it when re-sold.

Tax Planning For Off-The-Plan Apartment Purchasing

When it comes to tax for off-the-plan apartments, it’s important to know how CGT might affect the property before settlement and eventually when the property is sold.

Having a plan for the method of CGT you or your tax agent is likely to use when the time comes is good to know from the get-go.

Certain items can be used to make tax deductions and work to lower CGT including rental advertising, interest on the loan, strata fees, stamp duty, depreciation and repairs/maintenance, so keep these in mind.

Again, it is so important to contact a tax specialist to make sure you’re able to take advantage of these tax benefits before purchasing off-the-plan property in Australia.

How Can You Avoid Paying Capital Gains Tax?

Often, by making the property a principal place of residence (PPOR), investors can get away with not being taxed for GCT.

Here’s the deal…

The property must have a dwelling on it and it must be your PPOR, meaning it is where you live, where your personal belongings are, where your mail is delivered, etc.

An exemption is available if PPORs eventually become a rental property, as long as it sells within 6 years of becoming a rental AND no other property is listed as your PPOR. If you reoccupy the property as a PPOR before the 6 years is up, the exemption resets.

As for discounts, investors who have held an asset for more than a year-long period may be eligible for a 50% discount on capital gains tax once its sale is completed. There’s also the possibility of tax discounts if the property is purchased by a self-managed super fund.

Again, all of this is dependent on circumstances. Please seek expert advice before agreeing to a contract, paying a deposit or planning a sale.

Selling An Off-The-Plan Property Before Settlement

Can You Sell Off-The-Plan Properties Before Settlement?

Yep! Off-the-plan properties often provide the opportunity within the contract to re-sell in the time period before settlement which is an awesome advantage to buyers.

If circumstances change prior to settlement, you may be able to sell up and hand the signed agreement over to a new buyer (kind of like when you have a gym membership and you literally never go so you find someone else to take over the contract instead…yeah, we’ve all been there).

Making a tidy profit from pre-settlement sales is possible if you’re clever about it.

How To Sell Off-The-Plan Property Before Settlement?

Firstly, consider whether the developer will allow a re-sale on an unconditional contract prior to settlement. Always check the fine print in the contract and have a legal expert confirm whether a re-sale is possible.

Once the legal stuff has been a-okayed, here are a few tips…

Timing is key! Try and allow at least 6 months from the expected completion date to give the property a good chance at selling before it’s due to settle.
Hire an agent to market the property for you. They can promote through their website, sales agents or online platforms!

Things Consider When Selling An Off-The-Plan Investment Property Before Settlement

If re-selling prior to settlement, it’s important for investors to consider the need to pay stamp duty when the property is re-sold, cover any additional legal fees for solicitor services and marketing fees if you use an agency, plus, our old friend CGT will rear its ugly head in the same tax period.

Most importantly, remember that you do remain bound to the developer after signing if no other buyer will take on the title.

Where To Find Information On Capital Gains Tax Selling Off-The-Plan?

As always, a qualified tax agent or solicitor is your best bet for feedback on the nitty-gritty stuff, but if you’re still confused about any aspects of CGT and buying/selling an off-the-plan property, don’t hesitate to get in touch with our team here at Liviti.

You can get in contact with us or view our available properties.

Remember, CGT might suck but it doesn’t have to be hard to manage if you work with the right people.

Buying Off the Plan Properties: 7 Powerful Concessions to Save Big on Stamp Duty

Daniel Chadrawy on May 6, 2022

When it comes to off the plan concession offerings, quite a few benefits are available to purchasers who qualify for them, making them an attractive opportunity for all kinds of buyers.

One of the most popular off the plan concession opportunities involves acquiring a stamp duty concession. Generally, these concessions will benefit first homeowners and purchasers who intend on living in the home.

What Is An Off The Plan Transaction?

Buying a property off the plan means you are entering into a contract for property purchase before the construction of the property has commenced or while construction is in progress.

An off the plan transaction could refer to land that is going to be subdivided, an apartment, a townhouse, or a range of other dwelling types. Land, in itself, does not qualify.

Off The Plan Stamp Duty Concessions

Taking advantage of available benefits is a huge incentive for home buyers, especially ones that allow a reduction to the upfront fees required to secure a home.

What Is Stamp Duty?

Also known as transfer duty, this is one of the bigger costs to be accounted for. It is the tax that the Government imposes when you purchase a property at a particular value, or when the ownership is transferred. Unlike land tax, you only pay duty once.

It is calculated according to the total dutiable value of the property.

Simply match up the purchase price of the property you’re considering with the dutiable value information in the table below for NSW rates on owner-occupied or investment purchases. It’s easy enough to find information for other states via Google.

What Off The Plan Concession Is Available With Stamp Duty?

It’s no surprise that Australian stamp duty concession availability and eligibility vary between states.

In NSW, this concession works by pushing the duty payment due date 12 months into the future (ahead of the standard 3-month timeframe), or until the property has been officially handed over, whichever comes first.

In the ACT, if your contract was exchanged between 1 July 2021 and 31 March 2022, no duty applies to off the-plan unit owner-occupier purchases up to $500,000. This was then increased to purchases up to $600,000 as of April 2022.

There are quite a few first home owner concession opportunities including the First Home Buyer Assistance Scheme in NSW which may apply according to the dutiable value of off-the-plan properties.

Honestly, we’re chuffed just thinking of all the smashed Avo on toast those savings could buy!

Who Is Eligible For Off-The-Plan Concessions?

In NSW, in order to be eligible for stamp duty concession, the off-the-plan property you intend to purchase must be a residential property that at least one purchaser intends to live in as a principal place of residence for 6 months continuously, within 12 months of purchasing the home.

You must also be an Australian citizen OR a New Zealand citizen with a subclass 444 visa having lived in Australia for over 200 days in the last 12 months OR a permanent resident who has lived in Australia for just as long to be eligible.

If any residence requirement is not met, purchasers may need to pay a penalty tax.

How to Apply for Off-The-Plan Stamp Duty Concession

Currently, the State Revenue Office manages concession applications relating to first home buyer off-the-plan purchases in NSW.

Here’s your step-by-step action plan for applying…

Do your own thorough research before applying
Confirm your Australian citizenship status and other personal conditions meet the application requirements
Complete and lodge your application accurately and with supporting evidence

You can find further information and access the application form here.

New Requirements For Off-The-Plan Contracts To Know Before Your Contract Date

Prior to the date of the contract, check out the new requirements put into place in NSW from December 2019.

These new laws were added to create more disclosure obligations on vendors so that purchasers have more transparency throughout the buying process.

As a first home buyer, purchasing a residential property, like a new apartment, off-the-plan can offer some pretty sweet benefits, but please do keep in mind that suitability will always depend upon the individual circumstances of the purchaser.

Contact one of our expert property consultants at Liviti to help answer any of your questions or take a look at our latest off-the-plan properties available for purchase.

Happy house hunting!

Is stamp duty payable on off the plan purchases in NSW?

It certainly is! Unless you meet any of the concession options mentioned in this article, your stamp duty payment will be due within 3 months of the completion of the transaction.

What is a studio apartment?

