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Buying an off-the-plan property means committing to a home or investment before it’s built. Instead of walking through a finished property, you’re relying on plans, specifications and a contract that outlines what will be delivered at completion.
For many Australians, buying off-the-plan can be an appealing way to secure a brand-new home or investment property. It can come with benefits like locking in today’s price, potential capital growth during construction, and access to government incentives for new builds.
That said, it’s not without its considerations. Construction delays, valuation changes and contract conditions can all play a role, so it’s important to go in with a clear understanding of how it works.
This guide breaks down what off-the-plan property means, how the buying process works, and what to look out for, so you can decide if it’s the right option for your situation.
Key takeaways
- Buying off-the-plan means committing to a property before it’s built, based on plans and contract specifications.
- Settlement usually takes place around 18 to 36 months after exchange.
- You’ll typically pay a deposit at exchange, rather than the full purchase price upfront.
- Off-the-plan houses, townhouses and apartments can offer benefits like competitive pricing, potential capital growth and tax advantages for eligible investors.
- There are also risks to be aware of, including construction delays, valuation changes and contract variations.
- Your lender will reassess your financial position and the property value closer to settlement.
- Deposit options can vary and may include savings, deposit bonds, bank guarantees or guarantor arrangements.
- Taking the time to review the contract and research the developer is essential before committing.
What is an off-the-plan property?
So, what does “off-the-plan” mean?
An off-the-plan property is one you buy before construction is finished, and sometimes before it’s even started. These properties can include apartments, townhouses, or house and land packages.
It’s a popular option for a range of buyers, from first home buyers and investors to downsizers, because it gives you the opportunity to secure a property early in the development process.
This is different from buying an established home, where you can walk through the property before making a decision. With off-the-plan, there’s usually a longer gap between signing the contract and settlement, as the property still needs to be built.
In simple terms, you’re committing to what the property will be based on plans and specifications, rather than what you can physically inspect. That’s why it’s important to understand the timelines and contract details before signing.
How off-the-plan works: step by step
Below is a general guide to how off-the-plan purchases typically work. The exact process can vary depending on the state or territory, the developer’s requirements, the contract terms (including any cooling-off period), and whether you’re buying an apartment, townhouse, or house and land package.
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Decide your budget and deposit strategy – Review your finances, confirm borrowing capacity, and decide how the deposit will be paid. This may include savings, a deposit bond, or another approved option, like a guarantor. It’s also worth factoring in upfront costs like stamp duty, legal fees and loan expenses.
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Review the development and contract – Assess the project details, layout options, renders, inclusions and specifications so you understand exactly what’s being offered.
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Sign the contract of sale – Enter into the legal agreement based on the supplied plans and specifications. This is where a conveyancer or solicitor is essential.
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Pay the deposit at exchange – Secure the property by providing the required deposit amount (or an approved alternative).
- Construction period – The developer builds the property while you prepare for settlement. Timelines can vary and delays are possible.
- Pre-settlement inspection – Inspect the finished property to check it aligns with the contract and identify any defects or incomplete items.
- Final finance and valuation checks – Your lender reassesses your circumstances, completes a valuation and confirms funding for settlement.
- Settlement – Ownership transfers to you, final payments are made, and you receive the keys.
Pros and cons of buying off-the-plan
Before you buy a property off-the-plan, it’s important to weigh up the benefits against the risks. Some of them include:
Benefits
- Often priced competitively compared to established homes
- Lock in at today’s purchase price
- Potential equity growth before settlement
- Stronger tax depreciation benefits for eligible investors
- Opportunity to personalise finishes and layouts
- Builder warranties and structural protections
- High appeal to modern renters (if you’ll use the property as an investment)
Risks
- Finished property may differ slightly from plans or renders
- Construction delays can extend timelines
- Property values may fall before settlement
- Lending conditions or borrowing capacity may change
- Developments can be cancelled
- Strata fees in apartment or townhouse buildings can increase over time
- Cash deposit may be at risk should the developer go into liquidation
What to consider before buying off-the-plan
Before signing a contract, it’s worth taking the time to work through a few key checks. A little due diligence upfront can save you from costly surprises later.
- Research the developer’s track record – Look into their previous projects, build quality and delivery timelines. Have they successfully completed similar developments? Independent reviews and feedback from past buyers can give useful insight.
- Review the contract carefully – Have a conveyancer or solicitor go through the contract of sale with you. Pay close attention to things like sunset clauses, variation clauses, defect provisions and what happens if timelines shift.
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Understand the estimated completion date – Ask how realistic the construction timeframe is and what could cause delays. It’s also worth clarifying your rights if the project runs over schedule.
- Confirm deposit requirements – Check how much is required, when it needs to be paid and where it will be held. Make sure the structure works for your financial position and aligns with state regulations.
- Consider valuation timing – Lenders will usually reassess both the property value and your financial position closer to settlement. Be prepared for the possibility that the valuation may come in higher or lower than the original purchase price.
- Assess your financial readiness – Think about how stable your income, savings and borrowing capacity are likely to be over the build period. Interest rates and lending policies can change, so it pays to plan conservatively.
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Review ongoing costs – Look beyond the purchase price and factor in projected strata fees, council rates and maintenance costs so you know what to expect long term.
How do I pay the deposit for an off-the-plan property?
When buying off-the-plan, you’ll usually pay a deposit at exchange (when the contract is signed), rather than the full purchase price upfront. The amount required and how it’s paid can vary depending on the state or territory and the developer’s contract, so it’s worth confirming the details early.
There are a few common ways to structure your deposit:
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- Cash savings: Paying the deposit directly from your savings.
- Deposit bond: A guarantee that acts as a substitute for a cash deposit until settlement.
- Bank guarantee: A bank-issued guarantee that secures the deposit amount.
- Guarantor structures: In some cases, a family member may provide security to support the purchase.
Each option offers a different level of flexibility. For example, some buyers choose alternatives to cash so their savings can keep working for them during the construction period.
Understanding your options early can help you choose an approach that aligns with your financial plans leading up to settlement.
It’s also a good idea to check with the developer before signing the contract, as not all will accept alternatives to a cash deposit.
Tips for buying off-the-plan successfully
Before you sign anything, run through this checklist to make sure you’ve covered the key steps in buying off-the-plan:
Review the contract in detail
Have a solicitor check sunset clauses, variation rights and defect processes.
Research the developer and builder
Check past projects, build quality and delivery track record.
Sort finances early
Confirm borrowing capacity, how you will pay for the deposit and full purchase price come settlement, and stay financially stable through the build period.
Budget for all costs
Factor in stamp duty, legal fees, loan costs and ongoing expenses such as strata fees or maintenance.
Track timelines
Keep an eye on construction progress, stay in contact with your lender and be ready for valuation and final approval as settlement approaches.
How much of a deposit do I need to buy off-the-plan?
Deposit amounts for off-the-plan properties are usually set as a percentage of the purchase price, most commonly up to 10%. That said, this can vary depending on the state or territory and the developer’s contract.
The deposit is typically paid at exchange, when you sign the contract of sale. The remaining balance is then paid at settlement once construction is complete. This means you don’t need to come up with the full purchase price upfront, even if settlement is still some time away.
In some cases, developers may offer staged deposits or alternative arrangements. Because requirements can differ between projects, it’s important to review the contract carefully and confirm the exact terms before committing.
While many buyers use savings for the deposit, others choose to use a deposit bond instead of cash, if the developer accepts it. This can help keep your savings available during the construction period, giving you a bit more financial flexibility while still securing the property.
How deposits bonds can stave you money when making an off-the-plan purchase
When buying off-the-plan, the deposit is usually required at exchange. For many buyers, that means a large sum of money sits in a trust account for years and can’t be accessed.
A deposit bond offers an alternative. Instead of paying the deposit in cash at exchange, you can provide a deposit bond as a substitute. You keep your money with you until you pay in full at settlement as part of the purchase price.
This approach can offer several advantages:
- Improved cash flow: Your money or equity stays with you during the construction period rather than being tied up.
- Greater flexibility: Funds can stay in offset accounts, high-interest savings or other investments until settlement, saving or earning interest.
- Convenience: Deposit bonds can be arranged quickly, helping you secure a property sooner.
If you’re weighing up your options, it can be helpful to see the potential difference in real terms. A deposit bond savings calculator can give you a clearer picture of how much you might save based on your situation.
