For investors, owner occupiers and first home buyers alike, the weighing up of what sort of property to buy is difficult enough at any time. Should one look at established properties, house and land packages, apartments, brand new property or off-the-plan?
“Right now, off-the-plan makes good sense,” says Marion Mays (pictured), who has been an avid investor for over two decades and coming from a background in property finance and asset recovery, has worked with buyers and property investors for many years.
Marion Mays is also the founder of the Thalia Stanley Group, a property investing mentoring firm in Melbourne through which she assists people locally, nationally and overseas to make the best decisions for their situation when it comes to property investing in Australia.
“Getting into the market or buying another property before the end of the financial year makes obvious sense,” Marion says.
“Apart from the taxation benefits, legislative changes coming into effect with the start of the new financial year, really make it a no-brainer to look at off-the-plan property right now,” Mays explains.
Up until June 30th purchases of off-the-plan property do not require normally applicable stamp duty charges, which can equate to anywhere between $18 970 on a $450 000 purchase – $34 000 on purchases of $650 000 – which for most buyers is a significant amount of money.
With the new financial year kicking in, the full stamp duty is payable, an amount that scales up with the purchase price and is payable on purchase – essentially meaning buyers have to have more savings in order to proceed.
“Not having to pay stamp duty on an off-the-plan property has made it possible for a number of our clients to get into the market considerably sooner,” says Marion Mays.
The State Government had amended the usual regulation in order to stimulate the market, where as currently the stamp duty charge is being waved, however come the 30th June 2017, this waver will fall away.
“For those already looking at getting into the market or perhaps setting out on their first investment property, this makes it a real time-is-money situation,” says Marion.
In simple terms, buying any property usually requires the extra funds to pay for stamp duty on top of the required deposit, loan fees and the cost of purchases such as legal costs.
“The other key benefit with buying off-the-plan is that you only pay a 10% deposit and are not required to settle on the purchase until the property construction is fully complete. This often means there are months during which you are not servicing the loan but are already securing the asset.”
“In many cases, by the time that the property is ready and settlement occurs, the property has already increased in value from what it was purchased for, giving you a potential for instant capital gain,” explains Marion.
Another key benefit is that tax depreciation of the inclusions means that you can leverage the off-the-plan purchase against your taxable income and reduce the amount of tax you are paying. It is recommended to get advice from an experienced property savvy accountant on the ins and outs of this.
There has also been a bit of critique around off-the-plan buying in the media and that buying ‘unseen’ so to speak can have its risks. In some cases, the completed property differed in the finish and standard to as it was suggested in the brochure. These are rare occurrences but it is of utmost importance to do your due diligence before buying.
“Undertaking thorough due diligence on the project, developer and builder before considering to buy off-the-plan is paramount to ensure you are getting what you pay for, and that your investment will perform well for you,” says Mays.
“It’s where most investors lack or don’t know how to go about it and all too often learn costly lessons,” she says.
For new investors or first time home buyers it is recommended to seek the services of an experienced professional or property mentor rather than going it alone.
As the saying goes, the best investment is always in oneself. So, educating yourself and learning from experienced investors is key do buying the right property for you. And, when it comes to buying at the right time, with the stamp duty still waved on off-the-plan purchases before June 30th, might just make it the right time to step into the market and save.