Daniel Chadrawy on March 16, 2022

If you’re on the hunt for a new apartment, maybe even your first apartment, then you may have come across a studio apartment or two. Studio apartments and one-bedroom apartments are some of the most popular apartment options for their smaller, organised and functional space.

So say goodbye to difficult roommates! A one-room apartment is a perfect place for home buyers looking to live solo in a convenient and optimal space without breaking the bank.

Studio Apartment Meaning

#1 Studio apartment meaning & configuration

Contrary to common assumptions, a studio apartment isn’t determined by size. It is actually defined as a self-contained unit that has an open floor plan – meaning the bedroom, living room, and dining area are all in a single room space with no walls separating them.

Some floor plans of a studio apartment might have half walls or built-in bookcases to help divide the space. But don’t worry, the bathroom is an exception and will be a completely separate room.

#2 Studio apartment size?

The average size of a studio apartment generally varies between about 30 – 60 square metres, some might still include a balcony. And, the open floor plan is built effectively to utilise every part of it.

In order to create the illusion of a large room, you might find that some have higher ceilings and more or taller windows that let in lots of natural light.

#3 Common Studio apartment floorplan

There are a variety of studio apartment floor plan styles but generally, it consists of open plan living where the kitchen, living and dining areas are situated in one room. The bedroom is usually combined into the main living area with or without a partition to create privacy with the bathroom and laundry usually situated in a small enclosed space nearby.

Source: apartmenttherapy.com

#4 Studio apartment Price

The price ranges of studio apartments can vary depending on their location but regardless, they are the popular choice because of their affordability. Studios are generally less expensive than a 1 bedroom apartment although the rental income between the two property types can be quite similar.

Studio prices can start from as low as $395,000 so they offer an affordable entry point to home seekers.

Studio Apartments Vs. One-Bedroom Apartments

Often, on their apartment search, buyers get confused between a studio apartment and a 1 bedroom apartment.

You’ll likely need to pay a higher purchase or rent prices for a one-bedroom than you would for a studio. But the main difference between the two is that, unlike a studio apartment, a one-bedroom apartment will have a separate bedroom with a door and most likely more space for storage. Some one-bedroom apartments have a bathroom connected to the bedroom, which provides more privacy.

Other differences include:

Sizing – one-bedroom apartments tend to be slightly larger than studio apartments.
Extra space – the separate rooms in a one-bedroom apartment will likely allow for the opportunity to have more furniture since you’ll have more space to fill.
More privacy – rather than having everything in an open and common space like a studio apartment, each room in a one-bedroom apartment will be separate, including the kitchen.
For those who like to entertain – with the extra space and privacy, a one-bedroom apartment is the better option for those who like to host gatherings at their place.

Pros and Cons of buying a Studio apartment

Studio apartments may not be for everyone, but there are definitely several advantages to purchasing one.

We’ve compiled a list of pros and cons for you to take into consideration when looking to purchase a studio apartment.

Pros

Some of the advantages to buying a studio apartment include:

Living a minimal lifestyle free of clutter
Less property maintenance and cleaning than one bedroom apartments
Lower price point than a regular 1 bedroom apartment
Saving money on electricity bills
Central location at a lower price
Generally close to public transport
Good rental return potential

Cons

Some of the disadvantages to buying a studio apartment include:

Minimal privacy as it is one open space
Limited space and storage – would be difficult if you like to frequently entertain
Only suitable for a sole home buyer
Could have difficulty getting a home loan

Things to consider when choosing a Studio apartment

What type of home loan?

The affordability of a studio apartment can come with stricter lending criteria. Since studios are typically smaller than a standard apartment, some lenders may not approve loans for properties under 40 square metres. However, depending on your budget and how much you plan on borrowing, some lenders can sway their guidelines for smaller properties.

What are the costs?

Studios are generally cheaper to buy and rent than a one-bedroom apartment. So if you’re looking to save money through the purchase price, rental costs and strata fees, then a studio apartment just might be the alternative for you.

Where is it located?

Location is everything so it would be beneficial for you to consider studio apartments in a convenient location for you. They are most popular amongst university students and young professionals living on their own due to their close proximity to the places that they frequent such as:

Place of employment
Universities
Public transportation
Shops
Family
Hospitals

These amenities are generally the more desirable and therefore the primary reason for choosing a studio apartment in a location that contains them or is nearby.

What apartment features are available?

Studio apartments have the prime features of :

Open plan living – to optimise living space
Floor to ceiling windows – to let in lots of natural light
Cosy intimate space in a single with easy maintenance
Minimalist interior design to avoid the smaller space from looking too busy

Making the Most of Your Space

How To Organize A Studio Apartment

A studio apartment is best suited to people who strive to live a minimal lifestyle. When organising your space you will want to declutter and make sure you aren’t holding onto items that you don’t need or that don’t work with the size of your space.

Make trades and compromises. It would be a good idea to trade some of your full-sized furniture in for space-saving options that contain inbuilt storage.

For example, you could buy:

A bed that has drawers underneath it to maximise the storage space whilst maintaining a tidy appearance
Or a Murphy bed – you can store it away vertically against the wall when you’re not using it to open up the main living space even more
A coffee table that has cupboards, drawers or even open space underneath it
Furniture items that can double as additional space for storage – a storage ottoman can also be used as a footrest or a place to set your drink.

Furniture, rugs and dividers or privacy screens are perfect opportunities to both personalise the single room and separate each of the living spaces from one another. These additional touches create distinct areas in the single room without closing up any of the space to help you make the most of your studio apartment.

It can be very easy for a studio apartment to look cluttered so, in order to keep it organised, it’s most crucial to have a designated spot for each of your items.

Your Kitchen Area

The most common kitchen design in a studio apartment is where the cabinets and full-sized appliances are lined up along one wall. In larger studio apartments, you might also find an island or an ‘L’ shaped kitchen to maximise on both bench and storage space. But overall, these layouts are both functional and provide more open space to add to allude to a large room.

Dividing It Up

Sliding doors

Sliding doors create a distinct separation between rooms, ultimately creating privacy without impeding on space like a hinged door would. They also speed up heating and cooling by reducing the size of the room. Sliding door materials vary from glass to wood and metal so they can ultimately work with any style and space.

Room divider curtains

Room divider curtains are perfect for creating separate zones within any space. They are a functional and versatile alternative to sliding doors as they are quite simple to install and remove, perfect for home buyers/renters! They can also add a visual and design element to a space to enhance colour and texture throughout the apartment. Best of all, you can personalise them however you like to make your studio apartment feel more like home.

Source: curtain-tracks.com

Bookshelves

Bookshelves are another option to divide up the room as they can double as more storage space whilst also adding to the overall aesthetic of the apartment. Talk about a triple bonus! Whether you prefer a floor-to-ceiling bookshelf or a half of one to create partial walls, they are a great option to consider adding to your studio apartment.

What do you think?

It’s no secret studio apartments are gaining lots of attention and popularity, especially for sole home buyers or single renters. Their smaller open floor configuration makes the living space one of convenience and is also overall cheaper than its alternatives.

At Liviti, our property experts are dedicated to helping you find your dream property.

If you’ve decided a studio apartment is the one for you or you would like some more information, give us a call at (02) 9056 4311 or enquire here to book an appointment.

Do Apartments Appreciate In Value?

