Helpful Hints

1. Thermal mass

Thermal mass is often talked about as vital for good passive-solar design.

Thermal mass in WA is easier to provide that you think, purely due to the materials we prefer to build with. The installation of concrete floors and brick walls provides the thermal mass of our buildings. We must make sure that it works for us, rather than against us.

Thermal mass can be used to trap, store and later use the collected thermal energy in the form of heat. The performance of thermal mass elements of a home can be enhanced through the choice of floor coverings, colouring and textures selected. A matt, dark-coloured floor tile laid on a concrete floor is more effective than a light coloured carpet that insulates the concrete slab from the heat. Same goes for a dark paint colour on an internal brick wall that faces a window collecting the warmth of the sun – it is far more effective than a light or reflective colour to maximise its thermal performance.

In winter, opening the blinds and curtains will allow the floor and walls of your home to absorb the radiant heat. As the outside temperatures fall at night, the thermal mass will release the stored thermal energy as heat counter-acting the cooling external conditions. Close the window treatments to keep the warmth in.

In summer the opposite is true. So how can thermal mass be a good thing in the summer? You do need to shade the heat from the thermal mass to keep your home cool. The thermal mass will still absorb the heat of the home during the day. At night ventilate the thermal mass so the heat is released to keep your home cool.

Passive-solar design is about making your home more comfortable and to reduce the amount of artificial heating and cooling required. Having done that, you as the occupier need to ensure that you know how to use your home’s features to maximise the efficiency of your home through the way you live.

So benefiting from thermal mass through passive solar design does require some action by the occupant.

2. Narrow lot development

The move toward urban consolidation and home owners subdividing their existing properties has meant that more new home buyers are building on small narrow blocks. There is also a general trend to build larger 2 storey homes on smaller land areas. Houses are getting bigger, but blocks are getting smaller.

There are a number of specific issues which you need to consider. Building costs per square metre may be higher due to the need for additional cavity walls. Building on smaller narrow lots usually involves the construction of more perimeter walls than internal walls which will lead to higher building costs. Site access could also be a problem for delivery and placement of building materials.

You must also consider new residential design codes. These cover things like:

  • Restrictions on the size of the garage to less than 50 per cent of block width. If the block is less than 12 metres wide, it will be impossible to erect a double garage;
  • A requirement for neighbour consultation. Neighbours are often required to sign off their approval on new buildings which involves zero-lot lines, setbacks and overlooking adjoining property issues; and
  • On sloping sites, restrictions on floor height.

Local governments can often impose their own restrictions on house size and design in order to preserve, as they see it, the amenity of the street or surrounding area.

You may also have particular design challenges depending on your lifestyle. Incorporating courtyards and outdoor living areas into smaller lots can be difficult.

You should also contact Master Builders members for advice and consider their experience in dealing with small, narrow sites. Use the adjacent Find a Master Builder search service.

3. Multi-storey homes

There are a number of specific construction issues with two storey homes.

Obviously the square metre cost and length of the construction period will be greater when a second storey is added. Costs for additional storeys often double due to the cost of scaffolding, the requirement for engineering certification of the suspended slab and the need for the slab to cure for some time after being laid.

Building multi-storey is becoming much more popular than in the past.  Homebuyers require a great deal of internal living space, but are increasing confined to building on smaller lots. The home is now much more a focus for activities such as home theatre viewing, entertaining in alfresco areas, or working in a home office. Buyers requirement for additional space can only be met by building an additional storey.

Two or three storey homes can also be subject to more stringent planning requirements. Issues such as privacy rights of existing neighbours or shadowing effects on adjoining properties and noise often cause rancour between adjoining property owners even before construction commences. Many local authorities require existing owners to “sign off” on building plans proposed by new developers as part of the building approval process.

Some other issues that you need to consider include what type of materials you will use for the second storey. Framed construction is becoming more popular, particular for additions and renovation activities. New water efficiency regulations impose additional requirements for homes with more than 2 bathrooms which would be commonplace in two-storey homes.

4. Financing your home

The first step is to do a budget.

