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What you must know before buying off the plan

Buying off-the-plan carries a degree of risk so don’t be fooled by suave display suites or stamp duty concessions. Find out how to practice your due diligence below.

off the plan feature

When you’re looking at a blueprint, council plan or developers’ drawings, it may be hard to visualise the final result. For owner-occupiers and investors alike, purchasing a property off-the-plan presents both opportunities and challenges, so make sure you’ve got your wits about you when contemplating this kind of transaction.

While the flexibility to shape the floor plan and benefit from the first home owner grant (FHOG) may be tempting, don’t be swayed by lush or well-finished display suites as these do not necessarily reflect the final condition of the build.

Be cautious when buying off-the-plan as although these deals may offer tax, depreciation and capital gain incentives, there is always a degree of risk involved. Consider potential drawbacks of buying off the plan, such as the need to rely on the developer’s goodwill and the risk of buying in a poor growth market, to ensure that you make an informed choice.

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Read more guides about off-the-plan purchases

Buying off the plan

In certain cases, properties may be purchased before they have been built and this is known as purchasing off-the-plan. When buying an off-the-plan property, you’ll generally have the opportunity to inspect a model or demonstration property so you can get a feel for the final build. However, keep in mind that this may not be indicative of the final result so it’s important to analyse the terms of the contract to get details of the floor plans, materials, fittings and fixtures.

The way in which an off-the-plan property is sold can vary depending on the developer. For instance, the developer may be able to alter the design of the property without the buyer’s approval or buyers may need to pay more if the cost of construction varies. Again, ensure that you closely review the contract of sale before committing to a transaction so you don't get caught out.

Arnaud’s bumpy ride

Off the plan case study SydneyCBD

As an owner-occupier, Arnaud and his partner decided to purchase an off-the-plan apartment in Sydney’s CBD for $925,000.

After inspecting the display apartment, they researched the area and compared the price of the apartment to surrounding properties, and were pleased to learn that it was priced at under market value. They then decided to consult a mortgage broker and took out a variable home loan over a 30 year period.

However, the original developer could not finance the work, so it sold the project to another developer. This meant that the construction- which was originally meant to take 1.5 years- look much longer than originally anticipated. Arnaud explains:

“One day we received a letter and they said they had sold the project to another developer. The first developer we trusted because that’s who we bought the property from, we checked their registration so we knew we would get something quality. But we didn’t know who the new developer would be. Not only is it not going to be finished on time, but you then have to research the new developer and make the decision about whether you want to stay or get out, it was stressful. We were meant to move in by December 2013, and we moved in July 2015, just 3 months ago."

Although the developer warned Arnaud that the catalogue was only indicative of the final product, they later realised that the contract did not include a fridge. The developer then sent Arnaud and his partner a letter asking whether they would like the company to provide a fridge, and whether it would be integrated or not, so they had to fork out an extra $2,000, which they didn’t think was fair.

Another issue they encountered was that the developer changed the location of the lobby. Arnaud and his partner liked the positioning of the lobby because they felt it would be a nice environment to welcome guests, but the lobby ended up being in a different location which was inconvenient.

Arnaud offers this advice for any owner-occupiers thinking of purchasing off-the-plan:

“I would say to them that they need to expect that it's not going to be smooth sailing, it will be a bit stressful. In the end, we got it [the apartment] for a cheaper price than what its worth today, it's a beautiful apartment in a good location. The journey was a bit of a bumpy ride. Just be aware that it's not going to be what you expect in the first place."

Are you planning to buy off the plan? Ensure you have the right legal help in place

TitleXchange offers a fixed-price conveyancing package for those buying off the plan. Fill in the form below to get into contact with an expert from TitleXchange.

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TitleXchange has fixed price conveyancing packages to suit your needs whether you’re buying or selling a property. They can also help with:

  • Fixed-price contract of sale reviews
  • Building contract reviews
  • Building and pest reports

Should I buy off the plan or not?

The decision to buy off-the-plan will vary depending on your investment purpose, the amount of risk you’re willing to endure as well as your personal financial situation. You should carefully review the advantages and drawbacks of purchasing off-the-plan before signing on the dotted line.