Lara Osborn on March 3, 2022

For years it’s been a debate that a house appreciates while an apartment depreciates, so it will always be better to invest in a house rather than an apartment.

But is this always the case?

House Appreciates and Apartment depreciate?

It’s obvious that houses have better capital gain than apartments because the land they sit on tends to appreciate over time. However, do houses appreciate and apartments depreciate?

“Houses appreciate and apartments depreciate” is a myth that property investors in the property market often quote. This is, in fact, not always true.

Generally speaking, all buildings can be depreciated. Like any tangible asset, buildings depreciate through wear and tear and need to be constantly maintained. This is not always bad for investors as you can claim tax benefits on this depreciation, and the newer the property, the more tax benefits and the longer they will last.

However, land appreciates, and houses tend to have more land content. So, as a result, houses will have more potential to appreciate and offer a quicker capital growth than apartments.

However, in some inner-city areas, this is not always the case. A block of land in the regional suburbs, for example, is unlikely to be more valuable than floor space in Darling Harbour. Apartments in good locations will always have a lot of prospective buyers interested in them as time goes on.

As a result, when investing in real estate, it is critical to consider location as well as market conditions.

So do apartments increase in value? The answer is yes! A quality apartment in a great suburb can go up in value even more than a house in a less desirable suburb.

Investing in real estate entails purchasing a property that will appreciate over time and provide capital growth as well as good returns. It is not about investing in a specific type of property, such as a house, just because of the land content.

Houses as the only Investment option?

According to George Raptis, director of Metropole Sydney, most people think that when it comes to investment property, a house would be a better option due to the land that is attached to it.

“But here’s the thing: if you go out into the regional suburbs and buy a house and land package, you might pay $400,000. Of that, $100,000 accounts for the land, and $300,000 is the cost of constructing the property. So the part of the asset that appreciates is only a small portion anyway”. Mr Raptis said.

“If you buy an apartment in a premium land-locked suburb, the land has a higher value. There might be a block of 10 apartments where the land beneath is worth millions of dollars. Your land-to-asset ratio is a lot higher, and that’s really what drives the price up.”

This means that it might be better to own a small slice of a highly valuable piece of land, rather than a large slide of land that has a much lower value.

The current market condition

In addition, it’s also important to consider the market conditions and the current trend when choosing an investment property.

According to CoreLogic, the gap between houses and apartments is currently very high, where Capital city houses were 37.9 per cent, or $240,500, more expensive than units.

Units are obviously more affordable, and soaring housing prices mean that more consumers are choosing units rather than houses. As a result, city centre apartment prices have risen 12.6% in the last year, the highest annual growth rate in 11 years.

Apartments will continue to be a good investment because supply and demand are in alignment. Properties near the CBD or with good public transportation and easy access to shops, schools, and amenities are frequently in higher demand.

Furthermore, with the international border reopening after nearly two years, the apartment property market is expected to grow significantly in the coming months.

Why does an Apartment increase in value?

Capital growth vs cash flow

When deciding on a property investment strategy, you should first consider whether you want capital growth or cash flow.

A capital growth strategy entails purchasing an investment property that is expected to increase in value over time.

A cash flow strategy, on the other hand, entails purchasing a property that will provide a good rental yield and the ability to immediately draw a direct income

This is also the main difference in deciding which types of property to invest in. It would be reasonable to assume that apartments won’t see the same level of capital appreciation as houses, although, as previously mentioned, you are partially compensated by a higher rental income.

As a result, when comparing apartments and houses, both may have similar long-term investment returns, implying that apartments do appreciate in value.

Accelerating Appreciation In Apartments

Market comparable is how you determine the value of a property based on the selling price of a similar property with the same characteristics. This is the method by which nearly all houses are priced.

However, apartment values are determined by the profitability of rental income (your total rental income minus expenses). You can increase your net earnings by raising your rent, lowering your expenses, or doing both. By performing these 2 actions, you have increased your annual income, and secondly, you have forced the property value to increase. This is called forced appreciation.

This is the holy grail of real estate. You can increase the rent charged to tenants by upgrading different amenities, appliances, structural integrity, and overall aesthetics when you own an apartment. When rents are raised, the rental income has a direct impact on the building’s profitability, and the property value rises.

Forced appreciation in apartment complexes can be even more powerful than natural economic equity in houses overtimes.

Difference Between Investing in House and Apartment

Pros of investing in a House

1. Higher capital growth

Due to rising land values, houses typically offer greater and faster capital growth than apartments. As a result, investing in assets that provide the most long-term capital growth will help you pile up significant wealth.

2. Opportunities to renovate and subdivide

As the sole owner of the house, you can do any renovations you want to improve the house itself and increase its value. And in the case that you want to subdivide your land, you are free to do so without needing to request permission from the body corporate.

Cons of investing in a House

1. Price

It’s no doubt that houses are often more expensive than most apartments in the same area. Particularly in big cities like Sydney and Melbourne, this gap has grown tremendously over the recent year. So if you are looking to build up the diversity in your investment portfolio, buying a house might not be an optimal option.

2. Lower rental yield

A house will not be the best option if you need rental income because it offers lower rental yields than units. This is because, at the same price, you can afford a centrally located apartment but only a house in an outer suburb. And better location means more demand.

3. Maintenance costs and upkeep

A house with land is more difficult to maintain because you’ll be constantly mowing the lawn and caring for the garden, which can become quite costly over time.

Pros of investing in an Apartment

1. Affordable options

Apartments usually offer an affordable entry point for investors. Instead of buying a house at $1M, you can invest in 2 different apartments at $500k each. You have more flexibility if you have multiple assets. Concentrating a large portion of your wealth in one asset creates a lot of concentration risk, which may not be a good idea.

2. Supply and demand

Over the past 25 years, the number of occupied apartments in Australia has increased by 78%, according to the most recent census. A trend is more prevalent in urban areas within Australia’s major capital cities.

And while apartments are often closer to the urban centre and offer facilities, they could not afford in a house. And more retail demand means higher rental yields.

3. Maintenance costs and upkeep

Apartments are much easier and less expensive to maintain than houses. Garden areas are usually common areas that the body corporate maintains. Even though you will have to pay body corporate fees, you will save a significant amount of money and time as an investor.

Cons of investing in an Apartment

1. Lower land value

Again, apartments might offer lower capital growth due to a lower proportion of associated land. However, this is influenced by other factors such as location, market trends, and the condition of the property.

2. Lack of control

Because most apartments and units are part of a strata title, any changes or renovations must be approved by the body corporate. This lack of control can limit your ability to maximise the value and use of your property.

3. Future developments

If you own an existing apartment or unit in an oversupplied area, you may experience lower rental yield, renter demand, and capital growth.

Tips for Choosing a Property That Will Appreciate in Value

Location

The first and foremost tip will be choosing an apartment with a good location. These are some factors that will decide whether your new investment choices will attract tenants:

Proximity to business hubs
Popular cafes, restaurants and shops nearby
Close to public transport
Close to school catchments
Safety of the suburb

Property aspect

Property experts always recommend that buyers should look for an apartment with plenty of natural light, views and practicality. North or northeast facing properties are considered the most desirable because they get the most direct sunlight throughout the day. East-facing homes might also enjoy lovely sunrises and full morning sun.