You will need to sit down – in case any of the figures surprise you! From your seated position, work out your annual income and ALL your expenses. Check all your bills to work out the annual cost. If you are buying as a couple, do a combined budget. Allow for some inflation in costs and a contingency for unbudgeted expenses. Provide for maintenance costs, rates and bills at your new home too. You can find template budgets online, in various books and now-days on apps.

From this exercise, you will be able to see how much you can afford to spend on interest and any repayment costs. Remember that if this is your first home, you can get help with the First Home Owners Grant.

You will also need to do a stocktake of all your assets and liabilities.

Armed with this information, you can hop online and use online home loan calculators, such as the free one on the Bankwest website. This will allow you to work out how much money can be borrowed, what the repayments would be and to compare alternate home loans in the marketplace. A good example is the Keystart ‘Low Deposit’ home loan which is a variable interest rate loan which can be used by owner-occupiers to buy an established home or build a new house. It is available to both first and non-first home buyers and we lend across the State of Western Australia.

You will find a choice of fixed home loans and variable rate loans. Fixed loans give you certainty in your expenses over a period of 1 to 5 or sometimes up to 10 years. It removes the uncertainty of variable rates. But the downside is that fixed rates can lock you in if interest rates fall or your circumstances change.

Work out if you have enough funds for a deposit. Additional mortgage insurance costs can apply unless you have a 20% deposit. Check out the loans in the market though, you might qualify for low deposit loans from a financier, bank or Keystart.

If you want help with all of this, a banking, broker or financial specialist can assist you do the sums. Even better, they may be able to give you a pre-approval before you go shopping for a home.

You also need to be careful to allow for all costs when pricing your new home. This is not only the building price, but will sometimes need to also allow for finishings, fixtures and fittings and landscaping costs. Even with fixed price building contracts, you may have variations, extension of time costs and other adjustments. So allow for a contingency amount there too.

Stamp duty might also apply to land purchases or the total cost of an established home. This is a big cost you need to budget for.

Good luck with your new home purchase, it is a major investment so it is worth doing all the preparations above to be able to afford and enjoy your new home.

5. Deposits for plans

Under a Preparation of Plans Agreement or a Preliminary Work contract homebuyers sometimes pay a small deposit on signing these contracts, which does not commit either party to build the home. The agreement covers the builder’s costs of plans being drawn up, application fees, and the like.  Usually if the contract goes ahead, any deposit is taken into account in determining the final contract price.

An owner who pulls out of dealings with the builder at this stage  may find that the builder has incurred significantly more costs than the amount paid as a deposit. While there may be some refund due for indemnity insurance premiums, for example, these amounts may be less than the builder’s other costs in preparing the contract documents and drawings.

In other words, the builder may not be required to return the full deposit, or any amount, depending on the costs that have been incurred. If the owner wishes to dispute the situation, the Building Disputes Tribunal will not be appropriate since no home building work is involved.

On the other hand, if the owner has signed a building contract and then wishes to cancel, the situation may be more serious. In addition to any costs that have been incurred the builder may also be entitled to claim loss of profit for work that would have otherwise been completed under the contract.

It is vital that homebuyers read and understand the contract to be signed, in particular the obligations that may be incurred if the homebuyer has a change of mind. Remember also that cancelling a contract does not entitle the owner to take the building plans to another builder. Usually the plans are copyright and the use of them without permission by the author or originator is not permitted.

6. Aged residents and housing

Designing and building housing for older people is becoming very important as the Australian population ages. Each year one in three every older Australians will suffer a fall, with around 5 to 10 per cent of these falls causing an injury which requires medical attention.

Many of these falls around the home are preventable. Sensible designs and construction in new homes can minimise risk of falls by the elderly (or any age group for that matter).

Buyers, builders and tenants should do a risk assessment audit in home design by thinking about the following issues:

  • Using non-slip tiles rather than standard tiles, particularly in wet areas like bathrooms and laundries. Make sure that floor tiles are laid level.
  • Minimising the use of steps and stairs in and around the house and garden. If stairs are a requirement, ensure that the design minimises accidental tripping.
  • Ensuring that your lighting plan allows sufficient light, including in outside areas where steps are involved.
  • Shower hobs can be dangerous for elderly persons. Also make provision for a soap holder in the shower design.
  • Once construction concludes, be mindful of loose surfaces, cracked footpaths, loose pebbles and stones. Remove these dangerous items.
  • Inside the home make sure that floor coverings and rugs are secure, and that there are no loose electrical cords.
  • Handrails may be considered in suitable areas in and outside the home.

