Nila Sweeney

Some people camp out overnight to secure concert tickets to their favourite rock band. But when Rachel Anderson and partner Alan Edwards setup overnight in Sydney's northwest, they had another prize in mind - their dream home.

When land came available recently in The Ponds, a new Sydney suburb, the young couple made sure they didn't miss out. The night before the land was released, they brought some sleeping mats, a portable DVD player, and set up for a long night. Forecasts of rain were of no matter.

"It was 36 degrees Celsius with a massive wind all day," says Anderson. "The night got cold around 8 p.m., but it cleared up in the morning. Lucky it did not rain as it was forecasted to do so."

Although they were first to the site that night, they weren't alone. About half a dozen others joined them soon after, equally anxious to secure locations within the development.

For Anderson, 32, the overnight measure was to protect against the reoccurrence of a disappointing experience that happened to her and Edwards a year earlier.

In late 2007, Anderson and Edwards had started looking to buy some land and build their first home. Living with her parents in Glenhaven, they were looking to buy a large enough house where they could eventually start a family, but affordable enough to fit their budget.

However, the couple arrived a bit too late at the land release site in The Ponds. There were 30 people in the queue and no longer any land available by the time they reached the front.

"I was devastated," recalls Anderson, 32. With that option gone, they ended up holding off other serious considerations for the time being.

Better off buying now than a year ago

As it turns out, Anderson and Edwards were likely better off missing out, at least financially. With the latest boosts to the first home Owner Grant, they've ended up gaining an additional $17,000 by waiting until recently to return to their home ownership dreams. Keeping in mind interest rates were significantly higher then and home prices in Sydney have been level at best, it's looking even luckier to have waited.

Anderson says the news of the government incentives were what got her and Edwards so motivated to secure a land package this time around.

"It pushed our timing up," she says. "We made sure we got our butts in gear this time around."

Tony Pizzolato, Australand's general manager for NSW residential, says many other young couples have been spurred into buying action lately as well.

"These people at The Ponds, a lot of them have been sitting on the sidelines for some time now," he says.

Anderson and Edwards ended up buying 455 square meters of land for $275,000, combining it with a four bedroom plus study house package designed by Eden Brae Homes for a total of $500,000.

One of the keys to choosing The Ponds was its abundant surrounding green space, as well as proximity to work in Blacktown, says Anderson. She also liked that no home on the same block can have the same façade as another, making each home original. She didn't want a development where every house was the same.

The development also has some aesthetic requirements, including no garage can be in front of a house, and certain design standards must be met as well.

"You don't want to spend $500,000 on a home and then find out the house next door is a dump," says Anderson.

But one of the key features was also the price. Anderson says if she had looked closer to the city or in nearby Glenhaven where she lives now with her parents, there would have been little hope of finding a house of a similar size within her price range.

"We couldn't get anything like that if we looked in the area we are in living now," she says. "But I think we got a good value for what we got."

Although they've put a deposit down, the couple still has some waiting to do before they can actually move in.

"It's still nerve wracking," admits Anderson.

She and Edwards plan to directly put any savings they get from the government back into their mortgage.

House and land package price: $500,000
House details: Four bedrooms plus study
Land details: 455 square meters
Location: The Ponds, NSW
First Home Owner savings: $24,000 grant combined from federal and state government for purchasing a new home.

Risks and rewards of buying off the plan

• Project may not proceed at all
• The finished product may not be what you expected
• Expected capital growth doesn't eventuate or may fall
• Developer may go into liquidation which stalls the project and ties up your deposit

• Potential to buy cheaply, and that the property might show strong capital gain within a year or two.
• You can limit the stamp duty tax by needing to only pay for the value of the vacant land if done before any construction.
• First home buyers grant and boost equal as much as $21,000 to $24,000 in government incentives for any new property, as long as it is complete by 31 December 2010.
• Allows extra time to save, as only deposit is required when you sign the contract.
• Often more affordable than buying an existing preoccupied home due to the fact it is further out from the city.

Do's and Don'ts when buying off the plan

• obtain approval in principle for financing before you rush into a purchase
• save as much money as you can - the larger your deposit, the more chance you have of securing a loan
• do some research into the developer
• attempt to purchase in a building that is mainly owner-occupied
• exercise your right to renege on the purchase if the developer doesn't meet the various clauses in the contract
• get an independent evaluation before purchasing properties with a rental guarantee
• check the dimensions of the property carefully and make sure you know exactly how big or, more often, how small it will actually be 


• assume that the project will be finished on time
• assume you'll make a quick profit from "flicking on" the property
• assume that you'll be able to borrow the entire balance owing (plus costs as well)
• overcommit yourself just because you may be able to afford the deposit - be conservative in your estimations
• assume that interest rates will remain the same - they could be markedly higher, affecting your repayments

What to look out for when buying off the plan

1. Settlement period
This refers to the legal handover and usually involves the final payment.

If you fail to meet settlement, then under some circumstances the sellers have the right to cancel the contract with you and to re-list the property for sale. This will be at a higher price than you first agreed to if the market has moved on during the several months that have passed between the offer and the settlement date.

This might seem like an unlikely scenario, however sometimes delays in settlement are beyond the control of the buyer. If you require a loan to purchase the property the banks may not be able to offer finance with such a long settlement period. At a time closer to settlement you would have to reapply for finance which may not be offered.

Even if you have paid the stamp duty on the land, had the contract stamped and sold another property to move into your dream home, it might come unstuck at an overdue settlement which isn't directly your fault.

At this point the sellers and developers could cancel the contract and re-list the property for sale.

2. Sunset clauses
For anyone thinking of buying land or an apartment from an off-the-plan development, it's wise to enquire about any sunset clauses in the contract.

Does it contain any circumstances that could give rise to the seller's contractual right to withdraw and terminate the contract, and what are they?

In other words, are there any special conditions in the contract that you as the buyer should know about before signing anything?

It's important to take time to read and understand the contract to ensure you make an informed decision and a confident purchase.

Source: REIWA

* Article republished from the February, 2009 issue of Your Mortgage magazine.

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