Property level

To decide which levels to go with, you should consider looking back at your target tenants. Young professionals may love a view from up high, so the 5th to 6th floor might be the best option. However, if you want to target young families with kids or pets, apartments with good access and safe on the first three floors will be in higher demand.

Parking adds value

Another way to increase resale value is to buy an apartment with parking. According to Domain research, parking can add up to $300,000 to the value of an apartment in high-value inner-city locations.

Builder quality

The quality of the construction is also something that you should carefully consider. Before buying an apartment, you need to do some research to compare the development to others on the market.

Conclusion

Compounding capital growth is a powerful investment attribute and the simplest and easiest way to build wealth. Therefore, you should always look for an asset that comes with longer-term capital growth.

However, while focusing purely on capital growth, you might be missing out on an opportunity to achieve similar investment returns with a similar purchase price. And at the end of the day, the quality of that property will determine your investment returns.

If you need more advice, contact 02 9099 3412 or check out Our News for more information on the property market.

When Do You Start Paying Mortgage On Off The Plan Property?

Lara Osborn on March 3, 2022

When purchasing an off-the-plan or new-build property, your home loan requirements differ from those of a previously owned property or a completed brand new property.

It’s a unique way to buy a property as you purchase based on floorplan and render images, and then you wait for it to be built.

One significant advantage of buying off the plan is that you can make a very small deposit, sometimes as little as $1,000. You will then have years to repay the loan. Isn’t that fantastic?

What is off-the-plan property?

Purchasing a house, apartment, or townhouse ‘off-the-plan’ involves entering into a contract to purchase a property that has yet to be built or is still under construction, based on the building plans and designs.

It can be a more affordable option, particularly for young people looking to get into the property market and those looking to buy in more expensive suburbs.

Buying off the plan – From deposit to Settlement

Paying your deposit and signing the contract

Once you have found a property that you love, you will make an offer to the seller and put down a holding deposit to show your interest and take the property off the market. Once the seller accepts your offer, a contract will be prepared that outline your property information, your obligations regarding payments and the developer’s obligations to you.

The process for buying off the plan starts when you sign the contract and put down your deposit. Normally, you will be required to pay a minimum of 5% of the property value as a deposit.

Under some circumstances, some off the plan developer will let you secure your property with only your holding deposit or a part of your deposit, with the remainder to be paid at completion. This will give you additional time to save money before moving into your new home.

Your home under constructed

After you’ve exchanged contracts and paid your deposit, you’ll have more time to save money for your new home while it’s being built.

Depending on your development, the length of the construction period may vary. Construction may take some time to begin as the developers work to obtain the necessary approvals, hire contractors, and get everything in place before they begin.

Your sales agent will keep you updated on each construction milestone, and you will be given an estimated settlement date when the construction period is complete. As a result, it’s a good idea to get your finances in order at this point, as it will give you time to prepare for your settlement.

Pre – Settlement & Valuations

About 2-3 weeks prior to the actual completion of the development, you should seek finance for the remaining balance when the property reaches the pre-settlement stage.

At this stage, the bank or your mortgage broker will organise a valuer to conduct a formal property valuation before granting you your loan. They will consider a variety of factors such as location, floorplans and inclusions, and the overall condition of your property.

This is because when a bank lends you money to buy a new home, the property itself serves as security for a loan. In the event that you fail to make your payments, the bank has the right to sell the property to pay back its losses.

Because your property hasn’t been finished, the valuation will be done “as if” it is (generally known as On Completion valuation, or As If Complete valuation). The valuer will assess the property’s value in the current selling environment, not taking into consideration any rise or fall in the property market.

At this point, you can also conduct a pre-settlement inspection to ensure that everything about your property is in accordance with your contract.

Settlement

If you are buying a completed or off the plan property, the settlement means the day you get your keys. If you have a house and land package, the settlement will be the day you own the land, before the building can commence. After you settle on your new home, your repayment starts.

At this step, the remainder of the property price and stamp duty is due, and the bank will release this portion from your approved loan amount. On the settlement day, your solicitor will meet with your mortgage lender and your seller’s representative to complete the documentation transfer. Your property mortgage will be registered against the property title.

When everything is settled, all documents will be completed and lodged directly with the land registration office, and you will become the legal owner of the property.

Why do you save more money buying off the plan?

As little as a 5% deposit is usually required to secure property off the plan. The extended settlement period may provide you with additional breathing room to save up for the outstanding mortgage balance.

In addition, in New South Wales, stamp duty on this type of purchase agreement can be delayed for 12 months after the agreement’s date, giving you more time to save.

The government is also making it more appealing for people to purchase off the plan. First Home Buyers in NSW will be able to purchase a new home with a 5% down payment. Under the First Home Loan Deposit Scheme, first home buyers can also get a $10,000 if they buy a home that is ‘newly built, purchased off the plan, or sustainably renovated.’

If this is an investment property, you can take advantage of numerous tax deductions, including depreciation. This enables you to calculate and deduct any value loss due to market depreciation from your tax bill.

This can lower the ongoing costs of property ownership and allow you to expand your property portfolio more quickly.

Another factor to consider is that prices are usually fixed rather than negotiable in the current rising property market. As a result, buying off-the-plan may be a more appealing option than attending an auction and worrying about what offers another buyer might make.

Securing a Loan for an Off the plan property

According to Bill Nikolouzakis, chief executive of iBuyNew Group, the most important factor in securing a loan for off the plan purchase is to choose a property where the bank’s valuation matches the purchase price.

This is also the biggest risk when you are funding for an off the plan purchase.

Loan-to-Value Requirements

When your property valuation price is lower than your purchase price, you might have trouble borrowing the amount you want or the bank might need additional security before approving your loan.

Some lenders might also cap loans for off the plan property at 80%, and you will need to ‘tip in’ the difference from your own budget.

Therefore, even when you are confident that your property will increase in value, you should still keep a buffer just in case.

Deposit for Off-the-plan

If you go with the minimum 5% deposit price, your deposit might not be enough at the time of settlement if your property valuation falls short.

Therefore, to avoid this situation, you need to budget a financial buffer for a potential valuation shortfall, generally another 5 – 10% of the purchase price. However, given you have more time before the construction is complete when buying off the plan, this another 5% is totally feasible.

It’s also good to know that if a valuation does come in short, you can choose to order another valuation to find a valuer who understands the value proposition of the specific property, so that you may be able to avoid a shortfall.

Conclusion

It’s good to note that your mortgage repayments will not start until settlement – the date when the property is yours to enjoy! This means that when buying off the plan, you will have more time to save for your deposit and end up reducing your total loan amount.

While buying off the plan can seem complicated, engaging a team of experts and doing your research will give you a better chance of success.

What is Property Due Diligence, and What Do You Need To Know?

Lara Osborn on February 22, 2022

There are many risks to consider when purchasing residential property from both a property and financial standpoint. You might not know what to look for, or even where to start. That’s where we come in!

Inserting a due diligence clause into your contract of sale can ensure that the next property you invest in is financially attainable, physically suitable and legally favourable for you.

So let’s talk about due diligence!

What is Property Due Diligence?

Basically, due diligence helps you verify that you are getting what you pay for, and it is your responsibility when looking into buying a property.