Potential safety problems can be avoided by proper planning and suitable design in your new home. Talk to your builder about tenants’ or your needs and incorporate these elements into your building specifications. It is often easier to do this during construction rather than retrofitting items once a building is complete.

7. Accessible Design

Designing and building accessible homes is the way of the future. Due to Australia’s ageing population, the number of families with small children and the number of people with temporary and permanent disability.

Incorporating accessible design at the planning and design stage can save thousands in retrofitting down the track.

The State Government has partnered with the WA building industry to develop the Liveable Homes initiative to provide the tools and resources required to build accessible homes without compromising on style.

Modern interior design already lends itself to accessibility with open-plan living, spacious kitchens, wide entry doors and slung bathroom basins.

Incorporating accessible design features in new homes, such as wider doorways, level entrances and reinforced bathroom walls, make homes more adaptable and give people greater independence as the years go by.

A range of support materials is available at www.liveablehomes.net.au to help builders, designers, architects and home-owners incorporate accessible (or universal) design into their homes.

Fact sheets provide detailed technical specifications and perspectives for each Liveable Homes guideline, and CAD and jpeg images are free to download and use.

Examples of house plans for a range of block sizes and shapes—using all essential and some desirable Liveable Homes criteria—have been developed by WA builders and are available as PDFs and in CAD format.

A photo gallery highlights houses built using Liveable Homes guidelines and checklists are on hand to provide a quick overview of essential and desirable criteria.

8. First Homebuyers & Building

First homebuyers usually comprise around twenty per cent of the new home market. This means that of the 20,000 new dwellings constructed each year, around 4,000 will be built by new homebuyers.

Master Builders’ advice to homebuyers who are going through the building process for the first time is as follows:

  • Make sure that when you are obtaining quotes for your new home that you are comparing “apples with apples”. In other words look at the plans and specifications carefully and make sure that the prices you obtain are comparable in terms of what is included;

 

  • Do not choose a builder purely on price. You should also consider the builder’s track record. Talking to previous clients can provide valuable feedback on past performance. Assess your ability to be able to work with the builder. Good communication skills are vital;

 

  • Make sure that you have a contingency sum in your building budget. There may be variations to the original plans and drawings that you may wish to make during construction. Alternatively unexpected expenses like site costs may be higher than the provisional estimate in your building contract;

 

  • Check carefully what the building contract covers, because some contracts do not allow for floor coverings, driveways, landscaping or other fixtures that you may want;

 

  • Decide whether you wish to build with a large project builder or a smaller builder. Both have advantages and disadvantages. Large builders have the “economies of scale” resulting in lower costs, while smaller builders can be more flexible and directly supervise the building work;

 

  • Do not sign a building contract or preliminary agreement without reading and clearly understanding your rights and obligations;

 

  • Keep an accurate diary of negotiations and discussions with sales staff and construction supervisors. Do not rely on verbal representations or undertakings by sales staff. A written record of these undertakings should be included in the contract document, and/or maintained during the construction period;

 

  • Use only a builder who is registered and consider using a Master Builder member who has access to the latest information on regulatory changes and training programs;

 

  • Any variations should be documented and signed. Do not rely on a handshake or a “she’ll be right”; and

 

  • If there is anything that you are not happy with, talk to your builder first. Small problems can be easily sorted out, but could escalate if they are allowed to fester.
9. First Homebuyers & Incentives

There is a lot of assistance available to first home buyers from Governments. It is worth spending some time to carefully investigate the rebates and assistance available to you.

First Home Owner Grant
The WA Government’s First Home Owner Grant currently offers $15,000 to first home owners who purchase or build a new home (from 1 January 2017 for 12 months), and $3,000 for established homes. The grant is not a loan, and it doesn’t need to be repaid. Home buyers can use their grant to cover the deposit and loan fees in WA, provided they meet the criteria.