  • Set price: A key benefit of purchasing property off the plan is that you can pay the current market value for a property, even though it will be completed in future, and will likely appreciate in value by that time. This forms the basis of the “today’s price for tomorrow’s equity” rationale which means you can potentially make capital gains over time.
  • Choice: If you get in early, you have the flexibility to choose your purchase from the range of properties for the development project. For instance, you may be able to choose a property that’s closer to amenities or shops or the one with a better view, or you may even have choice regarding colour schemes or finishes.
  • Low initial capital outlay: Generally you’ll only need to provide a 10% deposit and the outstanding balance of the payment doesn’t need to be paid until settlement. This gives you time to get your finances in order.
  • Time: The long settlement period means that you have time, or ‘a breather’ to get your finances in order, boost your savings and time to save for settlement. You may also benefit from capital gains over time.
  • Tax and depreciation incentive: If you’re purchasing the property as an investment, you may be able to claim depreciation on your tax for items like fixtures and fittings.
  • FHOG and stamp duty concessions: In Australia, most states provide a first home owners grant (FHOG) for first home buyers purchasing new dwellings that are valued under a certain amount. This may involve exemptions or discounts associated with stamp duty. Review our FHOG guide to see if your state office of revenue provides grants and stamp duty concessions for off-the-plan purchases.


  • Limited growth market: When purchasing off the plan, you run the risk of paying too much for a property if the market enters into a decline.
  • Expectations: As many builders don’t allow you to see the property until construction has completed, there is the risk that the quality or layout of the build may not be what you had in mind.
  • Rising interest rates: As with any finance decision, you run the risk that interest rates may rise before you settle on the property, which may be an issue if you made the decision based on low interest rates.
  • Bankruptcy: There is a risk that the developer may go into liquidation before the build is completed, so you need to carefully review the terms of the contract to see what your options would be if this occurred.
  • Rely on good will: When buying off the plan, you must rely on the reputation, honesty and goodwill of the developer which is why it's crucial to research the developer and their financial strength.
  • Change in lender policy: Certain investors may be affected by a change in lender’s policy post the Australian Prudential Regulation Authority (APRA)’s recent intervention. For instance, if you took out a loan for a $500,000 investment your lender may have been prepared to lend you 95% LVR ($475,000). However, an intervention by APRA now means the lender can only lend you 80% LVR ($400,000). This would mean that you need an additional $75,000 to complete the deposit and qualify for the loan-- or find another lender that’s willing to lend at a higher LVR. Keep in mind that a loan approval today does not guarantee finance tomorrow.

Process of buying off the plan


While research suggests that buying off the plan may be more advantageous for investors rather than owner-occupiers, it’s crucial that you do some research not only regarding the property and the development plan but also into the area.

You need to consider the growth potential and trends for the location, whether or not it suits your investment strategy or lifestyle needs, review finance options, and depreciation and tax benefits.

Expression of interest

Developers may reach out to local real estate agents in an attempt to generate interest in the development. Sometimes you may be able to lodge an expression of interest payment, however it's important to note that this signals your interest and does not guarantee that the property will be sold to you.

Legal advice for contract review & signing

Once you’ve selected the location and development project, you’ll need to sign a contract of sale for the purchase. Before signing on the dotted line, it is paramount that you seek independent legal advice from a contract and property law specialist to ensure that the contract contains all the relevant terms for the exchange.

1. Cooling off period

In most Australian states, the cooling off period is between 3-5 days, means that you can change your mind about the purchase during this timeframe. However, keep in mind that if you have a change of heart and you decide to withdraw from the purchase, you may be charged a termination fee from the developer which is generally around 0.25% of the purchase price.

2. Project plans

The contract should disclose information regarding the specific plans of the build. This should include proposed plans, floor plans and a schedule for the construction. It’s important that you fully understand, and are satisfied with, the level of detail that the developer has disclosed regarding the development plans and the quality of fittings and fixtures.

3. Deposit amount

Generally a 10% deposit is required for off-the-plan purchases and the contract should specify who will receive the interest earned on the investment.

4. Inclusions

Make sure that you review the inclusions and warranties in the contract of sale to make sure that if the developer makes changes to the planned build, it will not affect you negatively. It’s also important to ensure that the contract specifies the cost of upgrading fixtures and fittings if you are not satisfied with the initial ones. Also check to see if there is a dispute resolution process in place in case of any delays or other issues.

