Look before you leap off the plan
There are many benefits to buying an apartment off the plan but it pays to do your homework before signing on the dotted line, according to Real Estate Institute of WA president David Airey.
“Off-the-plan sales refer to property purchases that take place before the Certificate of Title has been issued, ” he said.
“It means buying on trust, albeit with a legal contract in place.
“This type of sale can have its advantages and many people have benefited from this method of purchase. However, it’s very important that buyers read the fine print in these contracts to know exactly what they’re buying and what their rights and reponsibilities are.”
This included knowing the settlement period and the penalties of not meeting it, as well as if the contract contained sunset clauses.
“Put simply, are there any special conditions in the contract that you as the buyer should know about before signing anything, ” he said.
Consumer Protection Commissioner Anne Driscoll said the biggest risk of this type of sale was if the project failed to proceed as planned.
“When buying off the plan it is also important to know the status of any planning approvals, the likely timelines for these being settled and what happens if approvals are not granted within acceptable periods, ” she said.
“Off-the-plan buyers need to consider whether changing circumstances might affect their ability to honour the contract. There might be changes in the buyer’s financial situation, interest rates may rise and property values may fall — all factors that will affect their ability to get finance when settlement time comes many months or even years down the track.”
Match managing director Lloyd Clark said the benefits of a good off-the-plan purchase were immeasurable, as long as the buyer got what they signed up for.
He said these ranged from having the pick of the best apartments to the financial gain of securing a property for 10 per cent of its purchase price, with the balance only payable on completion.
“As apartment projects generally take around 12-18 months to build, the property market can deliver an average annual growth of around 8-10 per cent before settlement is finalised, ” he said.
“If you get it right, buying an apartment off the plan can be highly rewarding as a successful financial and lifestyle investment.”
Psaros managing director Mike Enslin agreed, adding buyers were able to buy property at current market prices.
“By buying off the plan, purchasers are buying property at today’s prices rather than at some point in the future when property values are likely to have increased, ” he said.
“It also gives the purchaser flexibility on changing the layout within reason as well as changing the internal finishing and furnishings.”
Mr Enslin said his best advice was for buyers to choose a reputable developer.
“Choose your developer before you choose your apartment, ” he said.
“Ensure that the developer you are buying the property from has a proven track record, can show you a finished product and essentially deliver on what they are proposing.
“Make sure you read and understand the obligations of the buyer as set out in the contract of sale and ask questions of the sales agent. Everything should be transparent so any question should be answered.”
Did you know?
Developers sell apartments off the plan to gauge whether it is worth the risk of proceeding with the project, according to Psaros managing director Mike Enslin. “Off-the-plan sales are usually a bank requirement where a certain proportion of the apartments must be sold in order to obtain finance,” he said. “Developers prefer to have a proportion of the properties sold before commencing construction even if they are not obtaining bank finance as it helps to de-risk the project.”
Match managing director Lloyd Clark said prudent developers generally sold half of the project before starting construction. “In this vein, strong pre-sales create a great safety net for buyers looking for positive market indicators — high demand in the early stages of a project often equates to good capital growth, ” he said.
HELP AT HAND
Consumer Protection recently released a guide for people considering buying property off the plan. It contains useful tips on the pros and cons of this type of sale as well the questions to ask before signing a contract. Find it at commerce.wa.gov.au/buying_off_the_plan.
© The West Australian
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