You don’t want to be stuck with building or financial issues that may cause even more problems for you in the future, so it is crucial that you conduct your own research on the property you intend to buy.

The Process

Due diligence begins before buying any property, and it’s key to understand the objectives behind the sale. The process itself involves various factors that should be considered to fully understand your position when buying a property.

These factors include:

Financial
Legal
Planning and environmental
Technical

These aspects often occur simultaneously, so it is crucial that you plan ahead.

Financial Situation:

Being aware of all the appropriate expenses, their worth and how they align with your financial situation is one of the first steps in this process and quite possibly the most important. Basically, what you need to ask yourself is, “Is this property worth the price and can I afford it?”

1. Potential yield and/or capital growth?

The potential yield is the profit generated by your investment as a percentage of its value. You want to be aware of this and have a sound understanding of how it works when making such an investment, as it will give you a good idea of the return that you can earn.

Also, being aware of the market is highly beneficial when looking to buy a property. Its purchase price and value could undergo significant growth. However, the exact opposite is also possible due to the supply and demand of property sales. It might be a good idea to compare the prices of other properties in the area to help you identify whether the property is worth the set price.

It is really beneficial to conduct your own research on these topics as the yield, and capital growth can vary significantly depending on the market of a particular area.

For more specific information and patterns on the market in your area, click here.

2. Can you afford the property you are interested in?

After you have figured out whether the property is worth investing in, it is time to find out whether you can actually afford it. A broker can work with you through the buying process so that you are well informed on things like the expenses you need to cover any grants you may be eligible for and your borrowing power.

Legal Situation

The due diligence process is a technical one that may be easier to understand with professional legal advice.

Review the sales contract and appendices

The contract of sale contains key information about the property and lots of legal terminologies you might be familiar with. Here is where a legal professional comes into play. Their main role in this process would be to go over your contract with you and make sure you understand every aspect of it to avoid any mishaps and disappointment on your part.

Every section, clause and appendix of the sales contract, as well as all your rights as a buyer, should be identified and explained for you to be able to sign it without any fears.

Property Due Diligence checklist

This due diligence checklist aims to ease you into the process by highlighting certain areas that you might not have thought of checking because, let’s face it, buying a property is a big decision. The last thing you want is to be stuck with the previous owner’s problems at your own expense.

1. Buying into an owners corporation

An owners corporation is created when a plan contains common property like driveways or grounds. Since this common property belongs to the owners, there may be fees or rules required to limit your ability to use your property. A lawyer can help you identify these and be aware of them when reviewing your contract.

2. Growth areas

With some properties, you may be required to pay a growth areas infrastructure contribution, which essentially is another cost that contributes to the price of essential State infrastructure, so it is important to find out if this is needed of you.

3. Flood and fire risk

Depending on the location of your property, there is the potential of it being vulnerable to fires and floods. This is a very important risk to consider investing in a property, so you should properly investigate this possibility, speak to your real estate agent or property consultant and consider the ways this could implicate the building, insurance, land management and any other additional costs.

4. Planning controls

Every local council runs a planning scheme for all land in its area. How the land can be used is determined by the zoning of the property and any overlays that may apply. Such planning controls can restrict what you can do with the property.

Including:

Building on vacant land
Altering or developing the land
Altering and developing buildings on the land over time

It is important to look into local council zoning of your planned property investment as well as surrounding land to avoid an apartment complex over towering you and possibly your view.

5. Safety – is it safe to live in?

Professional building inspections can help assess the safety of the building and whether it is suitable to live in. They check the property for electrical safety, possible illegal building work, adequate pool or spa fencing and the presence of mould, cracks, asbestos, or other hazards. It is important to obtain a building and pest inspection report to ensure that the complex is functional and safe to live in, as well as avoid any unnecessary future expenses.

6. Building Permits

Suppose you are buying with the intent to make any significant developments to the building or retaining walls. In that case, it is important to investigate any rules and regulations regarding this and how you can seek any approvals required. Along with this, be sure to check your strata by-laws regarding the process for these approvals if you are apart of a strata title.

This sort of information can usually be found through your local council, and it also might be a good idea for you to commission a private building surveyor’s assessment to be extra safe.

7. Utilities and Essential Services

Some utilities and essential services might not be available to you, or they may require a fee in order for you to connect to it. There might also be a range of suppliers to choose from for these services, which all vary in price. Some services might not be available at all, particularly in rural properties.

So, it is vital to ask whether the property has working connections to:

Water
Electricity
Gas
Sewerage
Phone
Internet

8. Buyer’s Rights

There are many important rules about how private sales and auctions are conducted.

These may include

A cooling-off period
Specific rights associated with off the plan sales

A legal professional will point out that as the buyer, you have rights.

If you discover something you don’t like or agree with during the due diligence period, you have the right to ask to remedy the issue, or you can cancel the contract and request a full refund on your deposit.

However, it is important to be mindful that there are some issues a seller can solve and some that they can’t like certain physical defects.

All in all, though, you have rights!

How can you ensure you have due diligence in your contract?

After reading all of this, you may be wondering why a seller would consent to a due diligence clause in a contract or if you should even bother requesting one when it benefits you more than them.

You would be right. Such a request could mean the difference between them accepting your offer or someone else’s. That is why having the appropriate legal help is so beneficial.

The right lawyer will:

Know how to negotiate well, so you receive the most favourable contract
Have sound knowledge of the current market
Know what is reasonable to request

Conclusion

Having a proper understanding of all physical, legal and financial aspects of property investment is more important than you can imagine and having a due diligence clause in your sales contract can make all the difference!

At Liviti, we are here to help you! Follow our due diligence checklist when looking to make your next property investment. With a prudent lawyer, you could sign a most advantageous contract for the perfect property for you.

For more information click here or give us a call at (02) 9056 4311!

Everything You Should Know About Buying Off The Plan

Lara Osborn on February 14, 2022

When deciding on a property to buy, you probably have been asking yourself the question “Should I buy an existing property or should I buy off the plan?”. It is also a question that a lot of people wrestle with.

While the majority of Australian people tend to buy “second-hand” or completed homes, the term “off the plan property” is getting more and more attention from property investors & enthusiasts due to the significant benefits.

So is buying off the plan worth the hype? Let’s find out!

What is Buying Off The Plan?

Essentially, buying a house or an apartment off the plan is entering a contract to purchase a property prior to the completion of the property title. This means signing off on purchasing a property before it has been built or finalised (pre or mid-construction stage).

Buying a home prior to completion also means that you can select your dream home from the architectural drawing, view the developer’s plans and designs, and get to know the location before you move in.

This is the key difference between buying off the plan and a completed product.

All Benefits of Buying Off The Plan

#1 More Freedom – More Choices

Time to save

Buying off the plan provides you with additional time to save for future repayments during the construction process while the property has already been secured and its value could potentially increase at the settlement date.

Purchase price discount

To encourage sales in the early stage, developers may set their price at a more attractive rate and sometimes offer you a discount on the purchase price when buying off the plan, especially before construction begins. Once the construction begins, the prices will go up.

Input into design

When buying an existing property, you have very little choice in terms of the finishes of the property. On the other hand, since buying off the plan can occur before the construction begins, you potentially have more options of level, aspect or floorplan and an opportunity to negotiate changes to the interior design.

