Buying a house or unit before the building works have been completed is known as buying off-the-plan.
In some cases, construction may not have started while in others it may only be partially built. You may be able to see the design of the building and sketches of its final appearance in advertising material.
Amendment to the Sale of Land Act 1962
New laws limiting the use of sunset clauses in contracts to buy off-the-plan have now commenced. For more information, view Sale of Land Amendment Act 2019 - Legislation update.
Contracts for buying off-the-plan
An off-the-plan contract of sale must contain a clearly visible warning notice with the following information for the buyer:
- Subject to the 10 per cent limit, the seller and buyer may negotiate on the deposit amount to be paid.
- A substantial amount of time may pass between the buyer signing the contract and owning the property.
- The value of the property may also change during the time between the buyer signing the contract and owning the property.
Deposit you need to pay
You are required to pay a deposit of no more than 10 per cent of the contract price.
If you buy off-the-plan and the plan of subdivision is not registered by the time specified in the contract, or the default time of 18 months, you have the right to end the contract and get your deposit back.
Exemptions and concessions
From 1 July 2017, the off-the-plan exemption and concessions for land transfer duty only apply to a property you buy to live in and to first home buyers.
You are eligible to apply for an exemption from paying land transfer duty if:
- you are a first home buyer, and
- the dutiable (payable) value of your property is $600,000 or less.
You are eligible to apply for a land transfer duty concession if:
- you are a first home buyer and the dutiable value of your property is between $600,001 and $750,000, or
- the property will be your principal place of residence and the dutiable value is $550,000 or less.
The amount of the duty concession depends on how advanced the construction of the building is and its value when the contract of sale is signed. If construction is close to completion, the duty is likely to be higher. For more information, visit Dutiable value of a property - State Revenue Office.
Advantages of buying off-the-plan
People are often attracted to off-the-plan sales as you may pay less land transfer duty than you would for an established house or unit.
Buying off-the-plan also means you have more input into the property's design and the contract price is locked in at the time the contract is signed. This means the contract price does not change even if the property increases or decreases in value throughout the build.
Risks of buying off-the-plan
Buying off-the-plan without being able to see the finished product has its risks, including:
- being unable to inspect the actual property. You have to rely on an artist's impression, floor plan and advertising material for information about what you are buying
- differences in the expected and actual quality of the final finishes
- unexpected changes to the plans or specifications
- an uncertain completion date
- complex contracts
- limited recourse with the builder if there is a dispute. This is because the developer enters into a major domestic building contract with the builder, and you buy the property from the developer
- property market volatility causing the value of your off-the-plan home at settlement to be less than the contract price
- potential issues with obtaining finance - for example, if the value of the property decreases or the completion date changes, you may have problems getting the loan approved.
If you intend to buy off-the-plan, get a firm completion date in writing from the developer. You should seek independent legal advice before signing a contract.