This grant is capped to properties with a total value, including the land of $750,000 or less. If the home is located north of the 26th parallel, the cap increases to $1,000,000 or less.

Home Buyers Assistance Account
This account provides a grant of up to $2000 for the incidental expenses of first home buyers when they purchase an established or partially built home through a licensed real estate agent for the purchase price of $400,000 or less. The grant can be used for mortgage registration fees, solicitor and/or conveyancing fees, valuation fees, inspection fees, establishment fees, mortgage insurance premiums and lending institution fees associated with lodging the application.

Stamp duty reductions or exemptions
When a home buyer is eligible for the First Home Owner Grant, a concessional rate of transfer duty may apply. Properties under $430,000 are completely exempt, and a reduced rate applies for properties of up to $530,000 for house and land. If land only is bought, first home owners are totally exempt for land purchased up to $300,000, and a reduced rate applies for land purchased for between $300,000 and $400,000.

Keystart Home Loan
The Keystart Home Loan is a low deposit loan for homes under $480,000. Home buyers may be eligible if they have an income under $95,000 a year, or if they are a couple with a combined income under $115,000. See Keystart for more information.

SharedStart Home Loan
With a fixed SharedStart loan, you receive finance from Keystart to purchase a percentage of the property from the Department of Housing. The Department will retain its share, up to 30%, in the property permanently and you can at any time sell your share of the property back to the Department.

GoodStart Loan
This loan is available for current Department of Housing tenants, which is another shared ownership arrangement.

Other Support
There is other financial support available through the Department of Housing, such as Disability Home Loans for people with disabilities, and Aboriginal Home Loans.

Even if you can access any of these government savings and grants, you must still carefully budget to see if you can afford your new home on your income, while allowing for unexpected expenses.
First home buyers should take advantage of all the opportunities out there to get assistance to buy or build their new homes, and take care to read the fine print to budget carefully for the largest single investment generally made in a lifetime.

10. Choosing a Builder

The choice of a builder will be influenced by the size and type of project.

If it is a new house, do you choose a project home or a custom builder? A remodelling project (ie. renovations, alterations and additions) for instance, usually requires a different level of experience and expertise to blend the old with the new.

Residential builders in WA are required to be registered. So whether you choose a project home builder or you are referred to a builder by friends, you must ensure the name of that builder is associated with a current registration and endorsed for the work you intend to have undertaken. If there is no licence, then immediately scratch the name from the list.

Below is a general checklist which you can use as part of your selection process. The most important thing to remember is to ask questions at any stage, particularly if you are unsure about any decisions or changes.

  • Be precise about the project details and your expectations of the builder. Ensure you have detailed plans and specifications;
  • Obtain information from your local council about zoning regulations, requirements and building approvals. Your Council website can be found at www.walga.asn.au/about_lg/council_websites;
  • Only deal with a builder who is licensed http://www.buildingcommission.wa.gov.au/;
  • Look to see if your builder is a member of the Master Builders Association and also to see whether they have won any Master Builders awards for the quality of their building work or customer service;
  • Decide whether you wish to build with a large project builder or a smaller builder. Both have advantages and disadvantages. Large builders have the “economies of scale” resulting in lower costs, while smaller builders can be more flexible and directly supervise the building work;
  • Make sure you have plans and specifications for builders to quote on, if the builder doesn’t draw the plans for you. Or choose a designer first.
  • Familiarise yourself with the fundamental legal obligations and jargon, to feel comfortable openly talking with your builder;
  • Do not sign a building contract or preliminary agreement without reading and clearly understanding your rights and obligations;
  • Select only three or four builders to quote on your project;
  • In comparing building prices or quotations, make sure that you are comparing “apples with apples”. Building prices can vary due to different types and grades of materials specified, or because of certain exclusions or inclusions in the price;
  • WA has mandatory home warranty insurance for works over $20,000
  • Any concerns you have should be raised with the builder immediately;
  • Try to be contactable at all times, thereby allowing your builder to discuss any issues and make a quick decision;
  • Any variations, extra work or omissions should be made in writing and signed by you and the builder. Expect requests for extra work to be an additional charge;
  • WA has stringent safety laws, so expect the builder to make regular site visits; and
  • Ask about the accessibility of the builder during construction – if a problem arises, can you contact the builder at short notice? How regularly will the builder or supervisor update you on the work programme?

