Off The Plan Home- How Do You Know It's Worth It?

Hi Ozbargainers,

I am a first home buyer trying to find an affordable (if that word even applies to the current housing prices) home in Melbourne west suburb. Recently I have come across a new development in the area I would like to move into. However, after further investigation, I discovered that the prices of the off-the-plan units are higher than I expected (about 50-100K higher than what the median prices area in the same suburb). My questions are:

  1. How do you determine the value of off-the plan (OTP) units?
  2. what are the advantages/ disadvantages of buying an OTP house?
  3. Have you guys had any luck negotiating prices for OTP units? If so, how did you do it?
  4. If you have bought an OTP house, what was your experience? Was the finished house what you had in mind when you signed the contract?

TIA for your time!

Comments

  • +1

    Value ? Research vacant land price of nearby or similar size + $150k for entry level 3 bed 2 baths built by project builder, and compare the overall price.

    Advantages ? Only pay deposit for now and settle the remaining once completed. Valuation might have gone up after 2 years.

    Disadvantages ? You've absolute no control on delayed completion / change in "non-significant" material or design or size. Valuation might have gone down during settlement as i consider market is peaking atm.

    Nego ? No idea.

    EXP ? Expect defects be it big or small.

  • +4

    Don't be surprised if the shonk developers reneg on the deal leaving you without a place and losing time value of your investment

  • +1

    yeah the other disadvantage is, you only get to see rendered images of what you think it will turn out to be
    when it is completed, it may not look like what you thought

  • One disadvantage? In can take bloody ages. You'll find a lot of the off the plan developments don't even have the land registered yet. You are then at the mercy of the council.

  • +2

    And if does increase in value, there is the risk of this happening

    https://www.domain.com.au/news/melbourne-newlyweds-dreams-cr...

    • Wasn't aware of this, thanks!

  • I have heard that developers can delay finish date by a very long time, and also can change the size.

  • "about 50-100K higher than what the median prices area in the same suburb)"

    dohhh…too obvious.

    its OFF the plan means developer factor in price in another 1-2-3 years time (depending when they think they can finish the project).
    if their prediction is correct then fine, but what if in another 2-3 years price not go up?

  • +1

    My experience - I brought an apartment off the plan a few years ago and it worked out well as over the 1.5 years it took to build the value went up 100k giving us an easier time getting banks approval (80%LVr to ~70% LVR). Negative aspects include not knowing what it looks like till its built, and our car park had a pipe running though it which made it tight to get in. I looked at another place just down the road when I moved in but decided against it. Now those places are just finished and there are a few on the market for the same price as what the deposit was for. So you should really do your research beforehand and know what you are getting into when you sign a contract.

    • Yea, I did some research for my neighborhood, the prices of apartments have not gone up in the past few years, if anything, second-hand apartments were sold for prices lower than what they were bought for.

  • +1

    Have you got "The Sims 3" game? I do mockups in it for getting a feel of interior colour schemes when I'm redecorating and to get a more 3D feel of floor plans. Other than that, buy the worst (or cheapest) house in the best street, if property values are low in the area and its not marked or geared for growth, values wont rise by magic.

  • +1

    If you buy the land yourself and get a builder etc. it is a lot of work, but it will save you lots of money. My guesstimate is that the total property will be worth $100K more than what you pay for it all up. But you will certainly work hard for that, almost instant, capital gain!

    • After going to some auctions, I realised land prices are crazy in my neighbourhood too, a rundown house sitting on a 600sqm land was sold for close to $1m… cant afford a house, will have to look into townhouses.

  • +1

    I sometimes equates buying OTP the same as internet shopping; you can't touch and feel. You buy based on your knowledge of the product, and how much you trust the Developer.

    Come buy in Brisbane, very affordable and great lifestyle! Many established ones, no need to wait with OTP.

    • +1

      I love internet shopping for clothes and shoes, with free return of course. Unfortunately, OTP can't be returned if you are not satisfied.

  • +1

    pretty sure you can negotiate the ones in sydney… so many buyers had to back out coz loan tightening .. very easy to negotiate.

    • THe ones I was looking at was stage1 development, apparently harder to negotiate than late stages.

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