Off‑the‑Plan Apartments: Risk, Reward, and How to Do It Right

Off-the-plan (OTP) purchasing has its critics, but in a tight rental market with strong yields, many investors are rediscovering the advantages: tax depreciation, modern specs, stamp duty savings, and time to build equity before settlement.

Here’s how to weigh the risks and secure the rewards.

What does “off-the-plan” mean?

You agree to buy an apartment before (or during) construction. Typically, you will pay a deposit before or during construction, and the balance upon completion/settlement. This approach allows investors to secure today’s price while the property is built, offering time to plan finances and watch market trends.

The key risks

Valuation risk at settlement

Property values can shift during the construction period. If the market softens, valuations may come in under contract price, leaving the buyer to cover the shortfall between the valuation and the loan amount.

Mitigation: Choose a reputable developer with a strong track record and invest in locations with solid, long-term demand drivers.

Construction delays

Labour shortages, materials supply issues, adverse weather, or council approvals can all delay completion, affecting your investment timeline.

Mitigation: Review builder and developer credentials carefully. Well-capitalised, long-standing developers are less likely to encounter serious setbacks. Also, review the contract terms for acceptable delays.

Developer default or design downgrade

In rare cases, the developer may go into administration or materially change the design or finishes.

Mitigation: Prioritise developers with financial transparency (e.g., ASX-listed companies like Finbar), pick a developer that has completed projects that you can view, and review all contract variation clauses carefully.

Interest rate or lending changes before settlement

Because you don’t apply for your final loan until the project is nearly finished, there’s a risk that lending conditions may change or you no longer meet serviceability.

Mitigation: Get pre-approval and work closely with your broker or lender to stress-test your borrowing capacity. Maintain financial discipline between paying your deposit and settlement of the development.

The rewards

Stamp duty savings / rebates (where applicable)

Many state governments offer incentives for off-the-plan buyers, especially first home buyers or those purchasing new dwellings. These can amount to tens of thousands in savings.

Note: WA has historically offered rebates and concessions for new builds — always check current eligibility criteria.

Depreciation benefits

Investors of brand-new apartments can take advantage of the substantial tax deductions that come with claiming depreciation on brand-new fixtures, fittings and common areas.

Tip: Engage a quantity surveyor to prepare a tax depreciation schedule post-settlement and consult your accountant.

Tenant appeal & reduced maintenance

New apartments with contemporary finishes, energy-efficient design and lifestyle amenities tend to lease quickly and attract premium tenants.

Plus, new builds carry builder warranties and lower short-term maintenance risk.

Time to plan finance and cash flow

Unlike established property, where full payment is due within weeks, purchasing off the plan allows time to lock in today's price, while giving you time to build your savings, prepare your lending position and even benefit from market movement.

How to “do it right”

1. Choose the right developer — look for a long-standing developer with a history of completed projects. ASX-listed is a plus as it ensures transparent financials and governance.
   

2. Prioritise rental demand locations — focus on proximity to CBDs and key employment/entertainment hubs, and look into suburbs with low vacancy rates
   

3. Understand the spec & amenity list — check the final fit-out and material quality and if the development offers an appealing range of lifestyle amenities
   

4. Read the strata budget and compare the fees — Is there a well-funded strata plan and do the fees line up when comparing them to other projects that are similar?
   

5. Stress test your numbers — Factor in interest rate rises and put in place a savings plan for the time between your deposit and settlement

   
   

FAQs

Is buying off-the-plan risky in WA right now? With the right developer, suburb and contract terms, many risks can be mitigated, while the rewards (yield, depreciation, incentives) remain.

How big is the deposit? Typically 10%, but check the contract specifics.

Can the price of my apartment increase after I sign the contract? This depends on who you purchase from. Long-standing developers like Finbar offer fixed-price contracts so buyers know exactly what they are spending when they sign. Ensure you always read your contract to check if there are clauses that allow the developer to increase the price after signing.

If you're interested in investing in a Perth apartment, look no further than WA's largest and most trusted developer, Finbar. With 30 years on the ASX, 79 completed developments and 7,400+ apartments delivered to the Western Australian market, Finbar isn't just a developer; they're a part of the city's foundation.

To find out more about Finbar's current development, visit https://www.finbar.com.au/

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Any information or advice is intended to be of a general nature only and has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries and consider whether the advice is appropriate for you.