Therefore, it is important to check with the developer what options are available as this may have a big impact on the property value over time.

Builder’s guarantee

Depending on your state or territory, most off the plan projects should be protected by builders’ warranty insurance while your property is being built, which means certain structural or interior building faults that emerge within a certain timeframe must be repaired by the builder.

#2 Deposit and Government Incentives

When purchasing off the plan apartment, the purchase price can be much less compared to an established property, as developers typically offer lower prices at the early stages of the project along with government tax benefits such as stamp duty concessions, especially before construction starts.

Deposit Benefits

When buying off the plan, typically you’ll only have to pay a deposit to the developer and then pay the remaining balance on completion of the property. This means you’ll have more time to save before settlement while the property is being built.

In addition, with off the plan property you generally only need to pay 10% toward today’s price, or even as little as 5% for some projects.

Tax benefits

The tax system in Australia is set up to favour property investment. It is important to note that you can always claim tax deductions on your investment property as an investor. There’s more tax depreciation available on new properties, meaning you can maximise benefits and improve after-tax cash flow

Government concessions

In some States and Territories in Australia, you may be able to claim incentives when buying an off-plan dwellings. Concessions on stamp duty grants are the most common incentive offered, which can be a saving of tens of thousands of dollars.

If you are buying your first home, you could also be eligible for the First Home Owner Grant (FHOG). Rules and grant amounts vary depending on the state or territory, so you can check out your eligibility here.

#3 Make a capital gain before you even move in!

Capital growth

The “Buy and hold” strategy has long been a long-term passive strategy for real estate investors. As the property market performing strongly over the last few decades, the longer you hold a property, the more return on investment you will get.

As mentioned above, buying off the plan means you tend to buy a property at its lowest value, there is a high potential for your property to increase in value during the construction period.

Depreciation benefits

Over time, any building and its associated assets will experience wear and tear. That is why new properties are easier to hole as they generally require less maintenance and fewer repairs than “second-hand” homes, hence less depreciation in value.

Under the current legislation, owners of any property that generate income can claim the depreciation tax deduction. Overall buying off the plan provides greater tax depreciation benefits than buying an established property – meaning that a larger portion of your property expenses and bills are deducted from your tax return.

The real risks

Although buying off the plan apartments might sound like a wonderful investment strategy, there are certain risks and downsides that might come with it.

The market could change

Due to the large delay between the start of construction and completion, it is possible that there may be changes in the market conditions. This means the property value may decrease by the time the property is complete.

However, in most cases, this tends to go the other way, which means your property value will increase, your Loan to value ratio (LVR) will go down and subsequently give you a better chance of formal approval.

Changes in financial circumstances

It could take up to 2 years for your off the plan property to be complete and in that time it’s expected that your financial situation to remain unchanged. However, it is unrealistic that your situation will remain the same for 2 years.

This can be your personal financial income or a wider economic environment such as changes in interest rates that are out of your control. Therefore, it is important to account for situational changes and prepare a good buffer in case this happens.

The property may not meet your expectations

When you purchase a property off the plan, you are committing to something that has not yet been built, hence it will come with uncertainty. Buying off the plan restricts the ability for you to inspect the property like you would a fully completed project and therefore it can be more difficult to gauge if it fits your wants and needs.

As the building is incomplete, there is the possibility for construction delays when buying off the plan, this opens up the potential for increased costs or inconvenience.

Foreign investors can suffer from policy changes

In recent years, the Australian Government has been pushed politically to prohibit foreign investment in real estate. Recently, foreign buyers who were to buy off the plan 12-18 months ago can no longer qualify for a home loan at the time of settlement. In addition, June 2017 saw the 12-month deferral of stamp duty payments for off the plan purchases in New South Wales (NSW) scrapped for foreign investors.

Contracts for buying off-the-plan

An off the plan contract of sale should contain the following:

A Plan of Subdivision – A proposed plan that provides information on the number of lots in that proposed subdivision. Your off the plan contract should specify a particular lot that you are going to purchase.
Architectural Drawings – Drawing that shows the scope of what the construction of the home or commercial lot will look like to the buyer.
Design Specification – often prepared by the developer’s architect and will include a list of fixtures, fittings and finishes of the complete property. These can be subject to change so it is important to understand what you are buying.
Deposits & GST – GST payable will most likely be included in the price when you are buying off the plan.
Owners Corporation – Information of the owners’ corporation (or body corporate) should be disclosed when the plan of subdivision is registered.
Sunset Clause and extensions – A sunset clause is included in every off-the-plan contract. A clause of this type includes a deadline by which either the vendor or the purchaser can terminate the contract if the plan of subdivision is not registered.
Measurements and Floorplan – Your off the plan contract will also include a floorplan and detailed measurements of your property. You should ensure that these measurements are consistent.
Disclosure statement

The seller must also give you a disclosure statement that:

Gives their name and address
Identifies you as the buyer (by name and address)
Clearly identifies the land or unit you are buying
Puts in writing their claims or promises about a future certificate of title.

To identify the property, the developer must disclose:

the proposed number of the lot
the total area of the lot
the proposed orientation of the lot (by referring to the north).

How much deposit do you need?

Once you’ve found a development you love and have decided on the floor plan, a contract will be drawn up and sent to your solicitor. Your contract will outline exactly what you are buying, what your obligations are regarding the purchase and payment, as well as the developer’s responsibilities and obligations to you.

Your solicitor will go through all the key information in the contract with you before the contracts are entered. Make sure you have all your questions answered before you sign.

Once the contracts are signed, the developer will sign an identical contract and you will exchange them. This will be arranged through your solicitor. After the contracts, you need to pay a deposit. A deposit of 10% of the total purchase price is legally required, however often there are special conditions available.

Under certain circumstances, a developer may elect to accept a partial deposit of 5% or they may be willing to accept a $1000 holding deposit with the remainder of the deposit to be paid within a certain time frame – giving you additional time to save the money needed.

Typically, your deposit is paid into a trust account where it will be held until the building is completed and ready for settlement. However, you can also use deposit bonds and bank guarantees to make your deposit.

Things to consider before buying off the plan

As mentioned above, there are some instances where development doesn’t go ahead. You should get your deposit back if this happens, but by tying up your money you may have missed out on interest and capital gains through other investments

Things can be delayed, which may also tie up your money. Although banks and other lenders may offer conditional approval (finance in principle) for off-the-plan purchases before construction commences, they won’t actually loan you any money until at least the property is built and they have performed a valuation of the finished product and re-evaluated your financial situation.

Your ability to service the home loan and/or resell the property may be impacted if your financial situation changes. The property market may fall and interest rates may rise between the time you agree to buy and the time you actually purchase the property.

Therefore, here are several things you need to do before securing an off the plan purchase.

Hire a conveyancer or solicitor to go through the contract with you closely. Look for any unexpected costs or conditions that may affect you down the line. Also, look at what will happen should things not go to plan.
Look for any sunset clause in the contract of sale to see how long the developer has to finish the project.
Spend time researching the people involved in the project, such as the developer, builder, architect and financier. Is the DA approved? Are you confident that the developer will perform the job to the quality you expect?
Explore the surrounding location. Is it a good location with strong potential for growth – and is it the right type of property for the right area?
Make sure you know what brands are being used for things such as inclusions and finishes (e.g. the dishwasher and oven), as well as what alternative brands will be used if the first choice isn’t available.

