Managing Director Ilya Melnikoff talks “Buying Off The Plan”



Buying off the plan is the concept in the Australian property market which, if applied correctly can help you get onto the property ladder and be on the way to building real wealth through owning a stake in the most tangible asset one can own in their lifetime and do it for a minimal initial outlay.

Whether you are a first home buyer or an investor, taking this plunge may seem risky at times, however utilising and careful consideration of 3 key principles can minimise the risk and create a much more outweighed chances of reward;


1. Timing – Timing is everything in Real Estate. For example, you can find the most amazing property but if you buy it at the top heat of the market, chances are that you will overpay either a little or a lot. Now, if you are a first time buyer as mentioned above, provided you have sufficient deposit,  are comfortable with repayments and intend to keep your property for 7 – 10 years,  the rate of capital growth of your property historically should outstrip the overpaying factor at the onset when buying. In NSW particularly when the market is hot, you hear people say that property is overpriced and they will wait for it (market) to come down and save more deposit. Trouble for a first home buyer with that, is that the rate of saving for a bigger deposit never catches up with the rate of growth of the market so its very important to get in at any point in time and buy by any affordable means possible.

If you are an investor, timing needs to be looked at more carefully depending on the investment strategy and whether its a long term hold or short to medium “buy and flick”, if its the latter, one should manage buying in the hot market more carefully than if its a long term investment.

With buying off the plan , the situation is far less risky for both of above scenarios, as you are effectively punting a small deposit and if the timing and the project is right, by the time building is finished you would have earned extra uplift in the value of the property. You are effectively buying between 1 and 3 years in capital growth for very little initial outlay. Many first time buyers for example, by this method, were able to start small and create enough value uplift to re-sell and buy into a larger more expensive property by the time project is completed. Buying off the Plan is also easier in terms of  a deposit as you can save your hard earned cash and instead purchase a deposit Bond ( issued by many insurance companies ) representing value of the deposit and save majority of your cash for other opportunities or even buy another property which will again grow in value.

Depending on when in the project timeline you buy, buying off the plan also gives a greater margin to withstand any market flactuations, in terms of it cooling down or heating up. Hence its extremely important to get in at the project release rather than half though construction at which point most developers would escalate prices as they have met their pre-sales targets and are not desperate to sell.

These are all particular benefits to buying off the plan.


2. Location – If you chose poor location even in ideal time of the market, while it may not lose you money it may also not earn as much and strip you of the opportunity to invest in better areas. Ensure to chose locations with obvious upsides, i.e. new train station being built or announced , upcoming shopping centre in the area, recent or proposed rezoning. These services and amenities will always help contribute to the capital growth and if you buy off the plan in that area, chances are that by the time project is finished, the value of your property will be driven higher by those factors.


3. Developer – Important to chose a developer known for experience and delivering high quality projects across their brand.  Developers who put effort into marketing their brand  will be more likely to deliver a product that will preserve their reputation and hence sustain and increase the value for the buyers in the long term.