Buying off the plan: benefits and risks of buying property before it’s built

When you buy off the plan, you’re buying a property that hasn’t been built or is in the process of being built – these properties tend to be apartment complexes and housing developments.

Whether you’re a first home buyer or an investor, there are advantages and disadvantages to weigh up before committing to buy a property off the plan. In this guide, we’ll examine what you should consider along with the pros and cons.

Buying off the plan means purchasing a property before it has been built, or is in the process of being built.

When you buy off the plan, your purchasing decision depends on viewing floor plans and artist’s impressions instead of seeing a finished property firsthand, which brings with it its own set of risks and benefits.

Having your money tied up

When you buy off the plan, you need to pay a deposit to secure the property and help the developer pay for its construction expenses. Unlike purchasing property at sale or auction, you may have to wait several months or even years before off-the-plan property is completed.

Seek legal advice or professional guidance

Contracts can be complex when buying property off the plan, so strongly consider seeking advice from a conveyancer or solicitor before making any decisions.

Fluctuating market prices

The property market can change from the time you first secure the property to when construction is complete. Once the property is built, it may receive a valuation by a bank or lender that is less than what was advertised by the property developer. This can leave you at risk of overpaying for a property.

Changes to the building and finishes

The floor plan or finishes can change as construction progresses, and buyers may have little room for recourse. For example, in New South Wales , buyers typically must be notified of changes that make what was disclosed inaccurate in a ‘material particular’.

A material particular is a change that will adversely affect the ‘use or enjoyment’ of the property being purchased.

Pros

• Time to prepare yourself financially: Buying off the plan can give you more time to prepare financially. You’ll often only need a 10% deposit to secure an off-the-plan property, giving you time to save another 10% or more during the construction.
• Developers may offer discounted rates: Developers can try to attract buyers to an off-the-plan development by offering properties at a competitive price, and potentially for less than an apartment or house that is already built.
• Stamp duty concessions: Some states and territories offer concessions to you when buying off the plan. For example, you may be able to defer paying stamp duty for up to 12 months when buying off the plan in New South Wales.
• Buyer protections: Buyer protections vary across states and territories, so you may want to speak with a conveyancer or solicitor to understand what your protections and rights are. In New South Wales, for example, there is a 10 business day cooling off period when buying off the plan.
• Property value may increase: The property’s value may increase from the time that you pay the deposit up until when construction has finished. However this is not guaranteed, and the property’s value also has the potential to decrease in value.

Cons

• Builder insolvency: There is risk when buying off the plan that the builder constructing your home could go insolvent. This can either significantly delay the project, or leave the property unfinished. It’s a genuine risk – according to ASIC , there were 2,975 insolvencies in the construction industry in 2023-24.
• Waiting for loan approval: You’re typically required to pay a 10% deposit when buying off the plan, with the remaining balance not due until settlement when the property is finished. There is a risk that your borrowing power could diminish during construction, and you may not be approved for the home loan amount you need.
• Investors offloading: When a large development finishes, some investors may try to cash in and sell at the same time. An oversupply of similar apartments could ultimately affect the value of your property.
• Finished property may be different: Once the property is finished, it could be different from the artist’s impression you were shown when you first secured it. Changes could be made to the exterior or interior of the building during the construction process, or some of the smaller finishes may be different.
• A lot of unknowns: Buying off the plan brings with it a lot of unknowns, and the lack of clarity around timing can generally make the process risky. For example, there could be lack of clarity on when the project will be completed, and any construction delays can add to this uncertainty. There can also be ambiguity around subdivision of the development land, registration of the strata plan, and so on.

Buying off the plan means buying property before it’s been completed, or before the project is even off the ground. This brings with it its own set of risks and benefits, and we strongly suggest you speak with a conveyancer or solicitor before making any buying decisions.

Some of the advantages of buying off the plan can include having more time to prepare yourself financially, access to stamp duty concessions and the potential for the developer to attract buyers by offering competitively priced apartments or houses.

However, buying off the plan also has plenty of disadvantages, such as the risk of the builder going into insolvency during construction, or the finished property not matching the artist’s impression you originally bought into. There can also be lots of unknowns when buying off the plan, including when the project will be finished or how the strata plan will work.