1. Buy from trusted developers with a proven track record. Established developers obviously have much more experience and resources than small developers. Reputable developers tend to make fewer mistakes (which can be extremely costly in the long run) and when problems occur, they tend to be in a position to rectify them more effectively and efficiently. Although many new development projects have mandatory 7 years structural warranty with an insurer as backup, it is not uncommon for developers to simply go bankrupt before this period is over. It then becomes much more complicated to claim for defects from the insurance company. Where possible, try to inspect other properties which the developers have completed so you can gauge the quality of the workmanship first hand.
2. Understand exactly what you are buying. Read the fine print and seek legal advice before signing any documents. Don’t make assumptions as to quality based on promises made by the salesperson or model/showroom. If detailed specifications are not provided, don’t be afraid to demand more information in writing or to provide your own list of requirements/specifications. For example, even if the shower screen for the bathroom is specified as ‘glass’, this does not tell you whether you will be getting 5mm thick semi-frameless glass screen or 10mm fully frameless ones. There is a significant difference both in quality and price. Most developers know that buyers look at the quality of the kitchen appliances and they tend to splurge on high-end brands. However, most buyers are not as educated or discerning when it comes to accessories such as tapware, cornices, skirting boards, balustrades, etc. You need to understand whether your money is going towards quality German tapware or cheaper Chinese ones, for example.
3. Understand your rights. What modifications or substitutions are possible without additional costs to you? Can the apartment be on-sold by you prior to completion? Where is the down-payment being held (i.e. is it in a trust account? Can the builder use it for construction?). Are you able to get out of the contract if the property is not finished on time? Are you able to visit the site during construction? What is the process to ensure that defects are fixed in a timely manner?
4. Have a contingency plan. Few developments are completed according to schedule and you need to make sure that you will not be overly inconvenienced should this occur. In addition, make sure you are financially prepared and able to pay a higher strata levy (where applicable) than what the developers calculate in order to appeal to buyers during the sales process.
5. Consider your exit strategy. When it comes time to sell, will it be easy to offload your new property? Without the newness factor, will it still appeal to many buyers? Has the property been well designed to have a timeless appeal? Will there be lots of other similar properties to compete with yours (in the area) when you want to sell? Will buyers be attracted or put off when they find out who the developer is? At the end of the day, the logic of buying off-the-plan property is similar to other investments. You need to weigh the pros and cons as they apply to your life and circumstances. You will also need to understand your level of appetite for taking risks and your ability to mitigate them; because buying off-the-plan means that you are buying something you can neither see nor touch. You are essentially buying a promise.
Henny Stier is a Licensed Real Estate Agent and the Director of one of Sydney’s oldest and most trusted property buyers agencies – OH Property Group. A respected property expert, Henny specialises in the search, analysis, appraisal, negotiation, bidding and purchase of properties across all price ranges throughout Sydney.