The purchase of “off the plan” apartments continues to carry favour with domestic and foreign investors and for good reason. A recent SQM Research report also quoted Melbourne as a preferred place to buy. Some of the drivers are less obvious than others and here are 7 of them.
- Like any market, if it softens there is a flight to quality. So if the rental market softens it will be the older less attractive apartments that will suffer most. Living patterns change over time and new apartment are more attuned with modern living habits.The design and finishes are contemporary which makes them more attractive to tenants.
- Older existing apartments often need a renovation to improve the presentation and rent. This incurs the direct cost of the works plus a rental void while the works are being done. Also the common areas of the apartment block may remain unrenovated which limits the property’s attraction.
- As the entire apartment development is new, all plant & machinery is covered by warranties or guarantees. This saves owner corporation levies for some repairs and maintenance over the first few years. Similarly appliances and equipment in your own property are covered by manufactures warranties. There are also building warranties from the developer and their suppliers for defects, faults etc.
- It will be many years before any of the plant or equipment such as lifts, car stackers, central hot water services, fire services, etc or your internal appliances needs major works or replacement. In older buildings significant owners corporation levies can be incurred when such items need replacing.
- There are greater depreciation / capital allowances available mostly during the first 5 years of ownership enhancing the after tax investment return. If a depreciation schedule is not supplied as part of the sale you can have one prepared.
- There is minimal stamp duty paid for off the plan apartments. When you consider the purchase of existing real estate attracts around 5% stamp duty this provides significant savings.
- It enables you to enter the market at an agreed price with only 10% deposit and then pay the balance in about 1 to 3 years time depending on the size of the project.