Q. Is buying a property off the plan a safe option for my first home? What sort of research do I need to do?
A. Every different type of property comes with its own risks, which is why research is so important. Buying off the plan can be a good alternative option to get into the property market for several reasons. Some buyers like to purchase off the plan for capital gain. By the time the construction is finished, the property may have increased in value and then you can either sell for a profit or charge a higher rent. However, it is important not to assume that the property value will go up.
Buying off the plan can also give you, as a first home buyer, extra time to save more money to put towards your home loan etc. before settlement.
However with potential benefits also come potential risks. Just as a property can easily increase in value, it can also decrease. Some buyers have been caught out when their off the plan property decreased below their purchase price and therefore they didn’t receive as high a rental return as they would have hoped for. Therefore, you will need to carefully assess the property market to see where it is heading and what the demand is like in the area.
Another risk is that the project could be abandoned if the developer goes bankrupt. So before signing the dotted line, make sure you check the developer’s experience and qualifications as well as what guarantees are available if the project isn’t completed.