BUILDING PRODUCTS AND SERVICES

Show More

FAQS

What assistance is there for first home buyers?

There is a lot of assistance available to first home buyers from Governments. It is worth spending some time to carefully investigate the rebates and assistance available to you.

First Home Owner Grant

The WA Government’s First Home Owner Grant currently offers $3,000 to first home owners for established homes. The grant is not a loan, and it doesn’t need to be repaid. Home buyers can use their grant to cover the deposit and loan fees in WA, provided they meet the criteria.

Home Buyers Assistance Account

This account provides a grant of up to $2,000 for the incidental expenses of first home buyers when they purchase an established or partially built home through a licensed real estate agent for the purchase price of $400,000 or less. The grant can be used for mortgage registration fees, solicitor and/or conveyancing fees, valuation fees, inspection fees, establishment fees, mortgage insurance premiums and lending institution fees associated with lodging the application.

Stamp duty reductions or exemptions

When a home buyer is eligible for the First Home Owner Grant, a concessional rate of transfer duty may apply. Properties under $430,000 are completely exempt, and a reduced rate applies for properties of up to $530,000 for house and land. If land only is bought, first home owners are totally exempt for land purchased up to $300,000, and a reduced rate applies for land purchased for between $300,000 and $400,000.

KeyStart Home Loan

The KeyStart Home Loan is a low deposit loan for homes under $480,000. Home buyers may be eligible if they have an income under $95,000 a year, or if they are a couple with a combined income under $115,000.

 SharedStart Home Loan

With a fixed SharedStart loan, you receive finance from Keystart to purchase a percentage of the property from the Department of Housing. The Department will retain its share, up to 30%, in the property permanently and you can at any time sell your share of the property back to the Department.

GoodStart Loan

This loan is available for current Department of Housing tenants, which is another shared ownership arrangement.

 Even if you can access any of these government savings and grants, you must still carefully budget to see if you can afford your new home on your income, while allowing for unexpected expenses.

First home buyers should take advantage of all the opportunities out there to get assistance to buy or build their new homes, and take care to read the fine print to budget carefully for the largest single investment generally made in a lifetime.

What is practical completion?

Practical completion is a term that is misunderstood by many home buyers. Generally it means the point where all building work is complete or all but completed, in accordance with the contract, and the house is reasonably fit for occupation.

A building contract usually defines practical completion being when all works are completed, except for any defects or omissions which do not prevent the home from being used for its intended purpose. In other words, if the unfinished items prevent the home from being “lived in” then practical completion could be deemed not to have occurred.

Usually there will be a practical completion inspection and the building supervisor and client will agree on a list of items that need to be attended to.

There is usually a short gap in time to the handover, commonly 10-14 working days, although two weeks is the standard timeframe to key handover. This may be extended if there are a lot of practical completion items still to be addressed.

The builder has a contractual obligation to repair minor defects, but this may not necessarily happen before handover, although most builders would attempt to do so. Many items are attended to in, or at the end of, the defects liability period (usually a period of four to six months after practical completion for many residential contracts, and sometimes called the maintenance period).

Practical completion is an important stage of the building process but buyers must understand that not every last detail will necessarily be completed at that time. In short, at practical completion, the builder is paid in full, there is a short gap of time, and the owner takes occupancy – then the defects liability period starts. The Building Commission or the courts will act if the builder does not meet the defects liability obligations.

What is home indemnity insurance?

Home indemnity insurance protects you against financial loss for faulty, unsatisfactory or incomplete building work and loss of deposit should the builder die, disappears or becomes insolvent. The insurance policy must cover the residential building work during the construction period and for six years from the date of practical completion.

