If you’ve been thinking about purchasing a new home, you might be weighing up whether to purchase an established house or something brand new. While there are pros to both options, we have outlined the benefits of buying off the plan to make your decision-making process a little easier.
When you buy an off-the-plan property in Victoria, you may be eligible for something called a ‘duty concession’. As a buyer, you pay duty on the dutiable value of your property – which is usually the price paid for the property or its market value, whichever amount is greater.
If you’re eligible for the off-the-plan duty concession, the dutiable value is the contract price minus the construction costs incurred on or after the contract date. This reduces the amount of duty you are required to pay. To learn more about the concession and whether or not you’re eligible, click here.
If you’re a first home buyer, the incentives to buy off the plan don’t stop there. Currently, the Victorian Government is offering first home buyers a $10,000 grant to purchase a brand-new property.
Victoria’s First Home Owners Grant (FHOG) is only available for people purchasing property for $750,000 or less, and the property must not have been previously sold as a place of residence, occupied as a home or used for short-term accommodation. Click here to check your eligibility for the FHOG.
To encourage pre-sales, developers will offer a range of incentives to prospective buyers. This could range from cash, through to furniture or a first year free of mortgage repayments. While a developer incentive shouldn’t be the sole decider of whether or not you purchase a property, it’s a welcomed gift to buyers who may be able to use the incentive in conjunction with stamp duty concessions or other government incentives.
Buy now and lock in a price
If your property increases in value during the construction phase, you aren’t required to pay any additional money. For example, if you purchased a property for $500,000 and by the time you settle, the property goes up in value by $50,000, this is just an added bonus to you as the buyer.
This property price increase is called capital growth, and it’s useful for getting your loan to value (LVR) ratio down. Your LVR determines whether you need to pay the added cost of Lenders Mortgage Insurance (LMI), so the lower your LVR is, the better.
More time to save
When you purchase an off-the-plan property, you are required to pay a deposit of no more than 10 per cent of your contract price. However, with the balance of the purchase price not required to be paid until construction is finished and the property is settled, you will have more time to build your savings. In turn, this can reduce your loan amount, or allow you to save for furniture for your new pad.
It’s brand new!
Arguably the biggest benefit of buying off the plan is that your new home will be brand new. With no previous owners or tenants, you’ll be moving into a sparkling clean home with the most up-to-date appliances, fittings, and furnishings.
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DISCLAIMER: This article is provided for general information only, and the author is not engaged to render professional financial advice through this article. Readers should seek professional legal and/or financial advice before deciding to make a specific purchase, investment, or conduct any other financial activity.