It’s also worth checking in with the developer or sales agent early on, as acceptance of deposit bonds can vary. Learn more about who can use a deposit bond.
Buying off the plan with confidence
Buying off-the-plan can be a smart way to secure a property early, whether you’re a first home buyer, investor or looking to downsize. It offers the potential to lock in a purchase price, access newer properties and plan ahead while construction is underway.
At the same time, it comes with its own set of considerations. Timelines can shift, property values can change, and your financial position may be reassessed before settlement. That’s why doing your research, understanding the contract and planning your finances carefully are all key.
It’s also worth thinking about how you structure your deposit. For some buyers, using alternatives like a deposit bond can provide more flexibility by keeping funds available during the build period.
Ultimately, going in informed and prepared puts you in the best position to make off-the-plan work for you and avoid surprises along the way.
Commonly asked buying off-the-plan questions
Can I take a mortgage for an off-the-plan property?
Yes, you can take out a mortgage for an off-the-plan property, but the timing works a little differently compared to buying an established home.
Many buyers seek pre-approval before signing the contract so they understand their borrowing capacity. However, formal loan approval and funding typically occur closer to settlement, once construction is complete and the lender has conducted a final valuation of the finished property.
Because there can be a long gap between exchange and settlement, lenders will reassess your financial position at that time. Changes in income, debts, interest rates or lending policies can affect the final approval outcome.
Can you negotiate off-the-plan prices?
In some cases, yes. The ability to negotiate often depends on the stage of the development and current market conditions.
Early in a project, developers may be more open to negotiating price, offering upgrades or including incentives to secure sales and support project funding. In slower markets or where stock levels are higher, there may also be more flexibility.
Negotiations don’t always relate to the headline price. Buyers may be able to discuss upgrade packages, inclusion levels, settlement timing or deposit structures. For example, some purchasers negotiate to use a deposit bond in place of a cash deposit, subject to the developer’s approval.
As with any property purchase, it helps to understand the local market and approach discussions with realistic expectations.
How much are the levies or strata fees for off-the-plan apartments or buildings?
Strata or body corporate fees can vary depending on the size of the development and the facilities included, so there isn’t a standard amount.
In general, larger apartment buildings with features like lifts, gyms, pools, rooftop areas or concierge services tend to have higher strata fees. Smaller complexes with fewer shared amenities usually have lower ongoing costs.
Before committing, it’s important to review the proposed strata budget included in the contract documentation. This outlines the estimated annual levies and how funds are allocated for maintenance, insurance and building management.
It’s also worth keeping in mind that strata fees can increase over time, particularly as buildings age or if maintenance and service costs rise. Factoring this into your long-term budget can help you avoid surprises down the track.
Do I need to pay a larger deposit for premium or early-release apartments?
Not necessarily, but it depends on the developer and the specific project.
In many cases, the standard deposit requirement applies across the development, regardless of whether the apartment is premium or part of an early release. However, some developers may set different deposit structures for high-demand or premium stock.
The amount and timing of the deposit should be clearly outlined in the contract of sale. Because requirements can vary by project and state, it’s important to confirm the exact terms before committing.
If flexibility is important to you, it may also be worth discussing approved alternatives to a cash deposit with the developer early in the process.
Do developers usually accept deposit bonds for off-the-plan purchases?
Acceptance of a deposit bond is always at the developer’s discretion.
Many developers are familiar with deposit bonds and will accept them as a substitute for a cash deposit, particularly when issued by an established provider. However, some may prefer cash or have specific conditions around the type or term of bond they will accept.
If you’re considering using a deposit bond, it’s best to confirm acceptance with the developer or selling agent early in the process. This ensures your deposit structure aligns with the contract requirements before you exchange.
Is my deposit refundable if the developer cancels the project?
In most cases, yes. If a project is cancelled in accordance with the contract, buyers are generally entitled to have their deposit refunded.
The exact outcome depends on the terms of the contract and the reason for cancellation. For example, sunset clauses may allow a developer to end the contract if the project is not completed by a certain date.
Because rights and protections vary by state and by contract, it’s important to have a solicitor review the agreement before signing so you understand when and how a deposit would be returned if the development does not proceed.