The past year has seen a resurgence of residential property developments coming to the real estate market – bringing with them dozens of opportunities to buy apartments ‘off the plans’ .
Off the – plans, that is – buying an apartment before it is completed, and in many cases, before construction work even begins. Purchasers looking to secure a dwelling ‘off plan’ can benefit from getting in ahead of the competition, although there several practices which would-be buyers should be weary of to avoid getting ‘burnt’ from the process.
As with any property transaction, it is imperative that potential buyers seek their own legal and financial advice before proceeding to buy off plan.
Buying off the plans is securing a property - typically an apartment, townhouse or terraced house - before construction has taken place, and therefore there is no physical property to view.
As part of financiers’ lending policies, it is necessary that developers secure a certain amount of pre-sales before a development can proceed and mortgage lending is approved. Hence why off the plans sales programmes are launched ahead of construction.
With any property purchase, buyers must ensure they have the financial capacity to complete the transaction. The necessary deposit tends to vary from project to project however generally speaking, the common amount has been 10 percent deposit with the remainder payable at the completion of the project.
Buyers of off the plan projects get to live in a brand new premises when the apartment is completed. All the mod’-con’ appliances and fixtures are provided without having to go through the relevant administrative and compliance processes, or the costs of a renovation.
Some people may like the flexibility of committing now to a future abode or investment vehicle, with only a down-payment, and the remainder to be paid later.
First home buyers may look to circumnavigate the Loan-to-Value Ratio rules which limit banks to having no more than 10 per cent of their new residential mortgage lending on deposits of less than 20 per cent.
New builds such as apartment complexes were later exempted from the LVR restrictions providing, at the point of sale, construction has either not begun or is at an early stage.
Buying off plan also provides buyers with the opportunity to ride any uplift in the property market during the intervening period between when deposits are paid, and final instalments are due.
The risk of buying an apartment off plan is the ‘unknown’. Therefore, be prepared to expect the unexpected. Buying off the plans works well for people who can visualise a finished product. Many developers create a showhome or showroom to enable potential buyers to see and feel what their property will be like on completion.
Money invested in the project is safeguarded by compliance criteria to ensure security. Any monies deposited for developments should be held in a solicitors
For further assurance, it is advisable to use a trusted developer which has a track history of completed projects. Ask the developers’ representative, usually a registered real estate salesperson, for their previous projects. Go and visit the owners of dwellings within those projects and get personal referrals on how they found their experience, and the condition of the project now.
If the developer doesn’t have a track record, find out what suppliers they are using. Again, any reputable sales person should be prepared to give you this information. Ask those suppliers if the construction and project managers of the building are reputable? or have any previous track record.
Also ask the real estate salesperson if the developer is personally investing in the project – both financially, or actually living in one of the dwellings on completion.
Make sure you take written or recorded notes of all your conversations with either the real estate salesperson or the developers’ representatives.
Depending on the scope of the project, it can take one to three years to see the apartment development through to completion. Make sure the scheduled completion dates work for you.
While there are regulations in place to hold the developer accountable for timeframes regarding completion, your legal representative may wish to insert penalty clauses if work is not completed to your schedule.
The best piece of advice when buying an apartment off the plans is ensuring that you have as much information as possible and that all your dealings with the vendor and their representative are beyond reproach. Your legal and financial advisors can assist to ensure you are protected.