A first home buyers guide:

Buying your first property is perhaps one of the biggest and most exciting decisions you can make. One of the most common questions we are asked by first home buyers is whether they should buy an off the plan unit or an established residence.

At HKH we help explain the legalities involved in each type of purchase and the advantages and disadvantages so that you can decide which type of property best suits your budget and your needs.

Off the plan

Buying ‘off the plan’ is the process of entering into a contract to purchase a property, usually a unit, even though the unit has not yet been built. You are required to pay a deposit on exchange of contracts and then the balance of the purchase price is paid once construction has finished.

The main disadvantage is that a buyer does not see the finished product before entering into the contract. There may also be delays in construction times and sometimes the developer can make to make minor changes to the layout of the unit.

One of the main benefits of purchasing an OTP property is the potential Home Buyer Assistance available. Home Buyer Assistance is geared towards new construction in the ACT. Provided the contract price is within the relevant thresholds, a first home owner is entitled to the First Home Owners Grant (currently $7,000) and a concession on the stamp duty payable. Further, most new units also come with a 90 day defect warranty. There may also be other benefits in a financial sense, such as having time to save money before settlement and in some cases an increase in property value between the date of exchange and settlement.

Established Property

Buying an established property is more straightforward. A buyer can plan around a more reliable settlement date, but more importantly, the buyer can inspect the property before exchanging contracts. As a rule of thumb, what you see is what you get. A buyer can thoroughly inspect the property and be fully aware of what they are getting in to.

Unfortunately, there is no First Home Owners Grant or stamp duty concessions available for purchasing an established property, however a buyer may be able to apply for a stamp duty deferral. This means stamp duty can be deferred and repaid over 10 years rather than in one lump sum after settlement.

What’s the better choice?

Both options will appeal to different people. The Home Buyer Assistance is only available to an eligible person buying a property. The property must be an eligible property (in most cases an off-the-plan property). Once you purchase a property you cannot apply for the Home Buyer Assistance again (one small exception can apply). This means you cannot buy an established house and then look to buy an OTP unit and expect to receive Home Buyer Assistance.

We find a lot of clients tend to use the Home Buyer Assistance as the decisive factor when purchasing an off the plan property.  On the other hand, some clients will prefer a property they can actually inspect before committing to the purchase.

The decision is ultimately up to each buyer, but we strongly recommend discussing the implications that will apply in your personal circumstances. If you, or somebody you know, are looking to purchase their first property, give HKH a call to discuss.