Home News What are the risks of buying off-the-plan units?

What are the risks of buying off-the-plan units?

Font size :

Buying off-the-plan units has some risks.

While buying off-the-plan is a viable option for buyers who have not saved that much for down payment, it remains a risky thing to do in a market riddled with declining house prices.

In a report on ABC News, mortgage broker Luke Camilleri said banks often undervalue off-the-plan properties way below their purchase prices. As a result, buyers are left with no choice but to shell out more than they expected just to complete their purchase.

"To someone who it's their biggest investment, or their biggest life purchase, to have someone on the other end of the phone saying, 'There's a problem, it doesn't stack up in the evaluation', you can imagine what runs through their minds and it's quite stressful," Camilleri said.

With this, off-the-plan buyers seem to face a double whammy of stricter lending standards and lower property valuations.

Buyers advocate Miriam Sandkuhler told ABC News that there are several other risks off-the-plan buyers have to deal with and one has to do with the developer.

"The level and experience of the developer are quite significant in determining whether or not the property is going to end up being good quality," she said.

She also agreed that securing financing for off-the-plan units can be a huge risk, given that property values are easily affected by the current condition of the market.

"If there's a downturn in the market, or if there's an oversupply of stock in the market when the property is finally built, that can substantially affect the value of that property and frequently those values come in under the purchase price of the contract," she said.

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Mortgage News and Articles

McGowan government earmarks $421m to assist prospective homeowners McGowan government earmarks $421m to assist prospective homeowners

Premier Mark McGowan announces the extension of WA’s Keystart loan book Read more

Will the housing market nosedive to a hard landing? Will the housing market nosedive to a hard landing? A new report sheds light on the housing downturn’s possible impact on the economy ... Read more

Tight lending rules weigh down auction clearance rates Tight lending rules weigh down auction clearance rates An industry expert calls for an extension of auction campaigns ... Read more

Construction activity crumbles as housing downturn takes toll Construction activity crumbles as housing downturn takes toll New orders remained weak, indicating weak activity in the future ... Read more

More mortgage news and articles

Sponsored Links

Tuesday, Dec 11, 2018
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords