FROM THE BLOG

Buying property off-plan is an exciting journey that allows you to purchase a property before it’s constructed, often at an attractive price. One of the key financial aspects to consider when entering into an off-plan purchase is the deposit. In this post, we’ll explore the typical deposit amount for off-plan properties and factors that can influence it.

1. The Standard Off-Plan Deposit

In Victoria, the standard deposit for an off-plan property purchase typically ranges from 5% to 10% of the total purchase price. This means that if you’re buying a property valued at $500,000, your deposit would typically be between $25,000 and $50,000.

The deposit is paid upfront when you sign the contract of sale or shortly thereafter, and it serves as a commitment to the purchase. Keep in mind that the specific deposit amount can vary depending on the developer, the project, and the terms negotiated in your contract. However, the Sale of Land Act states that a deposit for an off-the-plan contract must not exceed 10% of the purchase price. Where the contract is also considered to be a major domestic building contract, such as when the vendor is also the builder, the deposit must not exceed 5% of the purchase price.

The contract for the sale of an off-the-plan property must contain a notice that the purchaser may negotiate with the vendor about the amount of deposit payable.

2. Factors Influencing the Deposit Amount

Several factors can influence the deposit amount required for an off-plan property:

• Developer Policies: Different developers may have varying deposit policies. Some may require a higher deposit to secure the property, while others may be more flexible.
• Property Price: The total price of the property directly affects the deposit amount. Higher-priced properties will naturally have larger deposit requirements.
• Market Conditions: In a competitive market, developers may demand a larger deposit to ensure that buyers are committed to the purchase.
• Property Type: The type of property you’re buying can also play a role. Apartments or units in multi-unit developments may have different deposit requirements compared to standalone houses or land.

3. Off-Plan Deposits vs. Established Property Deposits

It’s essential to recognize that off-plan property deposits may differ from deposits for established properties. In established property transactions, the deposit is typically 10% of the purchase price, but this can vary based on negotiations.

Off-plan deposits are generally more negotiable because buyers are committing to a property that doesn’t exist yet and the Sale of Land Act prevents the deposit being released prior to settlement on off-the-plan contracts so the seller won’t be reliant on those funds. However, it’s crucial to understand the terms of your contract, as the deposit amount and payment schedule can vary from one off-plan purchase to another.

4. Protecting Your Deposit

When you pay your off-plan deposit, it will be held in a trust account or invested until the property is completed. This provides some protection in case the developer encounters financial difficulties or fails to complete the project as promised.

Ensure that your contract includes clear provisions outlining the circumstances under which your deposit is refunded or forfeited. This is an important aspect of protecting your financial investment in the off-plan property.

Conclusion

The deposit for an off-plan property purchase in Victoria, typically ranges from 5% to 10% of the total purchase price. However, this amount can vary depending on factors like the developer’s policies, property price, market conditions, and property type.

Before committing to an off-plan purchase, it’s essential to thoroughly review your contract, understand the deposit requirements, and consult with an experienced conveyancer. This will help ensure that you make an informed decision and protect your interests throughout the off-plan property buying process.

Further information on buying property off the plan can be obtained from the State Revenue Office website here: https://www.consumer.vic.gov.au/housing/buying-and-selling-property/buying-property/buying-off-the-plan or by contacting ConveyancingX.