5. Finance

If you’re obtaining finance from a lender, you need to ensure the contract is subject to you obtaining the relevant finance. Generally, developers will give you 30 days to obtain finance approval from the date that the contract was signed.

6. Building defects

The contract should include a clause stating that the developer is responsible for rectifying any defects in the construction, prior to settlement.

What happens if there are defects?

When you’re buying a newly-built off-the-plan property, it’s understandable that you would expect your home to be in pristine condition on the day you move in. However. this may not always be the case.

Before you sign any contracts, make sure you ascertain the developer’s policy regarding maintenance. Most developers will have a maintenance period written into the contract, in most cases around 90 days. This means you have 90 days from settlement to make them aware of any defects, and they have 90 days in which to rectify them.

Be warned, however: there may be cases in which a feature you identify as a defect falls within the builder’s acceptable standard of workmanship.

Development team review

It’s wise to conduct a background check to confirm the experience and qualifications of the developer, builder, and architects. You should visit the company website, review past and current projects as well as their financial performance to ensure that the developer is in a strong position to carry out the intended works.

You should ensure that the builders for the development are licensed and qualified and you can check this on your relevant state government website.

If the contract is valued over $200,000 the developer is legally obliged to provide home warranty insurance.

Obtain finance

Some Australian lenders may be reluctant to provide finance for off-the-plan purchases because the property may be sold for more than it's worth. In an uncertain market, the property value might decline between the signing of the contract and the completion of the build.

As a result, some lenders will require an 80% loan-to-value (LVR) ratio, while others may require reviews of any pre-approvals they issue at the time you sign the contract. It’s a good idea to wait and apply for approval 6 weeks prior to settlement.

You can compare a range of home loans using the comparison table below.

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Get a low-rate construction loan with an LVR up to 80%.
$10 monthly ($120 p.a.)
Build a home or investment property and take advantage of interest-only repayment options.
$8 monthly ($96 p.a.)
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Considerations when buying off the plan

  • Property and location inspection: Make sure you research the local market conditions and speak to experts about property price trends and growth factors for the area. Review the display home, models and floor plans. You should also review the fixtures, fittings and finishes.
  • Legal advice: You should review the contract with a legal professional and take note of all the terms and clauses including whether or not you can visit the site during construction, if you can alter finishes or fixtures, what happens if problems occur after build completion?
  • Inclusions in purchase price: You should speak directly with your developer to identify exactly what is included in the purchase price (e.g. floor coverings, paintings). You can request to have guarantees of the developers’ financial capabilities included in the contract to protect yourself in the event that the developer goes into liquidation.
  • Quality of construction: When purchasing off the plan, you may not know exactly how the property will look once finalised. You may also not know the standard of quality of fittings and fixtures and thus the final product may differ from what you originally anticipated.
  • Display suites: Keep in mind that display suites may be a marketing ploy and the final result may vary significantly from the model construction so don’t base your decision on a well-designed display suite.

What should I ask my developer?

  • Can I make changes to finishes or fixtures in the bathroom and kitchen?
  • Can I visit the site during construction?
  • Where do I stand if construction is altered from the original plan?
  • What are my rights if the design or layout is altered? Can the builder change the design without my consent?
  • What are my rights if there are delays?
  • Is my deposit secure if the construction doesn’t go ahead?

State concessions for buying off-the-plan

Find out if you’re eligible for any stamp duty concessions for an off-the-plan purchase.

Have APRA’s regulations affected investor off-the-plan purchases?

Many investors who have recently purchased off-the-plan and expect to settle within a 12 month timeframe may face the risk that lenders have changed their policies following APRA’s crackdown. According to CoreLogic (2015), APRA’s requirements for deposit-taking institutions to abide by a 10% speed limit has mean that many lenders are making major changes to their policies and discounts.

These changes make it important for investors to realise that what they receive from the lender is pre-approval and is not an unconditional approval to purchase. Investors should also be mindful that pre-approvals are generally only effective for 3 months, while it may take a large development 2-3 years to complete.

When the property is almost completed, the developer will generally notify the potential buyer and they’ll have 2 weeks to organise the outstanding finance and get ready for settlement. This generally involves a new application as the property will need to be re-valued.

Frequently Asked Questions (FAQ)

Belinda Punshon

Belinda is a journalist here at finder.com.au. Specialising in the home loans and property sections, she is passionate about helping Australians improve their financial wellbeing.

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