Buying off the plan
For many first home buyers, and even those looking to buy an investment property, buying off the plan can be an attractive proposition; Not only do you get a brand new property, built to the latest building code, but the price is fixed at the time of purchase.
However, not all developments are created equal, and the array of options on the market can be daunting. In this blog, we cover everything you need to know before you take the plunge.
Location location location
If you are buying off plans, location is just as important, if not more than when buying an existing property. You’ll need to consider the cafes, shops, schools, transport and amenities in the area and keep the quality of the location in mind. Does the area have a community feel? Sometimes developments are built on old commercial/industrial land and miss that sense of community.
Are you going to get plenty of natural light? What about sun? Will your apartment be blocked by a future development? Do you want views? If so, city or water? Think about these things carefully because you can’t change a view. Obviously the price will increase as the view gets better. North facing homes with plenty of windows are usually the best.
A home that stands out
Make sure you’re buying something with unique features, that isn’t the same as all the other developments out there these days. This includes size, quality, location, views and carparking. Make sure you’re buying into something that will appeal to future tenants and buyers.
Early bird gets the worm
When buying off the plans, you can often acquire the exact property of your choice, as opposed to having to pick from what is left which may not meet your exact requirements. By buying at this early stage, you have the opportunity to choose the best property, with the best location and views.
When you initially commit to an off-the-plan property, you might not fully understand the extent to which sound will travel in and out of it. The minimum according to building regulations is a sound transmission class (STC) of 55 and no less, but it’s always best to find something with a higher rating if possible. 65 STC/IIC is great and will make a huge difference to the enjoyment of your space.
Size and layout
Make sure you understand how big your apartment or townhouse is actually going to be. Check the square meterage. Remember this will include ‘wasted space’ like hallways and cupboards. Check all the details - fixtures and fittings, wardrobes, floor finishes, balconies, parking and communal spaces - carefully.
To protect yourself and ensure the developer delivers as promised, do your due diligence. Research the company and its previous developments and projects. Be wary if the developer doesn't own the land and hasn't yet got a consent. With the exception of apartment developers, that typically means they don't have much capital. Make sure you thoroughly investigate the body corporate; check that the annual fees are realistic and will cover expected maintenance.
Contract and legal advice
Buying off the plan is a complex process that can be risky if you don’t have your wits about you. Make sure you use a lawyer that understands development sale and purchase agreements - they are different. Your lawyer should know all of the shortfalls. The S&P Agreement will have special conditions around the developer's ability to get resource consent and get development funding by a certain date. Unlike a traditional build contract where the buyer is involved in all building decisions. with a development you are buying the end product. Developers therefore need to maintain control of the build process and have the flexibility to make decisions. For example, the contract will always give the Developer the ability to alter the floor plan by up to 5% during build. Other changes they could make include the layout, the materials to be used, and any finishes. Be aware that what you see in those first glossy brochures may not be exactly what you get once your property is completed!
Be aware, that you’ll be required to pay a deposit up front and show that you have the necessary finance in place to pay the balance due on completion. Typically you will need to pay a 10% deposit. Check that your deposit is held in a third party’s trust account (a lawyer or solicitor) so you earn interest on that money. Your deposit cannot be used to fund the development, and most developments will only proceed once a certain number of units have been sold off the plan. If the property market is favourable during the construction of your property, you could potentially make a profit on it between the time of paying your deposit and the final instalment.
To round it up
As you can see, buying off the plan can be a complex undertaking. But with the right advice, a lot of research and a little caution, your new build purchase might just be your best yet.
Ready to take the plunge?