Currently all residential building work valued over $20,000 must be covered by a policy of home indemnity insurance except when carrying out ‘associated work’ only ie. installing a swimming pool, kitchen cabinetry or landscaping.

It is compulsory for builders to take out a home indemnity insurance policy before accepting any payment or obtaining a building licence from the local government. The home owner must also be given a copy of the insurance certificate.

It is the builders’ responsibility to take out home indemnity insurance; however the insurance cost will be paid for by you, so ensure it is in the contract before signing. Home indemnity insurance needs to be purchased before commencing any re residential building work, asking you to pay a deposit or asking you to pay any other money under a residential building contract.

The builder is also required to give you a copy of the certificate of insurance which summarises the main requirements.

 The policy will be in your (owner) name, so should you sell the property within the six year insurance period, the benefit of the policy will pass to the subsequent owner.

If home indemnity insurance cannot be obtained, it is recommended that you find another builder who can to ensure you are covered.

Click here for more information.

Should I have a building inspection before buying?

Under the Builders Registration Act, a builder is legally responsible for all faulty and defective work for a period of six years after practical completion. Whether or not you engage a private building inspector will not affect the builder’s obligation for the integrity of your home.

However, many owners do seek assistance from a private consultant if they do not feel qualified or confident in their ability to deal with the builder or his construction supervisor at handover.

If you decide to engage a private inspector, as a matter of courtesy you should advise the builder of your intentions. It is important also that you instruct the inspector appropriately. What you do not require is a list of minor defects e.g. chipped paint, cracked tiles etc which are perfectly obvious for all to see. Builders and clients are often annoyed by voluminous inspection reports which identify imperfections like these which would be rectified in the normal course of events anyway.

Your instructions to an inspector should be to verify the integrity of major building elements. For example, the inspector should climb into the roof space to see if the roof structure is correctly installed. Checking that windows are correctly fitted and sealed is another important item.

Sometimes it is the things that are unseen that are most important. An experienced building inspector can usually assess integrity of the footings and slab by visual examination.

Before engaging a building consultant you should ask for a sample copy of a previous building report.  Are the defects described specifically?  Comments such as “non-compliant with building code” are vague and unsatisfactory as they give the builder no clue as to what specific section of the code has not been met and what needs to be remedied.

Private inspectors do not require registration in Western Australia, so it is important to check their experience and credentials before engaging them.  The quality of some building consultants has been heavily criticised by the Building Disputes Tribunal so it is important to choose wisely. There are a number of precautionary steps that you can take to ensure that you are getting value for money.

Tips:

  • Check with the Builders’ Registration Board to confirm their registration number;
  • Contact the Master Builders Association for members who are building inspectors. You can use Master Builders’ free Find a Member service to find an inspector;
  • Obtain a list of previous clients and obtain their feedback; and
  • Confirm an agreed price before agreeing to an inspection.
What are the benefits of apartment living?

Apartment living is becoming a more popular choice for Western Australians, and what will suit one individual may not suit another.  There is a greater variety of product coming onto the market – it is exciting that WA residents now have much more choice than in the past.

 Affordability

As house prices continue to rise, for many first home buyers the dream of buying a four by two house with land is not a realistic option. Apartments tend to be more affordable, and with smaller floor plans can save on cleaning time and gas and electric bills. As many apartments being built in transport oriented developments, you can also cut down on car use

Location

With many located in Perth’s inner suburbs there is great access to shopping, restaurants, entertainment and cultural facilities, and can be found near public transport which can save you costs too.

Lifestyle

Due to the location of many inner city apartments, everything from shops, cafes, theatres and parks is usually right on your doorstep.

Maintenance

Apartments tend to have a smaller floor plan then homes, meaning the cleaning and general upkeep are less. All apartments come with a corporate body or strata company to handle the bigger issues and maintenance of the complex such as painting, window and gutter cleaning or gardening which means lower repairs and maintenance bills for you.

Amenities

A lot of bigger apartment developments can have great additional amenities such as swimming pools, gyms, communal gardens or entertainment rooms. This can be a great way to meet and make friends with the other people living in your complex.

