Many people considering investing in property face the question of whether to invest in a new or off-the-plan property or established property. The term off-the-plan denotes property bought before completion, often before completion has even started – hence at contract date, buyers can only see the plans of what they are buying rather than the actual, finished product.

The answer is not black and white, as there are advantages and disadvantages to buying an investment property that is brand new and off-the-plan, as well as an established property. It also depends on each property in question, whether you are an overseas investor and your own financial situation, which you could discuss with a financial planner in more detail. My take on this is that you could always buy one of each…a bit like an insurance ‘portfolio’!

Below are some points to consider for both options…


Buying off the plan property in Australia can have some benefits and in particular, buying off the plan in Melbourne may have added advantages of saving you thousands of dollars in stamp duty!

Stamp duty in Victoria is calculated based on the price of the development at the purchase date (often just the ‘land value’) rather than on completion date – two numbers which can differ significantly!

In all states, there may be reduced up-front costs required to get into the market and often a delay in final settlement payments for some time, while the property is being constructed.

Benefits to Buying Off The Plan include:

• Potential for massive stamp duty savings (in Victoria)
• Negative gearing tax benefits are usually greater for new properties
• Professional quantity surveyors quantify tax deductions – maximising tax benefits
• Delayed settlements – buy now and pay much later once construction complete
• Possibility of using a deposit bond or bank guarantee in place of a cash deposit – so your equity or cash is not ‘tied up’  make an off the plan purchase

Potential Disadvantages:

• Watch for over supply issues into the future when completion is due – check out what else is being built and price points for sales and rental
• Be prepared for everything, including a falling market in future at settlement date. You will have to settle regardless of any movement in value your property has experienced over the time it has been constructed – again research future expected demand and any potential oversupply issues to minimise risk and talk to us as we may be able to help!
• Research the rental market in the area and project forward to the completion date – taking into account any future planned supply, yields and vacancy rates
• Check out the finer details such as the aspect and amount of light, building quality, fixtures and fittings, upgrades available, views – the sorts of things that are not so obvious when sight unseen
• Make note of sunset clauses and double-check the timing with regards to first home buyer grants, if you are a first home buyer and plan to move in within the first 12 months
• Check the builder is reputable and the project is likely to be completed in a timely manner

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Buying established property is often easier than buying off the plan property as you can see what you are getting! You can walk around the house and get the ‘feel’ of the place!

Benefits to Buying Established Property include:

• You see what you are getting, ‘lay of the land’, views, aspect, natural light, room sizes, and so on
• You can start receiving cash flow immediately if it rented out or as soon as you find a tenant
• There may be room for improvement and capital gains by way of renovation, subdivision and development (STCA), less likely with brand new
• Often an established area may pose less risk as you are not looking to the future to settle – you are buying in current market conditions and settling in current market conditions, reducing guesswork and research required when buying off the plan and settling in potentially uncertain conditions sometime in the future.

Potential Disadvantages:

• Older properties may need more spent on them for maintenance – if concerned, perhaps get a building inspection (Archicentre) to check it out.
• You need deposit and settlement funds sooner than when buying off the plan
• Less potential for negative gearing tax advantages than brand new – but you could talk to a quantity surveyor as they may help you maximise benefits
• No massive stamp duty savings as with off the plan purchases in Victoria

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