Conclusion

In today’s market, more and more Australians are choosing off the plan apartments instead of houses due to the benefits that come with it. This can include affordability, convenient location or the ‘lock up and leave lifestyle.

Buying an apartment off-the-plan has many appealing features and benefits for both investors and home buyers, but there are also many important considerations to understand before signing a purchase contract.

With years of experience in assisting customers with off the plan purchases, our team at Liviti can provide you with tips and guides for the smoothes property purchasing journey you can get. Get in touch with our team today at (02) 9056 4311 or check out our off the plan property options here.

Questions To Ask When Buying Off The Plan

Lara Osborn on February 14, 2022

Deciding whether or not buying off the plan is the direction you would like to go in can be a rather daunting and tedious experience, especially for first home buyers.

To help de-mystify this subject, our experienced team at Liviti have compiled a list of questions you should ask when buying off the plan.

1. What is off the plan?

Pretty much, buying off the plan is when you sign a contract to purchase a property before the construction is complete or has even started. When purchasing an off the plan property, you won’t be able to see the completed product until it’s, well completed. So you can be quite dependent on floor plans, render images and display rooms.

Therefore, it is important that you conduct your own research as well as seek professional advice when securing an off the plan purchase to ensure you are making the right decision.

2. Why should I buy off the plan property?

There are many advantages to buying off the plan, the main one being that it can save you a lot more money than if you were to purchase an already established property. This is because a purchase price is agreed upon before the construction period and generally, only a small deposit is needed.

Some other financial benefits include:

Capital growth on your property prior to completion – the market price could grow significantly from the time you buy the project to the time it is complete.
Tax benefits can also be available for investors during this process that can be claimed on your tax return.

3. How much deposit do I require and is it secure?

The deposit required to purchase off the plan differs from person to person and their unique situations. Generally, a 10% deposit bond is required to secure an off the plan property. However, under the First Home Loan Deposit Scheme, only a 5% deposit is required by the buyer if they are buying their first home, while the remaining balance will be guaranteed by the Australian Government.

And yes, it’s secure!

The deposit is kept securely in a solicitor’s trust account during the construction period or until the sunset period expires that cannot be released by the developer.

4. What is the timeline between deposit and completion?

The timeline starts from when you put your deposit down to the end of the construction period, generally from 6 months to 3 years.

Don’t stress though, there are some advantages to having this gap in between. It can give you some more time to get your finances in order before you need to make any more payments and there’s the possibility of earning interest on the cash deposit you put down.

5. Will my apartment be similar to the floor plans and brochure?

Display units are what people generally trust most, as it presents the finishes and appliances that the completed apartment will hold.

However, other reliable documents include:

Floor plans – show the layout of the property to scale
Designs – emulates what the finished product will look like
Computer Generated Images or 3D tours – makes you feel as though you are actually walking through the completed apartment.

Often, a property contract will contain a clause entitling the developer to make minor changes to the floorplan and/or substitute unavailable products with similar ones. This is why it is very beneficial for you to work with a trusted developer whose project history you are aware of.

6. Are there any incentives to buy off the plan?

As aforementioned, there is an agreed-upon price prior to the completion of the building. If property prices in the area increase during the construction period, you could end up paying a lot less than it’s worth when you move in. What a steal!

This is definitely not the only incentive price-wise to buying off the plan – you could also save a lot of money if you are eligible for stamp duty concessions and through some government grants that may apply to first home buyers.

7. Will I be eligible for the First Home Owner Grant (FHOG)?

The First Home Owner Grant is available to those purchasing their first property, that they will then live in. Although the amount varies from state to state, in NSW you could be eligible for a $10,000 grant. You can check your eligibility and find out more here.

8. What tax benefits are there?

The two major tax benefits for investors when buying off the plan are depreciation savings and negative gearing.

Depreciation Savings

Depreciation savings are highest in the first year where you can claim on the building as well as the fittings and fixtures. It is favourable to use a reputable quantity surveyor (whose fees are tax-deductible by the way!) to create a depreciation schedule for you in order to ensure you are saving as much as possible during this time.

Negative Gearing

Negative gearing is a beneficial tax break for investors, especially those on a higher salary. It occurs when there is a shortfall where your mortgage costs are not entirely covered by your rent and the difference needs to be made up from your own pocket. It can be claimed against your tax return throughout the year from each pay or at the end of the year.

9. What is Strata?

Strata Levies are fees you need to pay to the Owners Corporation for the running costs of the building.

How much is strata?

There’s no fixed standard for strata fees. They tend to vary from scheme to scheme depending on how many communal facilities there are and other factors. In New South Wales, the average cost can be anywhere from 0.3% to 1.2% of the property’s value.

The different types of Strata Levies

Combined with the one payment are three different types:

Administrative Fund Levy – takes care of daily expenses such as cleaning, utility fees and facility management charges.
Sinking Fund or Capital Works Levy – finances large ongoing capital expenditures like anticipated expenses for exterior repairs and repainting.
Special Levy – takes care of unexpected costs to ensure the complex is safe to live in.

10. Is buying off the plan safe?

Yes, it is! It’s also often less volatile compared to other investment types. However, it’s important to carefully examine the risks associated with this process.

The Risks Involved

Unexpected delays
The possibility of the developer going bankrupt
The finished property might not directly align with your expectations
The sunset clause expires before the property is completed

By conducting research, seeking professional advice, being aware of your developer’s previous projects and ensuring it sits comfortably within your budget, you can avoid financial risks and disappointment surrounding the process.

11. When is the best time to buy off the plan?

There’s no real best time to buy a property off the plan. Ideally, you want to be buying within a market before the peak to capitalise on the growth.

However, if:

You are financially stable enough to buy a property in today’s market
You have your deposit ready

Then NOW is the best time to buy before the market goes up.

12. What happens if the market changes?

Market conditions and the interest rate are known to change rather sporadically. In the time a property is built, which usually takes at least a year, the rates could rise and conditions can change drastically. In order to reduce such a risk and avoid any major stress on your financial situation, it is important to ensure that the price of the property sits comfortably within your budget.

It is always a good idea to conduct a plan to mitigate risk and how you may approach any if they were to arise.

13. When is settlement?

Property settlement is a legal process where the ownership of a property is passed down to you from the seller and is assisted by both the seller’s and your legal and financial representatives.

The settlement date is set by the seller in the contract and while they can vary, usually, the settlement period is 30 to 90 days.

14. What is the sunset clause?

This is a statement in the contract that puts a time limit known as the sunset period, on the contract’s validity and states when the project needs to be completed by.

It is included to protect both the buyer and developer as if the property is not complete before the sunset period expires, a new contract is drawn up or the deposit is returned.

Conclusion

With a little bit of research, the right professional advice and adequate knowledge of your developer there are major benefits to purchasing off the plan up front and for many years after the purchase.

Working with a Property Consultant can also make this off the plan buying process far easier and our Property Consultants at Liviti are here to help you every step of the way. We deal with off the plan purchases every single day and thoroughly understand the property market and can find a suitable property tailored to your needs and requirements.