Security

A lot of the newer apartment complexes are quite hard to access, with a security door or tow to get through before you enter the actual building. You are also in close proximity to other residents which offers greater security and comfort of, as well as secured off street car parking.

Sustainability

Do to apartments being smaller, many people own less possessions which means less waste going to landfill. These days, many modern apartments are being built with smart wiring and sustainability in mind.

Are apartments a good investment option?

Apartments are a great investment option if you can afford to. They are typically in high density areas with amenities close by, and are a great option if you want to lock and leave as they are very safe.

It’s important to research the area you want to buy in, and the supply and demand in the area as this will determine the financial success of your investment. There is currently a strong demand for apartment living in inner city Perth, meaning there is a large supply of apartments which you can typically purchase at a good price. However, when there is an oversupply and a lot of apartments available for sale at the one time, it’s easy to flood the market and cause prices to drop.

Land to asset ratio – on average, land value appreciated 10% per annum, while buildings depreciate at 1.5% per annum.

A lot of people believe that buying a house on a large piece of land will increase your value, as it is the land value that appreciates. However, purchasing an apartment in a premium location where the land beneath it is worth a lot, even if the apartment itself is on the smaller size, your land-to-asset ratio is a lot higher as the land you are sitting on will continue to increase in value, driving up your apartment price.

For this reason, it’s wise to look for apartments in a premium location, or one that is in a growing and emerging suburb, and a complex that has fewer buildings.

One of the biggest lures of an investment property is tax depreciation. This is where an investor can write depreciation (the lowering value of the property) off as a tax-deductible expense and end of increasing their cash flow. Depreciation rates depend on a property’s age, with apartments less than 10 year –old having the greatest benefits.

What are the risks with buying off the plan?

Buyers of new apartments have a choice of buying “off the plan” (before construction commences). An off the plan property transaction involves signing a contract with a developer to buy either vacant land, or land to be developed with a building on it, before construction has started. Usually an initial deposit is paid at the time of contract signing, with the balance payable at settlement.

Buying off the plan can provide the opportunity to purchase a property at today’s prices without having to pay the full amount for some time. It is not uncommon for apartments to be re-sold at a lower price than they were originally bought for. One reason for this is the amount of apartments for sale at the one time (supply). The other reason is the land to asset ratio which is explained below.

However there are risks associated with these types of transactions. One of these is the risk that the development may not proceed due to failure by the developer to obtain sub-division approval or construction finance. In addition, most contracts have a cancellation or withdrawal clause for the developer if construction costs rise so high as to make the project unprofitable, or if a certain number of apartments are not pre-sold.

Off the plan contracts need to be read very carefully. There may be clauses which allow for higher building or engineering costs to be passed on to you. Careful attention should be paid to the quality of construction documentation relating to elements such as landscaping, fixtures and fittings, car parking (spaces per unit), room dimensions and materials used. Any provision which allows the developer to unilaterally change these specifications should be carefully considered before contract signing.

Seeing a floor plan is quite different to actually standing in the space and again different once it is full of furniture. Most builders do not allow site access to owners throughout the build, only at the time of handover. Once you have moved in, you may realise the space is not as functional as you first thought, or the rooms are smaller than you realised. You also are not able to take any measurements of your apartment beforehand, meaning items such as curtains, tables, beds or couches cannot be purchased until you have moved in.

However, buying off the plan can present the opportunity for substantial capital gain during construction even before you move in, if markets are moving up.

It can be a great way to get into the property market with little outlay, as buyers can use deposit bonds and bank guarantees to stake their claim. However, should you fail to settle, you stand to lose a fortune. “If the market moves against you, you could be putting down a 20% deposit on the current cost, plus the amount the unit has dropped,” explains Gray.

He suggests engaging the services of an independent valuer to gain a valid, impartial assessment of the property’s current value, as well as sourcing reputable research to predict which way the market will go. You should ensure you have sufficient equity and a plan in case the market blows the wrong way.

Off the plan purchases have been very popular in recent times. Rising property prices have presented buyers with an opportunity for capital gains during the construction of off the plan property investment. The process is not without risks which need to be considered before entering into a contract agreement.

Processing.....

loading