8 Common Questions when buying Off The Plan.
Buying an apartment “Off the plan” means signing a contract to purchase an apartment that will be constructed in the future. When purchasers are looking at off the plan apartments for sale they can view the building plans, floor layout and specifications of the future apartment and if everything suits their requirements they can purchase an apartment in the development. Deposit amounts differ from each individual developer with the norm being a 10% deposit with the remaining 90% of the purchase price paid upon settlement of the completed property. A great upcoming project in Elizabeth Quay in Perth city is Perth Plus by Brookfield and designed by Rex architecture: https://www.executiveproperties.com.au/brookfield-rex-elzabeth-quay/
Here are 8 questions and answers to keep in mind when buying an off the plan apartment.
- What price do you pay?
When you buy an off the plan apartment you lock in the current market price for a property that will be completed in the future. Off the plan purchasers can secure a high value asset with a low initial capital outlay. In a rising property market this can be very beneficial allowing purchasers to buy a property at a lower price than its potential future value.
- How much are the levies or strata fees of the complex?
When purchasing an off the plan apartment the contract should normally include an estimation of the future quarterly and yearly strata fees. These strata fees are paid to the management company who look after the upkeep of the building and its communal areas and the building insurance.
- What happens to your deposit money?
When you pay a deposit on an off the plan apartment, the money sits in a solicitors or settlement agents trust account. With the settlement period being over 60 days away and the deposit amount exceeding $20,000 you can ask the developer to place your deposit into an interest-bearing account and receive part or full payment of the interest. It is best to ask the sales agent about these details.
- What happens if the market drops?
When buying any property there is a risk that the property market falls. If the market falls between the signing of the contract and building completion it may make it more difficult to secure finance for the full amount. As a purchaser who has signed a contract you are obligated under the contract to settle on the apartment. Fixing an interest rate is one way to help minimise your risk and allow peace of mind.
- How can I ensure tenants in my new apartment look after the property?
That is where Perth Executive Properties fit into the picture. As expert property managers, we help locate and sign up high quality tenants for your new off the plan property. We check their rental history with other agencies, call references to make sure their details are confirmed and look them up in the national tenancy database. We also conduct ongoing inspections to make sure they are keeping the property clean and tidy. Additionally, we also recommend seeking a comprehensive landlord insurance policy.
- What is a sunset clause?
A sunset clause is a section of the contract which places a maximum amount of time the developer must complete the construction of the building. It gives a date when the buyer can legally walk away from the contract and they should receive their deposit back.
- Are the sales agents also the developer of the project?
This varies with each individual project. Some developers have their own in-house sales team whilst other developers appoint sales and marketing agencies to sell their developments. Consumers can ask the sales agent to confirm the details.
- Do you have to pay stamp duty on your off the plan apartment?
In Western Australia, you are required to pay stamp duty on off the plan apartment sales. This is paid at settlement. If you are a first home buyer you don’t have to pay stamp duty if the property is valued at under $430,000. More information can be found here: http://www.finance.wa.gov.au/cms/State_Revenue/Duties/Assessment_of_Duty.aspx