Q: We are about to put our home of twenty years on the market and are considering buying an apartment in the city off the plans. The block we are looking at will be finished in another 18 months so then we can decide whether to move in for a while or rent it out. What are your thoughts in buying off the plans and what are the risks?
Julie & Bryan K.
A: Interestingly our partner company Loan Market has just published an article on this, so I have summarised this in my answer. Signing a contract for an apartment that is yet to be built can be a little daunting. After all, you’re handing over money for a property that hasn’t been built yet. Buying off the plan can be tricky but doing your homework can help prevent disappointment down the track. Here are some tips to help guide you through the process.
Firstly, researching the developer and their reputation is probably the most important step to determine whether to invest in a particular project. Reputation is everything, so research the work ethics and level of integrity of the property developing company. Definitely take a look around some of their previous projects and speak with owners (if you can) about how they feel about the company.
Next thing to research is the location. This is hugely important. If you are buying in the city then you will be fine for services such as transport and restaurants but just be sure to check that there are no new developments planned that might block your view or sun in the future.
The NZ Building Code should ensure that the building is properly built and weather-proof and that you will have all the required safety and security features (fire alarms, etc.) but be sure to check that sound-proofing, the standard of finish, measurements, car parking etc. are all consistent with what is in the contract.
During the course of building, the developer may still have the right to modify the building plans so it’s paramount to go over the contract with a fine tooth comb and ensure the contract mitigates the risks involved in purchasing off the plan.
As always, seek the opinion of your solicitor before committing to paper, and always talk to a mortgage advisor re your finance.