Buying 'off the plan' means purchasing a property — typically an apartment, townhouse, or house-and-land package — before it has been built, based on architectural plans, renders, and a display suite. You sign a contract and pay a deposit (usually 10%) today, and settlement occurs when the property is completed — often 12 to 36 months later. Off-the-plan purchases offer potential benefits including stamp duty savings, time to save, and buying at today's prices. However, they also carry significant risks that every buyer must understand.
How Does Buying Off the Plan Work in Australia?
The process begins when a developer launches a new project — typically apartments, townhouses, or a housing estate. Buyers choose a lot or unit from plans, review the contract and disclosure documents, and sign a contract of sale with a deposit (typically 5–10%). The deposit is held in a trust account (in most states) until settlement.
The developer then builds the project over 12–36 months. During this time, you do not make any mortgage repayments — you are simply waiting for construction to complete. Some buyers use this period to save additional funds, pay down debt, or build their credit profile.
When construction is complete, the developer issues a notice of completion. You then have a specified period (typically 14–28 days) to settle — meaning your home loan must be formally approved, and funds must be ready. At settlement, your lender disburses the loan, the property title transfers to you, and you begin making mortgage repayments.
Stamp duty advantage: In most states, off-the-plan purchases attract stamp duty based on the land value only — not the land plus building cost. On a $700,000 apartment where the land component is $250,000, you pay stamp duty on $250,000 instead of $700,000 — potentially saving $15,000–$25,000. This concession varies by state and may have caps or conditions.
FHOG advantage: Off-the-plan purchases of new properties typically qualify for the First Home Owner Grant ($10,000–$30,000 depending on the state) and first home buyer stamp duty concessions. This makes off-the-plan a popular choice for first-time buyers.
Your Deposit Is Protected by Law
In most Australian states, off-the-plan deposits must be held in a trust account or controlled by a stakeholder — the developer cannot access your deposit during construction. If the developer becomes insolvent before completion, your deposit should be protected. However, the specific protections vary by state — have your solicitor confirm the deposit protection arrangements in your contract before signing.
The Finance Risks of Buying Off the Plan
Risk 1 — Valuation shortfall at settlement: This is the most common and most significant risk. When you apply for your home loan at settlement (12–36 months after signing the contract), the lender commissions a valuation of the completed property. If the market has declined, or if similar apartments have sold for less in the interim, the valuation may come in below your purchase price. This means your LVR is higher than expected, you may need a larger deposit, and LMI may be triggered.
Example: You signed a contract for $650,000 off the plan in 2024. At settlement in 2026, the lender values the completed apartment at $580,000. Your loan amount of $520,000 (80% of $650,000) now represents 89.6% LVR against the $580,000 valuation. You need an additional $56,000 to maintain 80% LVR — or pay LMI on the higher LVR.
Risk 2 — Pre-approval expiry: Pre-approvals typically last 3–6 months. If settlement is 2 years away, your pre-approval will expire multiple times. By the time settlement arrives, your circumstances may have changed — income, employment, debts, expenses, credit score, or lending policies may be different. You cannot guarantee formal approval at the time you sign the contract.
Risk 3 — Interest rate and lending policy changes: If interest rates rise between contract signing and settlement, your borrowing capacity decreases (due to the APRA serviceability buffer). APRA or individual lenders may also tighten lending criteria — reducing maximum LVRs, changing income assessment methods, or restricting lending for apartments in certain postcodes.
Risk 4 — Developer changes or insolvency: The completed property may differ from the plans — finishes may be lower quality, the layout may have minor changes, or the developer may have substituted materials. In extreme cases, the developer may become insolvent and the project may be abandoned or significantly delayed.
Risk 5 — Oversupply in the local market: If many apartments settle simultaneously in the same area, an oversupply can push values down and vacancy rates up. This is particularly relevant for inner-city apartment markets in Sydney, Melbourne, and Brisbane.
Your Biggest Risk Is the Valuation at Settlement
If the market declines between signing and settlement, your lender may value the property below the purchase price. This can require you to find $30,000–$100,000+ in additional deposit — or walk away from the purchase and lose your deposit. Always maintain a financial buffer well beyond your expected deposit requirement.
How to Protect Yourself When Buying Off the Plan
Contract review: Have your conveyancer or solicitor review the contract thoroughly before signing. Key clauses to check include:
Sunset clause: This allows either party (buyer or developer) to cancel the contract if the project is not completed by a specified date. In the past, unscrupulous developers used sunset clauses to cancel contracts when property values had risen — then resold at higher prices. Most states now require the buyer's consent or a court order before a developer can trigger a sunset clause. Ensure the sunset date is reasonable (typically 2–4 years) and understand your rights.
Schedule of finishes: The contract should include a detailed specification of all materials, fittings, fixtures, and finishes. Any item not specifically listed can be substituted by the developer. Ensure brand names, model numbers, or equivalent quality standards are specified.
Variation clauses: Check what changes the developer is permitted to make without your consent. Acceptable variations might include minor layout adjustments or material substitutions of equivalent quality. Unacceptable variations might include significant floor plan changes, reduced storage, or lower-quality finishes.
Deposit protection: Confirm the deposit is held in a trust account or by a stakeholder — not accessible to the developer during construction.
Finance and due diligence checklist:
Maintain a financial buffer of at least $50,000–$100,000 above your expected deposit requirement to cover potential valuation shortfalls.
Save aggressively during the construction period — every additional dollar improves your LVR buffer.
Do not take on new debt (car loans, credit cards, BNPL) between signing and settlement — this reduces borrowing capacity.
Monitor the local property market — if values are declining, prepare for a potential valuation shortfall.
Obtain pre-approval 3–4 months before expected settlement — not earlier (it will expire) and not later (insufficient time to address issues).
Research the developer — check their track record, previous projects, financial stability, and any legal disputes. ASIC and state fair trading websites provide some information.
Research the Developer Before You Sign
Visit the developer's previous completed projects. Speak to existing residents about build quality, defects, and the developer's responsiveness. Check the developer's company on ASIC and search for any legal disputes or insolvency notices. A strong developer track record significantly reduces your risk.
- ✓Have a solicitor review the full contract before signing
- ✓Check sunset clause terms and your cancellation rights
- ✓Ensure a detailed schedule of finishes is included
- ✓Confirm deposit is held in a trust account
- ✓Maintain a $50,000–$100,000 financial buffer beyond expected deposit
- ✓Avoid new debts between contract signing and settlement
- ✓Research the developer's track record and financial stability
- ✓Apply for pre-approval 3–4 months before expected settlement
- ✓Monitor local market values during the construction period
Frequently Asked Questions
About the Author
Sakib Manzoor
Senior Finance Wellness Expert
Sakib Manzoor is the founder of Secure Finance and brings extensive experience in Australian mortgage broking and financial wellness. Specialising in helping clients achieve their property finance goals through personalised strategies and expert guidance, Sakib is FBAA accredited and committed to providing clear, actionable advice. All content is written to meet Australian regulatory standards and is regularly updated to reflect current market conditions.