Apartment buyer’s guide – what to look for when buying off-the-plan

Once upon a time, apartments were exclusively the domain of students or single professionals. But today, more Australians are choosing apartment living than ever before – including couples, families and downsizers.

Whether it’s a decision determined by affordability, convenient location or the ‘lock up and leave lifestyle’, the trend towards apartment living is only likely to increase alongside our growing population – the majority of whom reside in our big cities.

For investors and home buyers alike, buying an apartment off-the-plan has many attractive features and benefits, though there are also many important considerations to understand before signing a contract to buy.

What is buying an apartment ‘off-the-plan’

Buying an apartment off-the-plan is signing a contract to buy an apartment before the building has been constructed. You can view plans and renders but you can not physically see the building or apartment itself.

Like most apartments, off-the-plan apartments will have an associated strata cost. The developer will provide a schedule of strata fees, which may or may not including the sinking fund fee.

In larger buildings there may also be a full-time building manager who looks after the day to day running of the building.

How long do off-the-plan apartments take to build?

Compared to house & land packages or buying a townhouse off-the-plan, off-the-plan apartments usually take a longer time to build. Typical build time is approximately 2-5 years, compared to 6-18 months for house & land or off-the-plan townhouses.

Off-the-plan apartments – key benefits

Convenience:

New apartments are frequently located in closer proximity to trains or buses (referred to as transport oriented development or TODs) as well as shops or schools, a convenience which has great appeal to a wide variety of potential residents.

Being able to give up the car and cut down in commute times has a big impact on day-to-day life for students, single professionals and families alike. The cost saving of giving up the car or moving from two cars to one is also significant. Downsizers or frequent travellers particularly prize the lock-up-and-leave lifestyle that apartments offer.

Maintenance:

Apartment owners have substantially lower maintenance than house owners, with strata fees in place to manage the building and gardens. Savvy investors and home owners note that strata fees and a well-managed building management program is a positive thing, which keeps your asset in good shape over time.

Affordability:

New apartments offer the opportunity to buy into a premium location at a much more attractive price point than a house. More and more, you find new apartments being constructed in nice suburbs close to train lines – areas which were previously only comprised of standalone houses. In Sydney, for example, a house in a North Shore suburb could set you back $2-3 million, but an apartment in the same suburb is significantly more affordable.

Choice:

Other benefits of buying an apartment off-the-plan include, having the choice of preferred floorplan, level or views. Once built, there may be limited, if any choice left within a building.

Cashflow / tax / time:

Apartments typically have stronger cashflow, given better rental yields than houses.

Like other off-the-plan property types, new apartments offer full tax depreciation benefits and the ability to ‘buy time’. That is, you can pay your 10% deposit and have time before you settle to save the remainder of your deposit.

Finding the best off-the-plan apartments

In our many years of experience, the best off-the-plan apartments can be identified firstly by their excellent floorplans, where the developer has clearly spent time and care thinking about how someone will live in these spaces – things like natural light, ample storage and open plan living.

A quality apartment site is typically much closer to shops, transport hubs and jobs. The best apartment buildings may even have ground floor retail, such as cafes or a Woolworths. As part of resident’s facilities inside the building, they may also have a gym, pool, cinema, private dining areas or car share.

Importantly, the best apartments are also future-proof in terms of technology, for example with electric-car charging facilities, or perhaps even ground floor refrigerated lockers that can allow a Woolworths grocery drop-off without you needing to be home to receive them.

Buildings with a component of renewable resources are also a great sign – for example, solar panels or rainwater tanks used for the garden.

Buildings with a social component designed to foster a sense of community are also becoming more prevalent. For example, with a monthly BBQ organised for residents, free yoga classes or an app to help communicate with other residents in the building.

This aspect is becoming even more important as we see a shift, with not just young families choosing to live in apartments, but also families.  A more ‘community-minded’ building can replicate the traditional community of neighbouring houses on a cul-de-sac with kids playing on the street. Seeing how developers continue to cater for this growing market is an interesting trend to watch over coming years.

 

Key considerations or factors to look out for:

  1. Is the DA approved?A residential development project must secure a DA (Development Approval) from the Local Council before it is able to proceed to the construction phase. It is a crucial step in the lifecycle of a project, and if not secured, the project will not be able to proceed. Therefore, it is important that when buying off the plan, you ask the developer if the DA has been secured.
  2. Sunset date & extensionsThe sunset date refers to the day by which a developer should have completed the project, allowing you to settle on your property. If this is not achieved, the developer may be able to cancel the contract, or extend the sunset date dependent on the terms and conditions of your contract. This is an important part of the contract, and your solicitor can assist you with understanding your rights should this occur.
  3. Will my views remain?Aspect and views can really be the difference between a good and great apartment. It’s well worth the effort to understand how likely it is that you may have your views blocked by other new developments. A call to the local council duty officer will reveal other development applications that may impact your viewline.
  4. AmenityResident amenities need to be well-designed, with quality fixtures and fittings that will stand the test of time when maintained appropriately. Amenity that is designed to require minimal maintenance is ideal, as this will keep management costs lower. For example, a good quality lift will require less maintenance or repair. Similarly, lower maintenance landscaping with inbuilt irrigation systems, will reduce the need for a regular gardener.
  5. Valuation:With a longer time to build, it’s important to be aware the market may fluctuate, one way or another, so it’s prudent to keep a financial buffer in place so you are able to cover any potential shortfall in your valuation. A good broker or your Ironfish strategist can help you understand this process.
  6. Quality and legacy of developer and builderThere’s perceived concern that quality is a bigger consideration when buying an apartment compared to a townhouse or house off-the-plan. However, in our experience, irrespective of what type of property you’re buying, construction quality is equally important. It’s essential to know the track record of the developer and builder – ask them what other buildings they’ve delivered previously ask to walk through a previous building or at least see photos of the completed property.

This article is intended to provide general information only, current at the time of first publication. It does not constitute any financial advice, offer, contract or inducement to buy. Investors are expressly recommended to do their own due diligence in relation to any investment decision they make and seek independent financial advice.

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