Buying property “off the plan” involves buying a property that has not been constructed yet, or land that has not yet been developed. Although the process is somewhat different to the purchase of established property, it has its advantages. For instance, there are certain tax concessions available to purchasers of off the plan property that do not apply to other property. However, there are also risks of which potential purchasers need to be aware.

The Process

The first step in the process of buying an off the plan property is to find a property development that you like. You should then look at brochures and information about the development to help you decide if you want to buy a property there. While you are deciding you should have an idea of how much you can afford to spend. Part of this might include getting pre-approval for a bank loan.

Once you have decided on the property you want to buy, some developers will allow you to pay a non-refundable reservation administration fee, usually around $500-$1,000. This takes the property off the market while you finalise your choice of property.

Following this, a contract will be sent to your solicitor or conveyancer, who will advise you on the terms and conditions of the contract. Once you have understood these and you are satisfied with them, it is time to sign the contract. Generally, part of the deposit is paid at the time you sign the contract, with the balance due at a later date specified in the contract.

The rest of the purchase price will be paid at settlement. With off the plan property, settlement can take place a long time after you sign the contract. Sometimes, a specific settlement date will be set out in the contract. If not, the contract will usually specify that settlement is due 14 days after the plans of the property are registered at the Land Titles Office, or after a Certificate of Occupancy is issued (whichever is later).

Once settlement takes place, your purchase will be complete and you will be registered as the owner of the property.

Grants and Concessions

First Home Owner Grant

If this is your first time buying a property, you may be eligible for the First Home Owner Grant (‘FHOG’). For contracts signed after 1 July 2017 a $10,000 FHOG is available when you buy or build your first new home, or $20,000 if the home is built in regional Victoria.

There are criteria you must meet to be eligible to receive the FHOG. You must have signed a contract for a new home, or for a home that is yet to be built. The FHOG applies to property that is less than five years old, with a value of less than $750,000. You must live in the property as your principal place of residence (PPR) for at least 12 months, commencing within 12 months of settlement or completion of construction.

If the property you decide to buy matches these criteria, you will be eligible to receive the FHOG.

First Home Buyer Duty Concession or Exemption

Purchasers who receive the FHOG are also eligible for a first home buyer duty exemption or concession. Unlike the FHOG however, this exemption or concession is also available for the purchase of established homes. If the property has a dutiable value of $600,000 or less, a duty exemption will apply, meaning that you will not have to pay any stamp duty on the purchase. Properties valued between $600,001 and $750,000 will entitle you to a duty concession.

The table below provides a rough indication of the stamp duty you will need to pay when a first home buyer duty concession or exemption applies.

Dutiable value ($) Normal duty ($) Duty after concession ($)
0-600,000 0-31,070 0
605,000 31,370 1,045
625,000 32,570 5,428
650,000 34,070 11,356
675,000 35,570 17,785
700,000 37,070 24,713
725,000 38,570 32,141
745,000 39,770 38,444

Off The Plan Concession

The off the plan concession determines the dutiable value to which the first home buyer duty exemption or concession applies. The dutiable value will be the contract price minus construction costs incurred after the contract. This reduces the dutiable value of the property, which in turn reduces the duty you will pay.

For contracts signed on or after 1 July 2017, the off the plan concession will only apply if you are eligible for the first home buyer duty exemption or concession, or if you are eligible for the principal place of residence (PPR) concession, which applies to property valued at less than $550,000 that you intend to live in for at least 12 months.

For contracts signed before 1 July 2017, the off the plan concession is available to all purchasers and for all property types, including residential investment properties and commercial properties. There are no thresholds relating to the property’s value.

Associated Risks

Despite the advantages of buying property off the plan, there are also some risks. These risks are particularly associated with the construction of the property. There may be delays in construction, which would delay settlement and cause you some inconvenience, particularly if you are looking to move into the property as soon as possible.

Once construction of the property has been completed, the final product might be different to what you had expected. Developers may allow you to inspect the property prior to settlement, giving you an opportunity to query any issues you may have with the quality of the finish.

An advantage of buying property off the plan is that you lock in the purchase price in advance. However, this might also mean that the property will not be as valuable by the time you own it, as there is a risk is that the value of the property may decrease in the time between you signing the contract and settlement.

Conveyancing Costs

Conveyancing costs for purchases of off the plan property are no different to those for established property. A standard conveyance will usually cost around $1,000.

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