Off-plan purchase offers investors the ability to achieve maximum returns on investment by buying at the lowest possible price.
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In order to limit financial risk and debts, the developers of any project will wish to sell units off-plan. They understand that if buyers cannot see a physical property at the beginning, they will demand a lower price, while relying purely on the developer’s reputation, the property location, artistic impressions and computer simulations on which to base their decision to purchase.
By the time the property is finished, prices rise due to market forces and the greater general appeal of a completely finished property that is ready to move into. Investors therefore sell the property on to another property purchaser and in doing so, enjoy some excellent returns whilst never having paid the full purchase price. Alternatively, many investors keep their property for a number of years, meanwhile receiving excellent rental income and often enjoying a beautiful holiday home. Over this time the value of their property increases steadily.
Investors should however exercise due diligence and choose wisely, making sure that the property is located in an area where they will resell quickly and easily or where there is a high rental demand for their buy-to-let option. With an off-plan investments, even in the “worst case” scenario if the property cannot be sold upon completion, the final balance due can often be financed by the developer himself, typically over 4 years or more. Furthermore, the rental income may pay off the finance of this loan and yield further eventual return on your investment property in Australia.
Off-Plan Property in Australia
Off-plan properties in Australia have provided huge returns, particularly within cities such as Melbourne and Sydney as well as those located in coastal regions where returns can be around 30% per annum. The growth in apartment, units and townhouses has been dramatic and off-plan is still a profitable investment option in Australia.
Benefits of buying off-plan in Australia:
- Only 10% deposit is required to secure your chosen property. This can be invested into an interest bearing account or be borrowed using products like deposit power or bank guarantees.
- You do not settle until after the development has been completed and title is issued. If the development is not due to be completed for say 12 months, then you have secured a property at today’s price but don’t really start paying for it for 12 months. It is not uncommon for an off-plan property to be bought and sold again prior to completion.
- Many developments are built as holiday accommodation. These provide better security, higher income potential and the opportunity to take holidays in your unit every year if you so choose.
- Good tax incentives which, with good advice, will increase your overall investment
Many developers in Australia will offer beneficial payment schemes. Through the IPIN Global (IPIN) we carefully vet these offers and work with only the most reputable and secure development companies that operate in your favoured location. Payment schemes currently on offer allow you to buy property off-plan with down payments of around 10% of the property price.
How can property be cheaper if bought off-plan – How does it work?
In addition to the excellent off-plan price, some highly beneficial finance structures are in place. Meanwhile you will normally pay only a 10% deposit, while the rest is payable upon completion. This could be funded by a mortgage (view our mortgages in Australia section).
If you decide to invest in off-plan property, you will need to decide which strategy you will adopt to achieve your return on investment. Our experts will help you to choose the most appropriate plan, creating an investment programme suitable to your needs, whether this is "pure investment" or a "buy-to-let" strategy (view our buy-to-let investment Australia section). We will also assist you in finding the most appropriate location to suit your investment needs.
Maximizing Profit From Off-Plan Investment in Australia
The Process of Price Increase
Prices never remain low for long and, as construction progresses, prices begin to rise steadily. In Australia, as in any other market, it is important to buy as soon as possible during the early stages of development when prices remain very competitive but are already beginning to rise. Early investors will invariably see the greatest returns.
Purchasing the best units
Early purchase allows investors to choose the most sought after properties on any given development. The best units always offer higher capital appreciation in the smallest time frame and can often demand the greatest rental incomes. Penthouses are often firm favourites.
Price increases as development matures
As the development begins to be constructed, the value of the units begins to rise. A completed show home is normally available for viewing at this stage, while buyers are taking less of a risk as they now do not need to rely completely on plans.
Price appreciates as more units sell
As more units are sold, the price of the remaining units rises. Units sell faster when buyers are able to physically see them. There is often a phase payment structure in place which mirrors the increasing value of the properties. To the early investor this means that, should you decide to sell your property, it will be worth considerably more at this stage than when you made your initial purchase and paid the deposit.
Investors are currently making some excellent choices about investment property in Australia
and we are dedicated to helping you to pick the best property investment options suitable to your particular needs. In this way, you can generate personal wealth through safe and intelligent off-plan investment.