Why Buying Off The Plan Is Your Best Choice After Covid-19?

Lara Osborn on January 5, 2022

The pandemic has brought many new realisations to our everyday life. That includes what we purchase, and how we purchase them—including properties.

Property buying is a journey that contains many different options and buying an off-the-plan apartment has always been one of the wiser ones.

Especially at this time, it presents a brilliant opportunity for all home buyers, both first homeowners, and seasoned home-buying veterans.

The Benefits of Buying Off-The-Plan

The biggest advantage to purchasing an off-the-plan apartment is that as a home buyer, you are offered the unique opportunity to put down a fraction of the final cost for your home, often with no additional fees required until settlement.

This gives you the chance to do some financial planning and plan for this new responsibility. It is crucial for every home buyer to have a clear, long-term plan of action with money.

A property isn’t a small purchase, you’ll need to know exactly how this expense fits in your future to avoid unnecessary stress.

Buying property off-the-plan is an ideal way to do all that as it allows you time to consider your decision and make a move without the immediate, pressing financial obligations.

Chances ‘COVID Dip’ Presents

COVID-19 taught the property market a big lesson with the COVID dip. The housing market abruptly staggered downwards when the pandemic first struck and buyers and sellers were unsure of the future and afraid of transacting. Its effects can particularly be seen in the pricing of new off-the-plan property options.

So what should you do?

The decision to buy off the plan during COVID can be incredibly lucrative. It is important for you as a home buyer to know how to use this situation in your favour to get the most benefit possible; knowing how such information can bring you wealth can be incredibly beneficial.

How Off-The Plan Can Work Well For You

Off-the-plan property options can work very well with your needs. It could rise in value after you’ve entered a contract and become an investment opportunity as well.

1. The benefits you are eligible for

You can communicate with the developer to gain more information on residence requirements, homebuilder grant, homeowners grant, stamp duty concession, and all the third parties involved in this particular project before you enter into a contract.

It is always a good idea to consider your own personal information and situation when making a property-buying decision.

There are a lot of organisations, for example, the government, to help you get your dream deal. You just need to see what you are eligible for.

If you are a first home buyer, you should look into the first homeowner grant. Eligible first home buyers can access the $10,000 NSW First Home Owners Grant if the purchase price does not exceed $600,000.

2. Extra freedom

Buying a property this way gives you the freedom to communicate your wishes of a dream apartment straight to the developer so that your unique needs can be satisfied.

The development is still ongoing so you have a lot of room to express what you are after—what a dream! It’s a tempting perk no matter if you are a first home buyer or not.

You can choose a particular level and building and even apartment model. And the developer will make sure to identify any potential problems and notify you posthaste about any progressions. They’re as excited about your new apartment as you are!

What is Buying Off-the-Plan like?

Although the building is probably not completed yet for you to have a physical visit, developers, and construction companies have been creative with giving you a good idea of what your new apartment will look like.

The property and development sector is always quick to give flexible options for private and virtual inspections of the site.

These types of inspections are relatively common for off-the-plan developments and have proven to work very well for the buyer.

Off the plan buildings are brand new, meaning they can often come with stamp duty savings and other grants. Don’t be shy to contact the developer to get more details on how the government can help you save some extra money

Many developers are also offering numerous incentives to assist buyers in the process of purchasing an off-the-plan property, especially during COVID-19. Try your best to contact as many different projects as possible to conduct thorough research.

These can include schemes such as rebates, discounts, and even upgrade packages. With no one spending money on brunch (shall we also say, avocado toast?) now is the best time to buy off the plan.

All in All…

If ‘Savings’ & ‘Discount’ have your name written on all of them, and with COVID-19 not going anywhere anytime soon, you should consider buying off the plan.

New apartments that are purchased off the plan are competitively priced with lower minimum deposits, and can often appreciate in value before the development is even complete.

Off-the-plan apartments are often concentrated in high-demand suburbs, with close proximity to shopping hubs, public transport and local amenities.

Moreover, they are able to offer more upfront security options, with many locked to resident-only access.

When buying off the plan, you might actually end up with more cash up your sleeve availing grants and schemes by developers and both State & Federal Governments. Address your needs, do your due diligence and use this opportunity to make the most out of your present.

Want to know more?

Purchasing a property isn’t easy and we are here to assist all home buyers to sign their dream real estate contract. We can arrange a phone call, a virtual meeting, or an in-person private appointment with you to answer any queries about buying off the plan.

Moreover, exploring 3D Floor plans can be a good option as well for prospective buyers who might want to look at the layout of a property remotely during the pandemic.

For further information on how to get into the Sydney property market, get in touch with Liviti on (02) 9056 4311 or check out what apartments are currently available. Also, you can always fill in this application form to register your interest.

The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation, or needs.

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How To Calculate Capital Gain Tax

1. Discount Method

2. Indexation Method

Capital Gains Tax For Foreign Residents

Tax Planning For Off-The-Plan Apartment Purchasing

How Can You Avoid Paying Capital Gains Tax?

Selling An Off-The-Plan Property Before Settlement

Can You Sell Off-The-Plan Properties Before Settlement?

How To Sell Off-The-Plan Property Before Settlement?

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Where To Find Information On Capital Gains Tax Selling Off-The-Plan?

What Is An Off The Plan Transaction?

Off The Plan Stamp Duty Concessions

What Is Stamp Duty?

What Off The Plan Concession Is Available With Stamp Duty?

Who Is Eligible For Off-The-Plan Concessions?

How to Apply for Off-The-Plan Stamp Duty Concession

New Requirements For Off-The-Plan Contracts To Know Before Your Contract Date

Is stamp duty payable on off the plan purchases in NSW?

Studio Apartment Meaning

#1 Studio apartment meaning & configuration

#2 Studio apartment size?

#3 Common Studio apartment floorplan

#4 Studio apartment Price

Studio Apartments Vs. One-Bedroom Apartments

Pros and Cons of buying a Studio apartment

Pros

Cons

Things to consider when choosing a Studio apartment

Making the Most of Your Space

How To Organize A Studio Apartment

Your Kitchen Area

Dividing It Up

Sliding doors

Room divider curtains

Bookshelves

What do you think?

House Appreciates and Apartment depreciate?

Houses as the only Investment option?

The current market condition

Why does an Apartment increase in value?

Capital growth vs cash flow

Accelerating Appreciation In Apartments

Difference Between Investing in House and Apartment

Pros of investing in a House

1. Higher capital growth

2. Opportunities to renovate and subdivide

Cons of investing in a House

1. Price

2. Lower rental yield

3. Maintenance costs and upkeep

Pros of investing in an Apartment

1. Affordable options

2. Supply and demand

3. Maintenance costs and upkeep

Cons of investing in an Apartment

1. Lower land value

2. Lack of control

3. Future developments

Tips for Choosing a Property That Will Appreciate in Value

Location

Property aspect

Property level

Parking adds value

Builder quality

Conclusion

What is off-the-plan property?

Buying off the plan – From deposit to Settlement

Paying your deposit and signing the contract

Your home under constructed

Pre – Settlement & Valuations

Settlement

Why do you save more money buying off the plan?

Securing a Loan for an Off the plan property