When it comes to marketing properties overseas, many developers are pretty keen to sell their stocks that are primarily off-the-plans. Off-the-plan properties are pretty popular with overseas investors because of stamp duty savings (e.g. buying off-the-plans in Victoria, investors need only to pay stamp duty on the land value) and the fact that only a 10% of the purchase price is required as a deposit and no further payment is required till settlement.

When it comes to building a portfolio for investors, it may not be necessarily a good thing to buy off-the-plan projects. The reasons are as follows:

Off-the-plan projects usually have ‘growth’ built into the price – e.g. if the project is going to be completed in 3 year’s time, it will be priced at its worth in 3 year’s time, NOT current market price. With rising construction and material costs, developers tend to price the units with a certain percentage increase so that the development remains economically viable.

The process of building equity starts only when the property is completed. It means that if you purchase a property off-the-plan today and it settles in 3 year’s time, your wealth building process actually starts in 3 year’s time, NOT today. For investors who are looking at building a portfolio aggressively, buying off-the-plan is not a strategy recommended for them.

Also, if an investor buys off-the-plan during the peak of the property cycle, he may get himself in a sticky situation when settlement happens. The valuation might not stack up and he will have to make up the difference with cash or available equity in his other assets.

The safest bet is to go for properties that are under construction or completed. Given the situation in the eastern seaboard, where new projects are far and few between, it is not easy to find good units that are still available during the construction phase.

A good alternative would be to go into house/land packages where the land title is registered. That way, investors can settle on the land within 30 days and building can commence right after the settlement of the land. The house would be up in 6-8 months and the investor can start his wealth building right away! That shortens the ‘waiting time’ for serious investors.