Building a New Home
It’s a significant decision, so having someone to guide you through it is beneficial.
New home sales are back on the rise, fuelled in part by manMany investors and owner-occupiers are buying off the plan, which is helping to boost new house sales.The idea is simple: pay a deposit (typically 10%) to help the developer fund construction and then pay the remainder when the project is finished.Apartments are being built at a rapid pace in capital cities and attractive vacation destinations, with the expectation that property prices would climb, providing buyers with a healthy cash gain when they take possession.
Developers sell off the plan to entice as many sales pledges as possible, allowing them to receive the necessary financing from their lender.Prices are established at current market rates, with incentives being offered to encourage buyers, because customers are basically turning over their deposit for the promise of an apartment they won’t see for one to two years (or more).This increases the possibility for capital gains, but as we have seen in previous years, price increases are never guaranteed.
In exchange for your deposit, the developer should give a contract that describes the specifics of your purchase, the development’s completion date, and the deadline for making a decision on whether or not the construction will proceed.Whether or whether adequate funds have been secured is usually the deciding factor.You should be entitled to a return of your deposit if the developer pulls the pin or misses the decision date, but this is dependent on the terms of the sale contract, so read it carefully and get financial or legal advice if necessary.The property is not required to be paid in full until settlement, which is normally one to three months after completion.
While buying off the plan appears to be a good investment on paper, getting in on the ground floor of a new development is not always a sure thing.Haven examines how to make the most of the opportunity while avoiding frequent traps.
Common questions for Home Builders
One of the most significant advantages of buying off the plan is the amount of time it saves you.You will have at least 12 months, if not more, to settle, unlike traditional property acquisitions, which have very short windows to round up the complete finance.Buyers with foresight will take advantage of the extra time to save money and lower their debt.
If you want a new home but don’t want to build it yourself, an off-the-plan purchase could be the right solution. Although you won’t have as much control over the design as you would with a custom-built home, most off-the-plan developments allow you to customise the finishes and fittings. Check your contract to see what you can customise and if there are any additional expenses.First-home-buyer advantage
Various incentives are still being offered to first-time homebuyers, which may increase the appeal of buying off the plan.
Concessions differ by state and territory, and some have been reduced since January 1, so check your state or territory’s website for the most up-to-date information on grants and exemptions.You can also use www.stampdutycalculator.com.au to see if you qualify for stamp duty discounts on new homes.
Concessions differ by state and territory, and some have been reduced since January 1, so check your state or territory’s website for the most up-to-date information on grants and exemptions.You can also use www.stampdutycalculator.com.au to see if you qualify for stamp duty discounts on new homes.
Due to the tax* advantages of depreciation on new properties and rental guarantees, off-the-plan flats are frequently actively marketed to investors.The amount of tax savings will vary depending on your specific circumstances, but the bigger the depreciation allowance for the building and fittings, the better.
For a limited time, investors may be provided significant rental guarantees.Before accepting the developer’s demands, make sure you conduct your study on rental returns on similar properties in the region.Be sceptical of rental guarantees that are too good to be true.To entice investors, builders may occasionally offer a high rental income, put the cost into the house price, and then subsidise any gap themselves for a limited time.When the rental guarantee expires, you may discover that the actual market rent is far less than what you were promised.If you’re buying a house to invest in, make sure you have the choice to manage it yourself or with a property management from the moment you take possession.
For a limited time, investors may be provided significant rental guarantees.Before accepting the developer’s demands, make sure you conduct your study on rental returns on similar properties in the region.Be sceptical of rental guarantees that are too good to be true.To entice investors, builders may occasionally offer a high rental income, put the cost into the house price, and then subsidise any gap themselves for a limited time.When the rental guarantee expires, you may discover that the actual market rent is far less than what you were promised.If you’re buying a house to invest in, make sure you have the choice to manage it yourself or with a property management from the moment you take possession.
When they hand over their money in return for a floor plan, many buyers are caught up in a wave of escalating home prices.Property has historically been a stable long-term performer, although economic conditions can cause prices to plateau or even decrease.
Buyers should also be aware of oversupply, which could lower the value of their home.
If you’re buying off the plan, make sure you think about the overall picture.Examine how many other developments are planned in the region, as well as whether any increases in apartment numbers are justified by new or upgraded infrastructure, such as transportation routes, commercial districts, universities, or hospitals.
Make sure you buy from a trustworthy builder and do your homework on their previous work.
Do they choose reputable contractors?
Are their projects completed on time?
Make a point of visiting some of their projects to get a firsthand look at the finished outcome.
- Investing in the proper people to have on board before making such a significant investment is money well spent.Before you sign any contract, make sure you receive competent legal guidance and consult with your financial advisor or tax specialist to ensure you’re getting the best advice possible from the start.
- Ascertain that your payment will be repaid if the project does not proceed by a specific deadline.
- As much information as possible regarding the end product should be included in the contract.
- Make sure you know what finishes and fixtures you can change.
- Find out if you can sell your home while it’s being built in case your circumstances change.
- Inquire about seeing the construction site during the process.
- Consult your mortgage broker for more information.
