UNO home loans
14th May 2018
Is buying off the plan a smarter choice? Learn more about the benefits and risks that will help you decide.
Buying off the plan can be a smart and affordable choice compared to buying an existing property. But it also comes with potential risks. Let’s look at the reasons for and against.
There will always be pros and cons with any investment, so how can you ensure you minimise the risks?
Research, research, research
Understand the location you are purchasing the property in and what the current market conditions are. Then make sure a reputable developer is working on the project. Review their past work, do license checks, find out their financial situation and try and seek feedback from others.
Review the contract with a legal professional
Taking the time to go through the contract with a conveyancer or solicitor is extremely important.
You will want to look for things like:
Have your finances in order
You will want to make sure that the contract is subject to you obtaining finance within a certain time frame from when you sign the contract.
While securing finance for an off-the-plan property doesn’t differ too much to getting a loan for an existing property, you will have to apply for a loan within 3 months of the home being complete. Sometimes you have to put a deposit down a year in advance too, which can be a struggle for some buyers.
A recent BIS Oxford Economic study forecast a marked slowdown in unit construction through 2019, as oversupply in Melbourne, Brisbane and Sydney starts to cool the market.
Docklands, Melbourne apartments built in the past five years have either dropped in value or seen no price growth. NAB recently predicted that unit prices in the capital city will fall by 2.6% by the end of 2017 and then drop a further 2.4% in 2018.
A buyer that has already paid a deposit and is awaiting completion in the next year or so could find themselves needing to make up the shortfall themselves.
Sydney’s median house and apartment prices are expected to fall 4% by 2020, with Brisbane units predicted to fall by 7% according to the same BIS Oxford Economics study.
Does this mean that an off-the-plan purchase is not wise in today’s market?
Not necessarily. An off-the-plan purchase can still make a great investment if you are purchasing in an area that has high demand and low supply. Look for a reputable developer with a proven track record.
Opportunities to purchase will appear where completion of the property is not too far away, leaving you less at the mercy of the market if you are familiar with the conditions in the area you are purchasing in.
* Two year fixed rate, owner occupier, P&I package loan with a maximum LVR of 70% and a loan amount >=$150k. Lender rates and products may change. We cannot suggest you remain in or switch to any loan until we complete our assessment. Fees and charges apply. ^WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rate is calculated on the basis of a loan of $150,000 over a term of 25 years. ± All loan applications are subject to uno assessment and lender approval. uno does not guarantee that it will be able to find a customer a better loan than the one they currently have or to save them money.