Advantages and disadvantages of buying-off-the-plan

When buying off-the-plan there are advantages AND disadvantages but what are they and are what are some key factors you should consider?

Buying off-the-plan generally means buying a property that hasn’t yet been built or is still under construction. It could also mean the land has not yet been subdivided. You make your decision to buy based on the building plans and designs, rather than the finished product.


Smaller Deposits

Many developers have promotions that do not require a big deposit or, alternatively, because of the stock available in a development, will allow a lesser deposit be paid compared to an established dwelling (i.e. $5,000/$10,000 or 5% deposit).  This makes it easier, particularly for first home buyers, to purchase a property.  Also, there are prohibitions on deposits being in excess of 10% for off-the-plan properties, meaning a maximum 10% deposit is required at the time of signing the contract and the balance of the price is payable at settlement.

Bank Guarantees

Many developers will accept that a deposit be paid by way of bank guarantee, rather than the traditional “cash” deposit. Essentially, to take out a bank guarantee, you are providing your deposit to the bank to be invested in a term deposit, and you will continue to accrue interest on your savings until the development is substantially complete. At settlement, this means that you will have to provide 100% of the price and your bank guarantee would then be returned at or following settlement. Depending on the terms of the contract or any agreement reached with the vendor, you may be able to substitute your bank guarantee for a cash deposit just prior to settlement so that you are not out of pocket whilst you wait for your bank guarantee to be returned.

Longer timeframes for settlement

Off-the-plan projects can often take up to a few years before settlement occurs. This gives purchasers more time to save and get their finances in order. When dealing with the sales agent, find out when the estimated completion date is so you can plan your finances ahead.

Stamp Duty Savings & Government grants

  • Off-the-plan concessions are available to home owners where the dutiable value is $1 million or less;
  • Stamp duty will be fully exempt if you are a first home buyer purchasing an off-the-plan property with a dutiable value of $600Kk and under. Otherwise, if the dutiable value is $750k and under, you will be eligible for a stamp duty concession;
  • First home buyers of new homes are eligible for the First Home Owner Grant of $10k or $20k in regional Victoria.

Dutiable value is the contract price minus the construction or refurbishment costs incurred on or after the contract date.

Personalise the design of the Property

Whilst some developers will have a standard specification list of fixtures, fittings and finishes in the property to be constructed, usually there will also be options to upgrade (for example, appliances or flooring) and select a colour scheme (for example, a light or dark colour scheme). With more boutique type developments, you will sometimes have the option to tailor the specifications to your liking. Including in relation to electrical requirements, type of flooring, type of cabinetry and other fixtures, fittings and finishes.

More energy efficient homes

Newly constructed homes must comply with the energy efficiency requirements of the Building Code of Australia (BCA) which aims to reduce energy consumption and water usage, hence reducing environmental impacts and utility bills.

Potential Capital Gains

Buying off-the-plan allows purchasers to pay current market value for the property even though the property is constructed and settled after a period of time.  In a rising market, this generally allows the value of the property to appreciate, thus benefiting from a capital gain at settlement.

Sunset Clause

The Sale of Land Act 1962 (Vic) includes some “consumer” protections for purchasers, including:

  • Allowing the purchaser, at its sole discretion, to exit the contract if the plan of subdivision has not been registered or the occupancy permit has not been issued by the sunset date noted in the Contract of Sale. All deposit monies paid will be refunded to the purchaser along with any interest earned on the invested deposit in such circumstances;
  • The vendor cannot end the Contract of Sale unless consent is obtained from the purchaser or by way of a court order. This prevents property developers from intentionally delaying the project in the hope to terminate the contract with the purchaser and resell the property at a higher price;
  • Where material changes are made to a plan of subdivision and those changes notified to the purchaser, the purchaser will have a right to end the Contract where they are not satisfied with such changes (note, this applies only to the plan of subdivision, not architectural floorplans or drawings);
  • Where changes are made to a plan of subdivision that limit or restrict the use of a lot, the purchaser may also have a right to end the Contract.


Buying off-the-plan can be exciting, but there are some factors out of your control, and these can potentially turn that excitement into a potential property headache.

Quality may not meet your expectations

As you have not actually inspected the property and you are buying based on the plans and specifications provided by the developer, the final build may not meet your expectations or suit your lifestyle. Depending on your contract, there may also be grounds for the developer to make alterations to those plans and specifications without your consent.

Possible delays

Estimated completion dates are always subject to change and may have significant delays due to construction progress, authority approvals, shortage of construction materials, weather, COVID-19 pandemic public health orders including restrictions on workers to name a few.

Developer's ability to make changes post Contract

Most contracts allow maximum flexibility for the developer to make such amendments to the plans and/or specifications as may be necessary for the developer to complete the project. This could include changes to location of your car space, internal area of the property changes, changes to fixtures, fittings and finishes etc.

Property market volatility and valuation not stacking up to the price

In the event that settlement takes place in a declining market, valuations of the property may come in lower than the purchase price. This means that the amount you can borrow may be less and you will need to fork out the shortfall funds.

Developer insolvency event

There is a risk that developers may go into liquidation before settlement. It is important to consider the reputation of and do your due diligence on the developer and consider or seek legal advice on the repercussions of the developer going into liquidation.

Some tips to help you when buying off-the-plan

  • Choose a reputable developer. A reputable developer has market experience and is more likely to be in a position to pivot to manage any unforeseen circumstances. A reputable developer will understand and consider your legitimate concerns with valuation issues, building defects, hardship concerns etc.
  • Have your contract reviewed for any unreasonable terms and conditions. For example, some contracts for developers include provisions such as the Purchaser being responsible for rates from the day of sale (rather than settlement), land tax being paid on a multiple holding / proportional basis rather than a single-holding basis, service and utility connection or metre charge adjustments, prohibiting voting at an owners corporation meeting and more.
  • Plan ahead for your finances. Speak to a mortgage broker or trusted banking partner who can assist you in planning ahead for your finances. Always provide regular updates to your conveyancer/solicitor and mortgage broker, in particular when there is a change in circumstances.
  • Engage a legal representative for the conveyancing as soon as your contract is signed, to ensure that no important notices are served on you directly and so you receive appropriate legal advice during the course of the development build. You should also ensure that your appointed legal representative (property lawyer) has sufficient experience in off-the-plan purchases, which are different to purchasing an established property.
  • In the event that the valuation does not stack up, consider obtaining multiple valuations. Whilst the developer is not obligated to assist, you could request the developer to assist with a settlement rebate or negotiate other favourable terms to contribute to the shortfall. Your legal partner can assist and provide advice on the best way to approach these requests.
  • Review the updated plan of subdivision against the plan of subdivision in the Contract of Sale for any changes and immediately advise your legal partner if anything material changes that you would like to challenge or object to. You only have 14 days from when the updated plan of subdivision is provided to object so your response is extremely time sensitive!

At Burke Lawyers, our property lawyers have a depth of experience in dealing with purchasers who buy property off-the-plan and, we also work extensively with property developers. This means that we have the expertise to  advise purchasers and developers because we understand developments, from both sides.

If you require any assistance with your Off-the-plan purchase or sale contact us today on +61 3 9822 8588.

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